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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 actions
ofoneindividual and was in no way
areflection on the company or the
restofthe BTGteam.
Growing our great team
Every year our customer base grows and
the technology powering the products we
provide evolves. To keep offering the high
levels of service and expertise for which
we are renowned, we also need to expand
and adapt. That means recruiting new
people with a passion for technology,
aswell as training and retaining our
existing employees.
Apprenticeships are an important and successful part of our efforts to
develop our talent from within. This year, for the first time within Bytes,
wehad people doing degree apprenticeships – gaining valuable work
experience whilethey study – a development that we are really pleased with.
Clare Wicks, Career Pathway Manager, Bytes
>
50%
of our people participate in
ourSharesave schemes
32 Bytes Technology Group plc
REVIEW OF THE YEAR
Impressive outcomes
from our Great Place
toWork surveys
Based on staff surveys, Phoenix was
certified as a Great Place to Work
inthe 2021/22 financial year, and
Bytes followed a year later. We
continued to generate impressive
survey results this year, with 94% of
employees at Phoenix and 87% at
Bytes agreeing that they work at a
‘great place’, compared to 54% of
employees at a typical UK-based
company. Both businesses featured
in the following Best Workplaces
lists this year too: women, wellbeing
and tech. In addition, Phoenix
wasranked seventh in the UK’s
BestWorkplaces among large
organisations, and Bytes moved
upten places in the same overall
rankings during the year.
This year, we increased our headcount
byalmost 14%, to 1,057. We’re proud of
the loyalty ofour people, many of whom
have been with us for a long time. We ran
new apprenticeships in HR, marketing,
sustainability, governance and business
analysis in 2023/24 and, across the Group,
doubled the degree-level apprenticeships
we offer. Apprenticeships are an
important and successful part of our
efforts to develop our talent from within,
and our new employees included 15 sales
and technical apprentices across our two
businesses. This year, and for the first
time within Bytes, we had four people
doing degree-level apprenticeships –
gaining valuable work experience while
they study – a development that we are
really pleased with.
With many new people joining us, it
wasimportant to make sure we had
thecapacity to integrate them, to offer
support and to help them understand
ourculture. Our induction programmes,
which run over several weeks, are
designed to get people quickly up to
speed with our way of working. All our
managers receive training on how to
onboard employees, and this year
weappointed leaders in the various
departments to provide additional
support. Other measures include pairing
new staff with an experienced ‘buddy’,
introductory meetings with department
heads and directors, and a check-in from
the welfare manager after a few months.
Rewarding our people,
whatevertheir roles
We pay our people fairly, but we also
reward high achievers and those who
gothe extra mile for our customers and
colleagues. Our employee recognition
programmes, based on the achievement
of business objectives, both for sales and
non-sales staff, include prizes such as a
scuba-diving trip to Malta. We also offer
awards for employees of the month and
people who are seen to be ‘living our
values’ in all they do at work. At Bytes
thisyear, eight people recognised for
supporting their colleagues’ wellbeing
were rewarded with a stay at a wellness
spa near Lake Garda in Italy.
We also recognise and reward long
service. This year, Phoenix aligned its
policy with Bytes, to give an additional day
of annual leave for anyone who has been
with us for five years, rising to an extra five
days’ paid holiday for those with 25 years
ofservice.
In June 2023, we launched our third
Sharesave scheme, which was again
wellreceived. More than half our staff
have participated in one or more of these
plans. Taken together, all these initiatives
contribute to our high employee net
promoter score (eNPS) of 71, which
measures the likelihood of people
recommending their employer to others.
Our values
• • Be passionate about our
employees, vendors and
customers
• • Act with integrity at all times
• • Work together and collaborate
across teams
• • Be kind and respectful to all
people, all of the time
• • Get business done and
havefundoing it
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
33
Sustainability review continued
Supporting wellbeing and
promoting good mental health
We do all we can to support the health and
happiness of our people. They can, for
example, use the free or subsidised gyms
at or near our offices, and buy reduced-
price bicycles through our cycle-to-work
programme. In our offices we provide
freefruit and healthy meal options.
We take mental health seriously,
encouraging openness and providing
support for anyone who needs it. We have
a 24/7 employee assistance programme,
offer up to two extra days of discretionary
paid leave for people in difficulty, and our
designated wellness ambassadors are
always available for a chat. This year
weheld informative sessions for staff
about men’s mental health, menopause
and, given the high cost of living, financial
wellbeing. Our managers also received
training on mental health issues, and an
introduction to neurodiversity.
Our hybrid-working policy – which, with
their manager, lets people determine the
best approach for them and the business
– contributes to wellbeing. People whose
role doesn’t require them to be fully
office-based can spend around half their
hours working remotely. We believe this
gives usand our people the best of both
worlds:the benefits of collaboration,
innovationand social interaction in the
office, with the flexibility and positive
work-life balance that comes from
beingat home.
282
new BTG employees
this year
34 Bytes Technology Group plc
REVIEW OF THE YEAR
Helping our people fulfil
theirpotential
We want all our people to reach their
potential. Every employee, whatever
theirrole, is given an opportunity to be
supported on a personal development
plan. We provide regular opportunities
fortraining, which not only benefits our
employees, but also the business, since
we can offer our customers greater
expertise. In addition, public sector
tender frameworks require us to have
certain accreditations, and vendors
payus higher rebates if we are well
accredited. At Phoenix, for example,
wefocused heavily on digital training
thisyear, so all our staff can operate at
ahigh level using Microsoft applications.
Identifying and developing future leaders
is a strong priority for us. At Bytes, we
selected 12 people, most aged under 30,
to participate in a programme run by an
external consultant to help develop their
leadership skills and style, and we will
extend that programme in the coming year.
Working towards greater gender
and ethnic diversity
Providing equal opportunities to people
ofall genders and ethnicities is not just
something we believe in – we see it as our
responsibility. In recent years we’ve made
good progress in gender parity. Sam Mudd
is our CEO, and Clare Metcalfe the new
MD Phoenix. Women now represent 34%
of the combined managers at Bytes and
Phoenix, and around 40% of our total
workforce. By comparison, across the
UK, less than a third of people in the
technology sector are women.
1
At a
Boardlevel, our gender balance was
50%at year end, compared with 29%
atthe end of 2022/23.
We’ve also seen progression in the types
of roles women hold at BTG – for example,
we have more women entering technology
sales positions, which are typically better
paid. As part of our commitment to
encourage more women to enter the
technology sector, we work with local
schools and attend events that promote
women in IT.
We are also trying to become more
ethnically diverse, though progress
hasbeen slower than with gender.
Ourworkforce has a higher proportion of
people from a White British ethnicity than
reflects UK society as a whole, but it does
reflect the demographics of the locations
of our head offices, in Surrey and East
Yorkshire. As part of our efforts to actively
encourage more diverse hiring, we provided
training this year to our hiring managers
on how to avoid unconscious bias when
recruiting. We also work with a specialist
agency that helps companies hire people
from minority groups. We’ve continued to
collect data on our ethnicity breakdown,
based on voluntary self-reporting from
our some of our employees and, in
2024/25, aim to have a self-reporting
ethnicity option for all employees.
We have held awareness activities to
promote understanding andinclusion.
Our employees created aRamadan
awareness session, for example,
withpeople taking on a dayof
Ramadanfasting.
BTG gender balance
as at 29 February 2024
Men Women
50%
50%
Board
50%
50%
2
2
Executive Committee
66%
34%
Managers
2
60%
40%
All colleagues
18
8
69%
31%
Executive Committee plus
direct reports
1
3
3
92
48
633
424
1 The Executive Committee plus direct
reportsinclude executive directors, our
managing directors and their direct reports,
comprising individuals for whom they have
directline management responsibility,
excludingadministrative and support roles.
2 Managers refers to leaders in BTG,
includingExecutive Committee and
seniorleadership members.
1 womenintech.co.uk/women-in-tech-survey-2023
1,0 5 7
BTG total headcount
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
35
Sustainability review continued
Our communities
One of the things we are most proud of about
our people is their passion for making a real
difference in the communities in which we work.
Volunteering enriches our local areas,
aligns with ourgoal of supporting social
causes andbuilds the reputation of our
businesses. It’s also really enjoyable
andrewarding for our employees
andenhances their wellbeing.
In addition, as part of BTG’s
commitmentto support positive change
inour environment and communities
where we operate, we continue to make
financial contributions in various ways to
corporate social responsibility activities.
Giving our time to help others
Volunteering is at the heart of our
community work. We give everyone one
fully paid volunteering day a year to help
causes that are close to their hearts. And
many of them use this opportunity to do
awide range of wonderful work. At Bytes,
for example, more than 100 people spent
time helping at an animal charity close
toour office in Surrey. The Wildlife Aid
Foundation, which is one of the UK’s busiest
wildlife rescue and rehabilitation centres,
needed assistance in moving to a bigger
site, so over the summer our staff got their
hands dirty planting trees and hedgerows
and building ponds and pathways.
Thework was greatly appreciated and,
besides the satisfaction of a job well
done, our employees also benefited
fromgetting to know each other better.
Inall, BTG employees contributed
morethan 1,500 hours to supporting
ourlocal communities.
We know how much our staff like helping
other people so, to make it easier to find
ways to do that, we partner with the
onHand volunteering platform. This
enables people to sign up for ‘missions’
that take as little as an hour. Among the
local causes supported this way in
2023/24 was the Wetherby Foodbank,
and two swimming clubs: East Riding
Leisure Driffield and Pocklington Dolphins.
Partnering with the Rio Ferdinand
Foundation to promote ITtogirls
At Phoenix, we’re delighted to have built a partnership with
the Rio Ferdinand Foundation, which was set up by the former
professional footballer to create opportunities for young
people to tackle inequality, achieve their personal potential
and drive social change. This year, the foundation ran a digital
leadership programme for 50 high-school girls from deprived
areas of Manchester. We provided a full day of career advice
from two women in our cybersecurity team, who talked about
what it was like being a woman in tech and what their jobs
entailed, before leading some fun digital activities.
A few weeks later, the same students came to our offices in
Salford, where they received a tour of Media City and took
part in several immersive IT activities, including learning
about sustainable cities and then putting their knowledge
tothe test using Minecraft, and experiencing virtual reality
technology. In feedback, the girls said the workshops had
really inspired them, and more than three quarters of them
said they were thinking about careers in technology.
Case study
432
hours of volunteering
byPhoenix staff
36 Bytes Technology Group plc
REVIEW OF THE YEAR
1
3
2
4
Raising and donating money
forgood causes
As a Group, and through our people, we
donate money to charities and institutions
that can use it to help others. At Phoenix, we
again supported two great causes this year:
St Leonard’s Hospice and York Special
Care Baby Unit. In total our people raised
more than £11,000 for them, as well as
other charities and causes, including Save
the Children, Macmillan Cancer Support
and the Turkey–Syria earthquake appeal.
Fundraising activities included entering
several teams to run the relay event at the
Yorkshire Marathon, Christmas jumper day,
an Easter raffle, a bake-off, and golf and
horse-racing fun days. To further support
our local communities, we also sponsored
a girls’ and a boys’ football team, and held
an autumn fair, where nearby businesses
were invited to sell their wares.
Many of our employees raise money
intheir own time, and we’re pleased to
support their efforts. At Bytes, we match
fundraising pound for pound up to £1,000
per employee per event. Bytes supports
many good causes but focused on four
inparticular this year: the Wildlife Aid
Foundation; the Change Foundation,
which uses sport to help marginalised
young people; the Rainbow Trust,
whichprovides emotional and practical
support to families who have a child with
life-threatening or terminal illness; and
Movember, which raises awareness
ofmen’s physical and mental health.
For the Change Foundation, we took part
in the Thames River Kayak Challenge, along
with one of our vendors, raisingaround
£5,000, and also ran cybersecurity
awareness and social media safety
workshops for young people supported by
the charity. To raise money for Movember,
we organised a charity football tournament
and set up a barbershop in our office so
one of our employees – a former barber
– could give people wet shaves. And
forthe Rainbow Trust we held various
fundraising activities and promoted
awareness among our staff of their
amazing work. All four charities were
supported through a Christmas fair, where
handmade items, baked goods and other
gifts were sold and proceeds of £330 split
between the charities. We also supported
the Macmillan Coffee Morning, which was
held at Leatherhead, with the charity
benefiting from the proceeds of £565.
Bytes staff also took on the mighty Dragon
Boat racing, supporting Playwise.
Bytes also made direct financial
donations to causes that our staff really
care about, including local sports clubs
and schools. Because of a laptop refresh,
Bytes was able to donate 140 laptops
toemployee-nominated non-profit
organisations and charities. These
laptops have supported Lifeshare, a
homeless charity in Manchester, schools
and nurseries, local youth groups and a
wildlife rescue charity in East Sussex.
Delivering social value in areas
where we work
Phoenix does business almost entirely
inthe public sector, and this comes with
acommitment to deliver social value
where the work is done. We take this
responsibility seriously and are pleased
tobe able to use our skills to make a
positive impact on people’s lives around
the country. Our social value projects
thisyear included building a community
directory for charities in Hull, and
providing digital skills support for
refugees who have been resettled in
Lancashire. We held an event for the
Sunderland and County Durham Royal
Society for the Blind to demonstrate how
technology can help visually impaired
people – including Seeing AI, a Microsoft
application that uses a phone camera to
identify and then audibly describe people
and objects.
We also love working with young people,
and this year our education outreach
programme involved nearly 2,000 school
children and young adults. This included
helping young people from disadvantaged
backgrounds explore technology, using
fun activities to encourage Year 8 girls to
take IT as a GCSE subject, and supporting
digital bootcamps for young people
aged19 and over from minority and
disadvantaged backgrounds.
Community activities
1
Wildlife AidFoundation
2
Dragon Boat racing
3
Thames River Kayak Challenge
4
Christmas fair at Leatherhead
1,11 0
hours of volunteering
by Bytes staff
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
37
Sustainability review continued
Our planet
We believe that everyone has a part to play in caring for
ourplanet. As a responsible business, we are reducing our
carbon footprint and helping our customers to do the same.
Although we haven’t identified a material
impact to our business through the
scenario analyses in our TCFD (see
pages 44 to 52), climate change is too
important for us not to take action. It is
our duty as a responsible business to
measure our carbon emissions and
undertake initiatives to reduce our impact.
It is also expected of us by a wide range of
stakeholders, from investors, employees
and customers. Our aim is to reach net
zero emissions by 2040 at the latest, ten
years ahead of the UK goal of 2050.
This year, we made major progress in more
fully measuring our Scope 3 emissions – the
indirect emissions across our value chain.
We are now able to report on all the Scope 3
categories relevant to our business, which
makes a considerable difference to our
overall footprint. This is because we are
including purchased goods and services
in full, which make up 93% of our total
emissions, while Scope 3 overall now
makes up over 99.9% of total emissions.
This comprehensive Scope 3 reporting
isasignificant milestone for us and the
culmination of several years of work. It is
helping us to better understand the potential
effects of climate change on our business
– and the role we can play in collective
efforts to achieve a net zero economy.
Our science-based targets
In 2021/22 we announced our ambition to
be net zero by 2040, along with near-term
Scope 1, 2 and 3 goals to help us get there.
This year we went further, by submitting a
set of targets to the Science Based Targets
initiative (SBTi), the global organisation that
helps businesses set emissions reduction
targets in line with climate science. This
step is vital to make sure we are in line with
the Paris Agreement goal of limiting the
global temperature rise above pre-
industrial levels to 1.5°C, which would
substantially limit the effects of climate
change. To achieve this, global
greenhouse gas emissions must halve
by2030 – and drop to net zero by 2050.
Adding to our targets and revising
our Scope 3 baseline year
The 50% reduction targets for Scope 1
and2 have been maintained and
additional interim targets submitted to
theSBTi. These are a 60% reduction in
Scope 1 by 2030 and maintaining a 100%
reduction inScope 2 by 2028/29. These
additional targets enable us to have
near-term targets under validation by
theSBTi, while also maintaining the
targets we previously committed to.
For Scope 3, our previously stated aim
was to reduce our emissions by half by
2030, but without articulating a baseline
year. For our CDP submission in July
2023, we used different baseline years
depending on when each category, or
subset of a category, was first measured.
While we’ve kept the same 2030 goal,
wedecided to adjust the base year to
2022/23 – the first year for which we
haddata for all the relevant Scope 3
categories. This change applies to all
Scope 3 categories, even those we
measured in previous years, to give us
abaseline year that is consistent and
realistic. Although we had hoped to
maintain the challenging baseline year
setduring Covid for business travel, the
changes to UK policy on the ban on sales
of new petrol and diesel cars have made
achieving reductions unreasonably
difficult. The change to our baseline,
however, has not affected our strong
focus to reduce all our Scope 3 emissions
as quickly as we can.
In our original low-carbon action plan
in2021/22, we had set interim targets
forcategory 5 (waste), and a subset of
category 1 (paper, water and wastewater),
of a 50% reduction by 2025/26. These are
now incorporated in the overall Scope 3
reduction targets for 2030 and 2040. As
our sustainability strategy matures, we’re
developing specific waste and water
policies, with targets based on a quantity
reduction and lifecycle processes, which
we hope to publish next financial year. We
believe this is a more robust way to target
efficient resource use. Having removed
water and waste as separate targets,
leaving paper, we will continue to monitor
paper usage and make more reductions
where possible. But, given paper alone
isa tiny fraction* of our emissions, its
impact on our footprint is minimal and
notdeemed to warrant a separate
carbonreduction target.
Our targets
By 2025/26 (from
2020/21 baseline)
By 2028/29 (from
2020/21 baseline)
By 2030/31 (from
2022/23 baseline
2
)
By 2040/41
Reduce Scope 1
emissions by
50%
Reduce Scope 2
emissions by
1
50%
Maintain a
reduction
ofScope 2
emissionsby
100%
Reduce Scope 1
emissions by
60%
Reduce Scope 3
emissions by
50%
Reach
net
zero
emissions across
the valuechain
1 We achieved our Scope 2 target in 2021/22 by completing a Group-wide switch to renewable energy
forallourelectricity at our owned offices.
2 2022/23 baseline applies only to Scope 3 target. Both Scope 1 targets are from a 2020/21 baseline. *Actual, 0.0000014%
38 Bytes Technology Group plc
REVIEW OF THE YEAR
A joined-up approach to net zero
Our carbon reduction efforts were
overseen this year by our first Group
Sustainability Manager, Lisa Prickett, who
is coordinating the approach across our
two businesses, Bytes and Phoenix. Lisa
works with the senior leadership team, our
Sustainability Steering Committee and
the wider business to coordinate our
activities, ensure progress against our
targets and report performance. The role
requires staying up to date on corporate
and public sector expectations, and
working with our customers and suppliers
to make sure we are putting resources
where we can have the biggest impact.
For full details of how we oversee and
manage environmental issues, see our
TCFD report on pages 44 to 52.
How we contribute to the environment
We’re a value-added IT reseller, focusing on cloud and security software
developed by leading vendors, so don’t manufacture or transport physical goods.
While we have two big offices, many of our people work part of the week from
home under our hybrid-working policy. This means that our direct impact on the
environment is quite small, and mostly relates to carbon emissions.
It also means that the positive effect we can have through our direct emissions is
limited, because what we do ourselves will only have a relatively small effect on
overall greenhouse gas emissions. However, we must all play our role, because
ifeverybody does what’s within their power, the overall impact will be significant.
As our expanded Scope 3 reporting shows, value-chain emissions are key to our
commitment to get to net zero. This means we need to work with our suppliers to
understand their emissions and carbon reduction plans, so we can prioritise
low-carbon technologies and vendors that demonstrate the same commitment
asourselves. And although our own emissions that relate to our customers are
minimal, we can make a positive contribution to a net zero future bysupporting
them to make more sustainable IT decisions.
The importance of collective action is reflected in the increasing expectations
from all stakeholders, including regulators, that businesses take responsibility
forminimising their own emissions. Under UK regulations, companies will soon
berequired to report on their net zero transition plans, alongside the existing
requirement to report against the recommendations of TCFD (see pages 44 to 52).
The road to 2040 – our journey so far
ISO 14001
environmental
management
systemattained
Initial measurement
of our carbon footprint
Reported Scope 1, 2
and 3 (business travel)
emissions under
SECR guidelines
2020/21
Launched low-
carbon action plan
Completed move
to100% renewable
electricity
Achieved carbon
neutral operational
emissions
throughoffsetting
Announced net zero
by 2040goal
2021/22
Partnered with
aspecialist consultancy
to help analyse
Scope3 emissions
Expanded our Scope
3 reporting from two
to six categories
Moved to 100%
green gas inour
Phoenix operations
Exceeded Scope 2
emissions target
Made first
submission to CDP
(formerly Carbon
DisclosureProject)
2022/23
Appointed first
Groupsustainability
manager
Submitted carbon
reduction targets to
the SBTi
Achieved our first
CDP score
Expanded
measurement of
Scope 3 categories,
with all relevant
categories now fully
reported
Maintained 100%
renewable energy for
our owned offices
2023/24
Validation of our
targets by the SBTi
(anticipated)
Developing
transitionplans
toachieve our
near-term and
netzero
emissionstargets
Continued focus on
reducing emissions
related to employee
commuting and
business travel
Development of
acarbon literacy
andsustainability
education
programme
2024/25
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
39
Sustainability review continued
Taking responsibility for our environmental
footprint across the value chain
Since the start of the 2022/23 year, we’ve
worked in partnership with a specialist
carbon emissions consultancy to get a
greater understanding of our Scope 3
emissions, and so broaden our reporting
of the categories that apply to us (as
defined by the Greenhouse Gas Protocol,
which is used as the methodology for all
our carbon reporting – see the appendix
on page 195). Having comprehensive
datahas enabled us to become far more
sophisticated in our analyses and reporting.
We have identified that ten of the 15 Scope 3
reporting categories are relevant to our
business. This is a change from our
expected nine categories last financial
year, because we have moved our
leasedoffices emissions into category 8,
upstream leased assets. This was done
because they are not required to be
reported in Scope 2 under our use of
financial control as our organisational
boundary. In2020/21, we reported on only
one category: category 6, business travel,
and only to the extent that it related to cars.
By the end of 2022/23, we had measured
five categories in full and one partially – a
very small subset of category 1, purchased
goods and services. These emissions
were disclosed in our 2022/23 Annual
Report, in our report to the CDP and in
ourindividual operating company reports.
This year, we expanded our emissions
data collection to cover in full all ten
categories that are relevant to us, with
effect from the 2022/23 year – having
continued our journey from the mandatory
SECR emissions reporting in 2020/21,
toadding more categories as required by
PPN06/21, to being able to fully report on
all emissions in our third year of carbon
reporting. We have been able to obtain
data for and include four categories we
had not previously reported on: capital
goods, upstream leased assets, use of
sold products and end-of-life treatment of
sold products. Most significantly, we fully
reported for the first time on purchased
goods and services, which meant including
all the emissions from our vendors that
relate to the solutions and services we
provide. As a result of this additional
measurement, we have expanded the
reporting of the emissions for 2022/23
that were published in last year’s Annual
Report, which we set out in the charts on
these pages.
This additional data measurement means
that Scope 3 emissions now account for
99.9% of our total emissions for 2022/23,
up from 93.5% previously (before all
categories were reported). The change
ismostly due to purchased goods and
services, which constituted 93% of our
total emissions in 2022/23. For context,
before completing our comprehensive
reporting this year, our biggest Scope 3
category was employee commuting,
accounting for67% of Scope 3 emissions.
This is now 1% of total Scope 3 emissions,
as shown in the charts.
Restatements to our Scope 1, 2, and 3 reporting
forthe 2022/23 financial year
• • Scope 1 and 2 have been amended to remove
assumptions related to leased offices, because we
don’t have financial control. These emissions have
been added into Scope 3, category 8, upstream
leasedassets.
• • Scope 3, category 5, additional data was made
available for a waste stream, which was not
previouslycaptured.
Additions and amendments to our Scope 1, 2 and 3
reporting for the 2022/23 financial year
• • Scope 3, category 1 has been expanded to all
purchases (except where covered in other categories,
e.g. capital goods). Previously this only measured
paper, water and wastewater. Category has been
measured through analysing top vendors’ emissions
related to BTG spend.
• • Scope 3, category 2, purchased capital goods,
hasbeen added.
50
%
targeted reduction in
Scope 1 emissions
by2025/26
Our total carbon footprint
(2023/24)
Total
151,822.7 tCO
2
e
Description
Scope 1
Direct emissions from our sites 45.5
Scope 2
Indirect emissions from the
energy we buy 0
Scope 3
All other indirect emissions
across our value chain 151,777.2
Scope 3 breakdown
151,777.2 tCO
2
e
11
2,3,4,5,6,7,8
1
Category
1 Purchased goods and services 141,420.9
2 Capital goods 914.9
3 Fuel and energy-related activities 78.9
4 Upstream transportation 3.7
5 Waste generated in operations 1.1
6 Business travel 258.9
7 Employee commuting
(including working from home) 1,018.6
8 Upstream leased assets 39.2
11 Use of sold products 8,0 41.0
12 End-of-life treatment
of sold products negligible**
40 Bytes Technology Group plc
REVIEW OF THE YEAR
• • Scope 3, category 3, our well-to-tank emissions
havebeen included in this category, which has been
expanded across other areas, including business
traveland upstream transportation and distribution.
• • Scope 3, category 4, methodology for calculation
wasimproved by using tonnes per kilometre.
• • Scope 3, category 6, business travel calculations
havebeen improved by using an activity (mileage)
methodology rather than on a spend basis.
• • Scope 3, category 7, employee commuting, has
beenexpanded to include the ‘optional’ remote
working criteria, because we offer hybrid working.
• • Scope 3, category 8, upstream leased assets, has
been added because we do not have financial control
of leased offices. Last year, the category was identified
as not relevant, with these estimated emissions
reported in Scope 1 and 2.
• • Scope 3, category 11 has been measured using
datafrom our sold products, using the upper range
ofestimates, to give the ‘worst case’ scenario.
• • Scope 3, category 12 has been measured using data
on our sold hardware products, but the emissions are
considered immaterial at 0.001%, based on fair use.
Our 2020/21 total carbon footprint
(baseline for Scope 1 and 2)
Total
315 .1 tCO
2
e
Description
Scope 1
Direct emissions from our sites 54.5
Scope 2
Indirect emissions from the
energy we buy 233.0
Scope 3
All other indirect emissions
across our value chain 2 7.6
Scope 3 breakdown
27.6 tCO
2
e
Category
6 Business travel 27.6
Our 2021/22 total
carbon footprint
Total
178.3 tCO
2
e
Description
Scope 1
Direct emissions from our sites 62.1
Scope 2
Indirect emissions from the
energy we buy 26.7
Scope 3
All other indirect emissions
across our value chain 89.5
Scope 3 breakdown
89.5 tCO
2
e
1,5
3
6
Category
1 Purchased goods and services
(paper, water and wastewater only) 1.0
3 Fuel and energy-related activities 19.9
5
Waste generated in operations 2.2
6
Business travel 66.4
Our 2022/23 restated total carbon
footprint (baseline for Scope 3)*
Total
113,867.0 tCO
2
e
Description
Scope 1
Direct emissions from our sites 73.2
Scope 2
Indirect emissions from the
energy we buy 0
Scope 3
All other indirect emissions
across our value chain 113,79 3.7
Scope 3 breakdown
113,793.7 tCO
2
e
2,3,4,5,6,7,8,11
1
Category
1 Purchased goods and services 10 5 ,5 3 7.9
2 Capital goods 88 0.1
3 Fuel and energy-related activities 58.0
4 Upstream transportation 4.3
5 Waste generated in operations 1.0
6 Business travel 214.5
7 Employee commuting
(including working from home) 1,142.6
8 Upstream leased assets 33.8
11 Use of sold products 5,921.5
12 End-of-life treatment
of sold products negligible**
Number of Scope 3 categories reported
2020/21
2021/22
2022/23 original
1*
4**
6**
2022/23 expanded data
2023/24
10
10
* car only for category 6
** paper, water and wastewater only for category 1
* Changes to 2022/23 reporting from
theAnnualReport 2022/23 (in tCO
2
e):
Recalculated: upstream transportation = -248.2.
Leased offices (using improved estimates) = -6.9
location-based, +16.8 market-based. Fuel and
energy-related activities = +41.2. Waste = +0.81.
Business travel = +1.6.
Expanded categories: Scope 3, categories 1
and 7 = +105,819.8.
New categories: Scope 3, categories 2
and 11 = +6801.6.
Moved: emissions in Scope 1 and 2 from leased
offices moved to Scope 3, category 8.
Scope 1 = -16.5. Scope 2 = -24.2 location-based,
0market-based.
** Category 12 has been excluded because it
isconsidered immaterial at 0.001% of our
emissionsand due to the assumptions
necessaryinthe calculation.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
41
Sustainability review continued
Performance in 2023/24
Our total carbon emissions for 2023/24
were 151,822.7 tonnes carbon dioxide
equivalent (tCO
2
e), and our expanded
2022/23 emissions were 113,867.0 tCO
2
e.
These headline figures appear to represent
a very big increase compared to the
previous financial years. However, this
isaccounted for by the much broader
reporting of our Scope 3 emissions this
year, in particular the inclusion for the
firsttime of purchased goods and
services, as discussed above.
This year, we have been able to collate
and measure emissions more accurately,
with an improvement to the methodology
for our expanded and recalculated
2022/23 emissions, with 2023/24
following the same methodologies. It
hasbeen a significant piece of work, but
one which will ensure we have the most
reliable baseline to compare future Scope 3
emissions. Our emissions increased in
2023/24, largely due to higher vendor
spend and revenue. Our actions for this
next year will be to create a transition plan
for our route to net zero, which will include
working with our vendors to understand
their journeys andcommitments to
reduce emissions. Although our largest
emissions are those not in our direct
control, we will also focus on actions that
we can take to influence areduction in
other areas.
In 2022/23, we reduced our market-based
Scope 2 emissions to zero by moving to
renewable electricity. We were able to
maintain that this year through purchasing
renewable energy for our owned offices. In
2023/24, our Scope 1 emissions reduced
due to a move to green gas in York and
having overcome the air-conditioning
maintenance issues that increased our
emissions in the prior year. We continue
toembed sustainability in our decision
making, which contributed to choosing
ourshared office space in London, which
we moved into in March 2023. This office
isrun by a certified B Corp company
anduses 100% renewable energy.
Government action on policy and
infrastructure is crucial to enable the
universal adoption of electric vehicles.
This year the UK Government announced
a five-year delay to the proposed ban on
new petrol and diesel cars, from 2030 to
2035. However, we are continuing to play
our role, through a scheme that allows
employees to buy electric vehicles via
salary sacrifice. It has proved more
successful than we expected, with 29
people entering the scheme since we
rolled it out in 2023/24. We will continue to
promote the scheme in the coming year.
This year we expanded our approach to
taking responsibility for emissions. The
value of our Scope 1 and 2 emissions has
been covered by investing in a carbon
removal mangrove restoration project
inPakistan. This not only supports
carbonsequestration but also provides
biodiversity net gain and community
benefits through reducing erosion
andsupporting fish nurseries.
We’ve offset our business emissions under
Scope 3 (categories 2 to 8, inclusive).
Thecarbon removal and offsetting are
purchased through our partner Ecologi,
which supports Gold Standard and
Verra-approved carbon reduction, and
community- and biodiversity-enhancing
projects around the world. This year we are
backing projects in Morocco, Pakistan and
Peru, among others. Over the long term,
however, we are committed to reduction
rather than offsetting.
Energy and carbon data*
Showing expanded Scope 3 from prior year 2022/23
Energy and carbon emissions (kWh and tCO
2
e) 2023/24 2022/23 (restated**)
Group kWh tCO
2
e kWh tCO
2
e Change
Energy consumption 4,989,909 4,186,75 3 +803,156 kWh
Scope 1 – Direct emissions from our sites 15 2 ,16 3 45.5 166,558 73.2 -27.7
Scope 2 – Indirect emissions from the energy webuy
Location-based
1
1,000,124
20 7.1
823,998
161.2 +45.9
Market-based
2
0.0 0.0 0
Scope 3 – All other indirect emissions across
ourvalue chain
3,8 37,6 2 2 151,777.2 3,19 6,197 113,793.7 +37,983.4
Total emissions – location-based
1
152,029.8 114,028.1 +38.001.6
Relative emissions – location-based tCO
2
e/£m 83.4 79.2 +4.2
Taking our renewable energy into account
Total emissions – market-based
2
151,822.7 113,867.0 +37,955.6
Relative emissions – market-based tCO
2
e/£m 83.3 79.1 +4.2
* Our methodologies for reporting energy and carbon data are set out in the appendix on page 195.
** 2022/23 emissions figures are restated for Scope 1, 2 and 3, categories 5 and 8. They include enhanced disclosures based on our comprehensive reporting in 2023/24.
1 Location-based emissions are calculated as the average emissions intensity of the electricity grid.
2 Market-based emissions take renewable energy purchasing into account.
42 Bytes Technology Group plc
REVIEW OF THE YEAR
Supporting our customers
toreduce their emissions
While reducing our own environmental
impact is crucial, one of the biggest
contributions we can make to hastening
the UK’s move to a low-carbon economy
is through the software and technical
solutions we sell to our customers. In
particular, we do this by supporting them
inmoving their on-site servers, products
and services to the cloud, which has the
potential to be more energy efficient than
customers hosting data centres themselves.
We can also support in an advisory
capacity, so customers are able to add
sustainability into their decision making.
We support customers to become more
sustainable by enabling them to hold
online meetings, which reduces travel
emissions, and through solutions such as
Phoenix’s sustainability app. Theapp –
developed with Microsoft and winner of
Sustainable Solution/Service ofthe Year
2022 at the CRN Tech Impact Awards
– connects to energy, water and mileage
data, allowing organisations to start
measuring and understanding their
emissions. However, we are also mindful
of the environmental impact of new
technologies such as AI-enabled tools,
which require additional computing power
and cloud storage, which consume a lot
of energy. We will continue to monitor this
inthe coming year.
Looking ahead
We are clear on what we aim to achieve in
the coming year. Once the SBTi validates
our carbon reduction targets, we will
develop our net zero transition plan to
help us achieve them, and this will build
on the low-carbon action plans we have
used so far. This will include working even
more closely with our top-tier vendors,
which account for more than 80% of our
Scope 3 emissions, to gain a greater
understanding of their net zero plans.
Wetake confidence from the fact that
many of them have well-publicised and
ambitious carbon reduction programmes.
Our biggest partner, Microsoft, for
example, has an ambitious plan to be
‘carbon negative’ by 2030; this includes
reducing Scope 1 and 2 emissions to
nearzero in 2025, and cutting Scope 3
emissions in half by 2030. And, of course,
we will strive to keep reducing our own
emissions, as a business and through the
actions we take as individuals, to help
protect the planet for future generations.
Entrenching sustainability in our culture
Reducing emissions is an ongoing reality that must be lived in the
choices we make every day. Across both our businesses, we focus
on helping our people make sustainable choices, including:
• • Reducing our business travel by encouraging our people to contact
customers and vendors by phone or videoconference whenever possible
• • Supporting hybrid working and efficient working practices to
reducecommuting
• • Encouraging our people to commute in a more efficient way by
installing electric car charging points at our main locations, setting
upa car sharing network and installing secure cycle parking
• • Partnering with Octopus Energy to allow our people to buy electric
vehicles under a salary sacrifice scheme
• • Using materials, energy and water efficiently – for example,
throughPIR sensors, reduced printing, a request system
forconsumables and low-flow bathroom fittings
• • Continuing to highlight the importance of good environmental
management throughout BTG, including controlling office heating
and cooling in a smart manner
• • Working with suppliers and partners to reduce their carbon footprints
• • Developing a carbon literacy programme for our employees,
toraiseunderstanding of environmental issues.
10 0 %
renewable electricity and
green gas in owned offices
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
43
Task Force on Climate-related
Financial Disclosures (TCFD)
As we discussed in Our planet on pages 38 to 43,
wearea responsible business that is committed to
protecting the environment by reducing our carbon
emissions and helping our customers to do the same.
We are acutely aware of the impact climate
change could have on our business and
society, and the risks it brings to businesses
and their supply chains. We support the
broader adoption of TCFD reporting,
because we believe that it will accelerate
business efforts towards the net zero
future we all need to achieve.
Climate change is one of the biggest
challenges facing the world today, and
the UK Government has made it a priority
for all businesses by its focus on climate
policy and regulation. This includes the
upcoming requirement to publish net zero
transition plans in support of the UK’s
overall net zero target.
We have made some changes to our
TCFDthis year to factor in the Companies
(Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022
(Regulations), new UK regulations that
affect our reporting requirements for
2023/24 and our continued efforts to
comply with TCFD recommendations. We
have taken the step to evaluate our risks
and opportunities against a number of
physical climate and transition scenarios.
TCFD recommendation Compliance and cross reference Comments/next steps
Governance see pages 45 to 46
a. Describe the board’s oversight of
climate-related risks and opportunities.
Fully compliant – see pages 45 to 46 N/A
b. Describe management’s role in assessing
and managing climate-related risks and
opportunities.
Fully compliant – see pages 45 to 46 N/A
Strategy see pages 46 to 51
a. Describe the climate-related risks
andopportunities the organisation
hasidentified over the short, medium
and long term.
Fully compliant – see pages 48 to 51 N/A
b. Describe the impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy
andfinancial planning.
Fully compliant – see pages 47 to 51 In 2023/24, we reviewed our risks
against the latest climate science and
external scenarios, incorporating
physical and transition risks.
Our view in summary: we believe that the
direct impact of climate change on BTG
willbe relatively low, given that our primary
business is in software, security and cloud
solutions and IT services, in which we work
with large software companies. This is
because, unlike many companies in
othersectors, we do not have factories or
operations outside the UK and, at present,
we perceive the impact of extreme weather
events in the UK to be relatively low. We do
not require staff and customers to always
attend our offices in person, and the
hardware we sell, which is transported by
third parties, represents a relatively small
part of our business. Like all responsible
companies, we will continue playing our
part by reducing our environmental
impacts. But it’s possible that climate
change may bring some opportunities
forus, as companies look to technology
tohelp them with the systems and services
needed to manage and monitor its impacts.
Nonetheless, the world’s understanding
of climate change and its effects are
constantly evolving, and we need to
monitor this on an ongoing basis to make
sure we can continue to withstand its
impacts and support the transition to
alow-carbon economy.
Compliance with TCFD
This is our third report against the
recommendations of TCFD, which
hasbeen expanded to incorporate the
requirements of the Regulations, which
alsoaligns with the recommendations of
TCFD. This year, we have complied with
all 11 areas of TCFD and, in comments
inthe table that follows, explained
wherewe were previously only partially
compliant. To help readers, we have
summarised ourcompliance in the table
and, to avoid repetition, cross-referenced
to relevant information elsewhere in the
Annual Report – particularly the Our
planet section on pages 38 to 43,
whichshould be read in conjunction
withthisTCFD report.
44 Bytes Technology Group plc
TCFD
Governance
Given the importance of climate change, and that the issues are evolving constantly, we oversee climate change at the highest level of
the Group, and our governance structure ensures that we factor climate-related issues into our thinking throughout the business. Since
1 March 2023, we have had a Group sustainability manager at BTG, responsible for ensuring a joined-up approach between our two
businesses, Bytes and Phoenix. Our governance structure is shown below. A new Board-level ESG Committee was established with
effectfrom 1 June 2024 to monitor the implementation of BTG’s ESG and sustainability strategy (see page 77 for more detail).
TCFD recommendation Compliance and cross reference Comments/next steps
c. Describe the resilience of the
organisation’s strategy, taking
intoconsideration different
climate-related scenarios,
including a 2°C or lower scenario.
Fully compliant – see pages 47 to 51 In 2023/24, we reviewed our risks
against the latest climate science and
external scenarios, incorporating physical
and transition risks – with scenarios
ranging from 1.5°C to 3°C of warming.
Risk management see page 52
a. Describe the organisation’s
processesfor identifying and
assessingclimate-related risks.
Fully compliant – see page 52 N/A
b. Describe the organisation’s processes
for managing climate-related risks.
Fully compliant – see page 52 N/A
c. Describe how processes for identifying,
assessing and managing climate-related
risks are integrated into the organisation’s
overall risk management.
Fully compliant – see page 52 N/A
Metrics and targets see page 52
a. Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with its
strategy and risk management process.
Fully compliant – see page 52 N/A
b. Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
emissions and the related risks.
Fully compliant – see page 52 N/A
c. Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets.
Fully compliant – see page 52 N/A
Executive Committee, management and Group sustainability manager
Operational management of environmental targets and stakeholder engagement
Review and monitor climate-related risks and opportunities
The Board
Overall responsibility for the effective delivery of our environmental targets Oversees climate-related risks and opportunities
Considers climate change as part of our engagement with stakeholders Our CFO is BTG’s executive director for sustainability
The Board, with senior leadership, also oversees governance aspects of sustainability
Sustainability Steering Committee
Sustainability Steering Committee (previously environmental and social steering committees) created in 2021/22
Members drawn from senior leadership and across the business Considers progress against targets and assesses operations from
a sustainability viewpoint Meets quarterly
Operational teams (Better Bytes team and Phoenix Sustainability Network)
Champion practical environmental activity Raise awareness of local social and environment issues
Meet regularly
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
45
Task Force on Climate-related Financial Disclosures (TCFD) continued
Focused oversight at Board and
management levels
Our Board has overall responsibility and
accountability for sustainability, including
the achievement of our environmental
targets, and for overseeing climate risks
and opportunities. This is outlined within
our Sustainability Framework, which
includes our sustainability reporting
methodology – which is available at
bytesplc.com/sustainability. Relevant
performance information is reported to the
Board on a half-yearly basis, which includes
progress against targets, significant actions
taken and any changes to risk, with any
material matters discussed and actions
identified, as necessary.
In addition, sustainability strategies may
also be discussed at the annual budget
meeting to review any material projects
withcapital expenditure, such as on-site
renewable energy generation projects
andappointment of aGroup sustainability
manager. As part ofour enterprise risk
management framework, our principal and
emerging Group risks, and any changes to
these, arealso presented tothe Board
twice ayear for approval.
Strategy
Our strategy is to grow organically by doing
more with existing customers and winning
new ones. But we also want to grow while
minimising our impact on the environment,
which is why our commitment to achieving
net zero by 2040 matters, since it enshrines
that aim in our strategic plans. Depending
on how the effects of climate change
materialise, there could also be
opportunities for us as more customers
look to technology to mitigate its effects.
The Board is supported by our CEO, CFO
and other senior leaders in ensuring that
sustainability remains core to our strategy.
It was again covered at our 2023/24 Board
strategy session, and remains part of
twice-yearly sustainability updates to the
Board. During the year, the Board was
briefed on the progress of our sustainability
initiatives and our TCFD report, along with
receiving standing updates on emerging
external trends and developments, and
stakeholder expectations around
commitments to net zero.
Beyond the Board, we have a tiered chain
of responsibility within the business for
driving, embedding and monitoring
ourapproach to environmental issues,
including consideration of the potential
effects of climate change.
Our Executive Committee is responsible
for the delivery of our environmental
targets, and reviews and monitors climate
risks and opportunities, reporting to the
Board. Our CFO is the executive director
responsible for overseeing climate
change-related activities and, working
withour Group sustainability manager
andthe MDs of our operations, leads
thedevelopment of our climate change
policies. Our CFO is also responsible
foroverseeing climate-related financial
activities and reporting, including
sponsoring the Sustainability Steering
Committee, as well as the Group risk
forum. The forum is made up of senior
colleagues from across our governance
and sustainability, risk management and
finance functions. The Group risk updates
are presented for review by the Board and
Executive and Audit Committees in line
with our risk review cycle.
Analysing our climate-related
risks and opportunities
In 2023/24, we reassessed the climate-
related risks and opportunities that we
identified last year, alongside TCFD
recommendations, and conducted
scenario and financial analyses and
financial risk assessment.
Scenario methodology
To incorporate the most realistic changes
in temperature for the UK, where the
Group’s operations are located, we have
selected three scenarios: two scenarios
below 2°C of global warming above
pre-industrial levels and one scenario of
3°C. Our analyses covered physical risks
(acute and chronic threats relating to
extreme weather) and transition risks
(such as financial, political, social and
reputational factors), which could have a
negative impact on our business, supply
chain and employees.
At operational level, we have our
Sustainability Steering Committee, which
aims to meet quarterly, and at least twice
ayear. It monitors the impact of climate
change through discussions and ensures
we integrate environmental issues into our
strategic planning. The Group sustainability
manager keeps up to date with the latest
science and regulations and works with
other members of the committee to interpret
the potential risks across the business. As
well as the Group sustainability manager,
the committee includes our CFO and other
senior leadership members and colleagues
with relevant functional roles or who have
aparticular interest in this area. Our CFO
reports on the progress of our environmental
initiatives and our risks and opportunities,
as covered by the Sustainability Steering
Committee, to the Executive Committee.
Also at operational level, we have two
staff-led teams, one for each of our
businesses, which promote initiatives,
raise awareness of the importance of
environmental issues and carry out local
activity: the Better Bytes group and the
Phoenix Sustainability Network. These
teams form an integral part of our
collective efforts and report into our
Sustainability Steering Committee.
Given the difference in physical and
transition risks, two different mechanisms
have been used for the scenarios. For
physical risk scenarios, we have selected
three relevant categories from the eight
identified in the Intergovernmental Panel
on Climate Change (IPCC) AR6 Categories
from Working Group III (IPCC AR6 WGIII).
These eight categories range from C1
‘limit warming to 1.5°C (>50%) with no or
limited overshoot’ up to C8 ‘exceed
warming of 4°C (>50%)’. BTG has chosen
to use C1, C3 and C6, as detailed in
thephysical risk scenarios table. For
transition risks, we have chosen to use
the International Energy Agency (IEA)
World Energy Outlook 2023 scenarios,
which relate to global policy decisions
andthe adherence to these. These
rangeacross three different trajectories,
asdetailed in the transitionrisk
scenariostable.
46 Bytes Technology Group plc
TCFD
We considered these risk scenarios
overa broad timeframe, from 2023/24:
• • Short term: one to three years – the
depreciation of the majority of our IT
assets, which reflects the length of our
typical customer software contracts
• • Medium term: three to ten years – to
2030, the target date for our main
emissions goal
• • Long term: ten to 26 years – which
covers our net zero goal of 2040,
andthe start of 2050, the UK’s net
zero target.
Some risks may arise in the shorter term;
however many of the effects of climate
change will arise in the longer term and
therefore come with an inherent level of
uncertainty. We have identified those – and
potential opportunities – most likely to
affect BTG, as set out in the tables on
pages 48 to 51. The magnitude of our
climate-related risks and opportunities not
Physical risk scenarios
Group notation IPCC AR6 WGIII Category Description
Low C1 Limit warming to 1.5°C (>50%)
with no or limited overshoot
Medium C3 Limit warming to 2°C (>67%)
High C6 Limit warming to 3°C (>50%)
Transition risk scenarios
Group notation IEA Description
1
NZE Net Zero Emissions
by 2050 Scenario (NZE)
‘maps out a transition pathway that would limit
globalwarming to 1.5°C’
2050 surface temperature prediction under this
scenario is 1.4°C above pre-industrial levels
APS Announced Pledges Scenario (APS) ‘gives governments the benefit of the doubt and
explores what the full and timely implementation of
national energy and climate goals, including net zero
emissions targets, would mean for the energy sector’
2050 surface temperature prediction under this
scenario is 1.7°C above pre-industrial levels
STEPS Stated Policies Scenario (STEPS) ‘based on current policy settings and also considers
the implications of industrial policies that support
clean energy supply chains as well as measures
related to energy and climate’
2050 surface temperature prediction under this
scenario is 2.4°C above pre-industrial levels
1 From the IEA World Energy Outlook 2023.
only depends on the physical impacts on
our business operations; it is also shaped
by regulatory developments in our markets,
our goal to reduce our operational carbon
footprint, and our efforts to understand and
shape a culture of climate action.
While we acknowledge that some physical
risks will be present well below the 2°C
threshold set out by TCFD, given these
risks are largely immaterial to our
business we have deemed them to be
aminor financial risk – except for under
theC6 scenario, where more extreme
weather events and heating might require
capital investment. We have confidence
that the business would be resilient
against the physical risks of climate
change under the scenarios assessed.
Nonetheless, we will continue to monitor
the potential impact of increases in global
temperatures and will adapt our analyses
as necessary.
Overall, our analyses showed no
immediate material risks that would affect
our strategy or performance, and so
concluded that climate change remains
an emerging risk for BTG. However, as
theanalyses demonstrate, the transition
risk that suggests a moderate financial
impact is about staying aligned with
stakeholders’ expectations and regulation
relating to climate change. In2022/23,
we elevated the regulatory aspects of
sustainability to a principal risk. This
principal risk incorporates all aspects
ofsustainability and, in particular, relates
to predicted and unforeseen future
regulations, which may assess areas that
we haven’t measured with thesame focus
as climate, such as biodiversity and social
aspects of sustainability. The risk from
climate remains as an emerging risk
(seeour risk report for more details on
pages 53 to 62).
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
47
Task Force on Climate-related Financial Disclosures (TCFD) continued
To analyse the materiality of the risks,
weused the same process and financial
impact categories to categorise the
climate risks as we do for principal risks.
An assessment has been made on the
potential financial cost/benefit for each
ofthose identified and this dictates
therelevant materiality of each risk/
opportunity. The materiality of the risks
then informs whether the business needs
to take into account the risk/opportunity
in strategic or financial planning. At
present, the materiality of the risks and
opportunities to the business is considered
low and our resilience to risks high. The
following table shows these categories,
whichare also referenced in the risks
andopportunities tables.
Short term: one to three years
Medium term: three to ten years
Long term: ten to 26 years
Focusing on Scope 3
opportunities
Developments this year have not changed
our initial conclusions around the nature of
climate change in itself as an emerging risk
for BTG, as described above. We are
therefore confident that it has had a limited
effect on our accounting judgements and
estimates this year, and have determined
that it has had no material impact on
ourasset and liability valuations at
29 February 2024.
However, like other companies, we
needto focus on our own impact on
theenvironment through our emissions.
Weknow that helping our customers
reduce their emissions through
technology is an opportunity for us,
although this is still relatively difficult to
measure. So, while keeping a watching
brief on climate science and related
policy, we’ve been working with an
external partner to analyse our Scope 3
emissions more fully. For the first time,
wewere able to report on all the Scope 3
categories relevant to our business,
which made a considerable difference
toour overall footprint. Completing this
work was an important milestone and
hasenabled us to better understand the
potential effects of climate change on
ourbusiness, and toset meaningful
targets for reduction. We submitted
ournear-term and net zero targets to
theScience Based Targets initiative
(SBTi) for validation this year.
The data we collected is also helping us
explore ways we can reduce emissions in
partnership with our vendors and customers,
and to determine whether we need to factor
climate issues into our future financial
planning. For more detail about this work,
see Our planet on pages 38 to 43.
Summary of our key climate-related risks
Risk
description
Risk
category
Potential
impact
Mitigation
actions
Scenario
andpotential
financial risk
Transition risks
Increased pricing of
carbon (or carbon-
intensive materials,
goods and services),
carbon reporting
obligations, regulation
ofproducts and services,
and exposure to litigation
Policy and
legal
The most likely effect of any
changes would be an increase
inoperating costs. For example,
reporting criteria could involve
additional time and expertise, or
amandatory reduction in carbon
emissions could require extra
capital expenditure. Failure to
comply with this risk, which is
relatively low, could result in
damage to our reputation and
possible regulatory fines in
certaininstances.
We have several internal groups
inplace to manage sustainability,
including the effects of climate
change on our business. We
continually monitor the regulatory
and legal environment and take
external advice as required. A large
percentage of our supply chain
iswith Microsoft, which has a
‘carbon negative’ date of 2030. If
itachieves this, it will mitigate the
majority of our supply chain Scope
3 emissions from 2030 onwards.
Wewill continue to monitor our
other vendors too, including new
ones – we will be expanding our
onboarding to include information
around their carbon emissions and
reduction targets.
NZE – minor
APS – minor
STEPS – minor
Risks and opportunities
Estimated financial impact Risk category
<£2.5m Minor
£2.5m to £5m Moderate
£5m to £7.5m Material
£7.5m to £12.5m Severe
48 Bytes Technology Group plc
TCFD
Risk
description
Risk
category
Potential
impact
Mitigation
actions
Scenario
andpotential
financial risk
Transition risks continued
Changes in customer
working behaviour
andinfrastructure
requirements
The move away from full-time,
office-based working
precipitated by Covid-19
could accelerate if climate
change-related extreme
weather events routinely made
it difficult to reach centralised
workplaces. This could further
encourage employees to
work from home or at other
less formal locations.
Market These changes could mean that
customers no longer needed so
much of the hardware infrastructure
that we supply, such as desktop
computers and telephones.
However, hardware makes up less
than 5% of our business, and the
software side is unlikely to be
affected. So, the impact on us
would be relatively small and
potentially feeds into some of the
opportunities identified around
increased cloud computing.
Given this risk is relatively
insignificant, and within BTG’s risk
tolerance, we have not developed
formal mitigation plans.
NZE – minor
APS – minor
STEPS – minor
Substitution of existing
products and services
that we currently sell,
with new technologies
that are not in our
portfolio
Technology On balance, we believe that most
ofthe software we sell would not
beaffected by this situation,
whichpresents both risks and
opportunities to BTG. If our
customers moved away from our
existing products and services,
andwe did not have relationships
with vendors that sold the new
in-demand products and services,
we would lose sales. However, if we
had built those relationships and
could offer those new products and
services, we would benefit from
additional revenue opportunities.
We analyse market trends to keep
up with changes in technology and
customer preferences and draw
onassistance and guidance from
external advisors as required.
Wealso have internal groups that
focus on managing sustainability,
including the effects of climate
change on our business.
NZE – minor
APS – minor
STEPS – minor
Concerned or negative
perceptions from
stakeholders that we
havenot responded
appropriately to
climatechange
Reputation Damage to our reputation could
affect all our stakeholders.
Investors increasingly have a
sustainability mandate – so a poor
or damaged reputation could
negatively affect our investment
case. Customers often include
asustainability score when
comparing suppliers. Reputational
damage would lower our score,
which, over time, would have a
negative impact on our revenue.
Our suppliers could also exert
pressure on us if our reputation
wastarnished. Any damage to our
reputation could also affect our
ability to attract and retain skilled
staff, who now look to employers for
more than just financial reward and
advancement opportunities.
We monitor our external reputation
through regular dialogue with our PR
agency and external advisors and
engagement with our institutional
investors, our vendors’ perception
through periodic reviews, our
customers’ views through our
customer net promoter score (NPS),
and our people’s views through our
employee NPS and through briefings
from our non-executive director
withresponsibility for employee
engagement. We monitor investor-
focused scoring through ISS,
andact on areas where we can
improve. Public disclosures
through CDP and EcoVadis enable
us to understand our position
within our peer network and enable
engagement with customers.
Wealso create opportunities for
engagement with all our stakeholders
via our Annual Report and Annual
General Meeting. We receive
insights on our performance from
our internal sustainability-focused
groups. We take account of the
feedback from these sources in the
context of our public commitments.
NZE – moderate
APS – moderate
STEPS – minor
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
49
Task Force on Climate-related Financial Disclosures (TCFD) continued
Risk
description
Risk
category
Potential
impact
Mitigation
actions
Scenario
andpotential
financial risk
Physical risks
Increase in extreme
weatherevents and
variable weather patterns
in the UK causing
disruption to energy
andrelated systems.
Such physical risks could
make it difficult for our
people to get to work, or our
vendors and subcontractors
to deliver their products
andservices to us or our
customers due, for example,
to blocked roads or public
transport failure.
Acute/chronic Low-impact scenario (C1) will have
alimited impact on the business,
ascoastal inundation and localised
flooding is likely to be minimal.
Under medium- and high-impact
scenarios, this risk increases but is
dependent on tipping points, such
as that of the Greenland ice sheet,
which could increase sea levels.
However, none of our UK locations
is at high risk of flooding – although,
in extreme weather conditions,
commuting to us from elsewhere
could be challenging.
Once-a-decade extreme events
(pre-industrial) will become more
frequent under each scenario as
warming increases. Periods of
extreme heat could affect productivity
and increase emissions from
officesthrough increased use of air
conditioning. Prolonged heatwaves
are still expected to be limited in the
UK under 2°C or lower scenarios,
with a relatively small impact to the
business and energy use.
Increased extreme weather could
affect power lines. With the ability to
work remotely and with employees
distributed across the UK, as well as
resilient cloud-based systems, the
impact to business activities and
productivity is considered limited.
If extreme weather events affect
power lines, or flooding affects
travel to offices, mobile
connectivity and our network
access means that our staff could
work remotely during times of
power interruption. Most of our IT
requirements are hosted in the
cloud, so we have limited physical
connectivity to any one site. We
have alternative power supply
capabilities and multiple vendors
can provide additional data
connectivity, to serve locations
with on-site computing needs.
In a hotter climate and with more
frequent heatwaves, the office
environment would need to
maintain comfortable working
conditions for employees, which
iscurrently serviced through
theHVAC system. To manage
emissions, we would look to
usethe most efficient and least
polluting refrigerant gases and
explore alternative options to
ensure a comfortable working
environment, while also maintaining
carbon efficiency. This may include
the addition of solar panels, to
provide self-generated power in
more extreme scenarios, and the
UK may look to amend working
hours to a working pattern similar
to more southerly European
countries today.
Low (C1) – minor
Medium (C3)
– minor
High (C6)
– moderate
Supply chain disruption
from the physical impacts
of climate change
Global supply chains could be
affected by the locations of our
suppliers in more severely affected
parts of the globe and through
disruptions to distribution channels.
Issues are most likely to affect the
relatively small hardware and IT
services parts of BTG. Software,
which makes up more than 94%
ofour gross invoiced income, is
unlikely to be affected, but we
willwork with our suppliers to
understand their climate change-
related risks. We perceive that the
impact from this will be fairly small,
given our top-tier suppliers will
already be taking steps to
ensurethe sustainability of
theirown businesses.
Low (C1) – minor
Medium (C3)
– moderate
High (C6)
– moderate
Short term: one to three years
Medium term: three to ten years
Long term: ten to 26 years
50 Bytes Technology Group plc
TCFD
Summary of our key climate-related opportunities
Opportunity Description How we’re responding
Scenario and
potential financial risk
Expansion of
cloudproducts
andservices
The desire to be more sustainable
– and limit climate change – is
already encouraging organisations
to move their IT servers to the cloud.
This is likely to continue, and may
accelerate, as the climatechange-
related risks of accessibility and
physical damage prompt entities
tountether themselves from their
physicallocations.
Since we are specialists in cloud technology, this trend
would have positive effects on our sales. We already
actively promote the sustainability benefits of moving
tothe cloud, along with our expertise in this.
Under the more progressive scenarios, such as NZE,
our opportunity would be greater than under the slower
mechanisms – but there are several reasons for shifting
to the cloud, so this may continue increasing irrespective
of global climate policies.
NZE – minor
APS – minor
STEPS – minor
Demand for
resource
andenergy
efficiency
The growing demand for more
energy efficiency, and for lower
consumption of water and
materials, presents opportunities
for us, because customers are
likely to need new technology to
help them identify, monitor and
manage risk and regulatory
compliance of such climate-
related matters.
Factors linked to the drive for
low-carbon energy – such
aspolicy incentives, new
technologies, participation in
thecarbon market and localised
energy generation – could present
more opportunities for us.
Given BTG’s established relationships with leading
vendors and our understanding of their software
offerings, we are well positioned to provide
appropriate solutions, as and when demand
increases. This could enhance our product
portfoliosleading to additional revenues.
Under the more progressive scenarios, customers
might be more likely to request information about
product sustainability, which could open up
opportunities for other services.
NZE – moderate
APS – moderate
STEPS – minor
Demand for
sustainable
hardware
Customers pursuing
renewableenergy programmes,
energy-efficiency measures
andresource replacements or
diversification may need new,
more sustainable hardware as
wellas associated software.
Although hardware sales are not our primary revenue
stream, we can advise customers on the most
environmentally friendly models, so this could
positively affect our revenue streams. We can also
support customers in advising on models that meet
certain certifications such as TCO, ePEAT or EnergyStar.
As with the ‘demand for resource and energy
efficiency’ opportunity, under more progressive
scenarios customers might be more likely to request
information about hardware sustainability, and this
could open up opportunities for other services.
NZE – minor
APS – minor
STEPS – minor
Keeping up with
socialchange
Companies with a market-leading
response to climate change could
attract new suppliers, customers,
investors, markets and assets.
Some public sector frameworks
already rate suppliers on their
sustainability credentials.
Being known for our sustainability
credentials could help us to
attractand retain talent. The
ITjobs market is extremely
competitive and increasing
ourheadcount is essential
forourgrowth.
We are raising our sustainability profile, for example
by submitting our emissions targets this year to the
SBTi for validation, through public disclosures such
asCDP and by taking into account the expectations
ofsustainability ratings agencies with the aim of
improving our scores. We are also proactive about
oursupport for the environment and promote this
toour employees. For example, we have:
• • Employee-led sustainability committees
• • An employee electric vehicle and cycle-to-work
programme
• • Flexible working hours (enabling employees
totravel out of peak hours, cutting journey time
andcarbon emissions)
• • Hybrid working (enabling staff to work from home
some of the time, reducing carbon emissions)
• • Electric charging points in our staff car parks.
Under the various scenarios, STEPS would provide us
with the biggest opportunity to be leaders in our field.
Incomparison, however, it might be more difficult to
achieve our goals if government policy lags behind.
NZE – minor
APS – minor
STEPS – moderate
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
51
Task Force on Climate-related Financial Disclosures (TCFD) continued
To reflect the importance of climate-
related risks and our commitment to
reporting against TCFD recommendations,
climate assessments are integrated into
our overall enterprise risk management
(ERM) framework. Thisis set out in our
risk report on pages 53 to 62 of this
Annual Report. Here, we summarise the
risk management process in relation to
climate-related risk.
This year, we have added an additional
physical risk relating to supply chains,
which is part of a broader principal risk
(see page 62). The remaining risks and
opportunities remain the same, but we
have worked to quantify the financial risk
against potential climate scenarios.
Board responsibilities – Audit
Committee
The authority for delivering the risk
framework is delegated by our Board
tothe Audit Committee, which formally
reviews our risk performance twice
ayear, using our ERM framework.
Given the nature of our business, and
therisks and opportunities presented by
climate change (as set out in the tables
onpages 57 to 62), the most relevant
climate-related metrics and targets for our
business are in calculating and meeting
our near-term and net zero carbon
reduction targets. Below are the targets
we have set for carbon emissions, which
we submitted to the SBTi this year for
validation (the targets for 2025/26 do not
meet SBTi’s criteria for validation because
of their proximity in time, but we will
maintain these as business targets):
• • To reduce our Scope 1 greenhouse
gas (GHG) emissions by 50% by
2025/26 and 60% by 2030/31 from
abaseline of 2020/21
• • To reduce our Scope 2 GHG emissions
by 50% by 2025/26 and maintain a
100% reduction by 2028/29 from
abaseline of2020/21
Since2022/23, the Audit Committee
hasconsidered climate-related risks as a
standing item on its agenda, underlying the
importance of this area to our business.
Executive and operational
management
Our CFO is the executive responsible for
overseeing the implementation of our
ERM framework, and compliance with
itacross the Group. Risk management,
which includes a review of climate-related
risks together with other risks faced by
thebusiness, is a standing item on the
agenda of our Executive Committee
meetings, and formal feedback on risk
management is integral to our operating
company board meetings. This ensures
accountability at each level for identifying,
monitoring and proactively managing
riskand compliance issues. Reviewing
climate risk also forms part of Bytes’ and
Phoenix’s board agendas. This is set out
in the risk management section of our
riskreport on pages 54 to 56.
• • To reduce our Scope 3 GHG
emissions by 50% by 2030/31
fromabaseline of 2022/23
• • To reach net zero GHG emissions
across the value chain by 2040/41.
Our net zero target is based on absolute
emissions, but we are measuring against
a revenue-intensity metric so we can
assess the impact should the business
significantly change. To meet our Scope 2
targets, we also have a commitment to
maintain the purchase of 100% renewable
electricity for our owned offices.
Annual bonuses for executive directors
are based on achieving financial and
non-financial targets, including an
external ESG quality assessment. While
detailed performance targets aren’t
disclosed for the forthcoming year, the
outcome of the 2023/24 ESG target, based
on the achievement of an ISS Quality and
Our business processes ensure that
thepolicies, procedures and control
environment set by the Board, and our
commitments on topics such as climate
risk, are understood and adhered to
across BTG. The factors we consider in
drafting policies and procedures include
regulatory requirements, reputational and
physical risks, and our opportunities to
advise our customers on sustainable
technology solutions. The evaluation
criteria include relevance to our industry
and sustainability, regulatory and legal
risks, financial implications and the areas
of our business affected.
We manage our environmental impacts
through the framework of the ISO 14001
environmental management system.
ISO14001 also requires that risks
andopportunities be identified, and
processes put in place to mitigate and
manage them. Both Bytes and Phoenix
are certified to ISO 14001. For more about
our principal risks and how we manage
and mitigate them, see pages 56 to 62.
Governance Score, is set out on page 118
of the directors’ remuneration report, with
more detail set out on page 126.
In March 2022, we achieved our goal to be
carbon neutral by offsetting our operational
emissions through reputable carbon credit
schemes. We did this through a partnership
with carbon-offsetting company Ecologi,
and this year we invested in carbon removal
projects as well as carbon reduction,
carbon avoidance, nature and
communityprojects.
For more on our carbon metrics and
progress to reduce carbon emissions,
see Our planet on pages 38 to 43.
Our methodologies for reporting
environmental metrics are set out
intheappendix on page 195.
Risk management
Metrics and targets
52 Bytes Technology Group plc
TCFD
Maintaining a robust and
agile approach to risk
In an uncertain year for global business, we closely
monitored the risks to BTG, and the policies and
procedures we have in place to manage them.
We’re confident that our enterprise risk
management (ERM) framework remains
fit for purpose, keeping our business
nimble and aligned to our cautious
approach to risk.
The unsettled geopolitical and
macroeconomic environment persisted
this year, affecting business and people
around the world. Russia’s war in Ukraine
continued unabated, contributing to
higher energy prices and inflation. As
tensions rose across the Middle East after
the 7 October attack on Israel, strikes on
commercial ships in the Red Sea forced
companies to pay higher insurance rates
or a higher cost to reroute goods around
southern Africa. Meanwhile, interest rates
remained high.
This all served as a strong reminder of
theimportance of having a robust, agile
approach to managing risk. For us, risk
management is a 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. The changes
we made in 2022/23, by including risk
management as a standing agenda item
at each of the subsidiary board meetings,
have solidified the Group’s bottom-up
approach to risk.
Managing existing risks and
identifying new ones
Through our ongoing risk monitoring
process, we assess current and emerging
risks. The evolving geopolitical and
macroeconomic challenges this year
increased the potential for economic
disruption, especially as it affects our
customers, which is one of our principal
risks. While we remain vigilant, our
business has performed strongly through
various external crises in recent years,
demonstrating its resilience.
Since our last Annual Report, we
haveadded two new principal risks,
reclassified an emerging risk as a principal
risk and added one new emerging risk.
The first new principal risk relates to
supply chain management, because a
failure to monitor our suppliers could lead
to reputational and financial damage. We
also note that escalating conflicts could
also affect our supply chain – although
the risks from the Red Sea shipping
disruptions are considered low because
hardware is a comparatively small part of
our business. The second new principal risk
relates to the regulatory and compliance
landscape, where changes in laws,
regulations and industry standards
couldsignificantly affect our operations,
financial stability and reputation.
In 2022/23, our primary emerging risk
wasclimate change and sustainability.
This year, the Group Risk Committee
decided to elevate sustainability and ESG
to a principal risk, given fast-changing
regulatory requirements and enhanced
scrutiny from stakeholders around
reporting and disclosure requirements.
The physical risk from climate change
remains unchanged as an emerging risk,
as does our second emerging risk from
2022/23, around keeping pace with
socialchange.
This year we identified a third emerging
risk, related to artificial intelligence (AI)
and what it means for our customers. The
potential AI risks include moral, legal and
ethical issues relating to the information
sources that the technology is trained
onand extracting data from, and the
social issues arising from the potential
replacement of human roles in the
workplace. However, for our business
directly, we consider AI to be an opportunity,
because we provide support and sell AI
products to our customers.
Increasing the scope
of internal audit
For nearly three years, we’ve been
working closely with PwC as our internal
audit partner. We have a good relationship
and believe the partnership adds significant
value to our risk management. This year,
different PwC teams, outside the internal
audit team, performed additional work
documenting some of our key processes,
including general IT controls, tax and
governance, which maintains independence.
Considering the growth ofour business,
we’ve asked PwC to increase its capacity
by 15% to enhance assurance as we
continue to grow.
While we will never be complacent, I’m
confident that the steps we took this year,
combined with our ongoing and careful
risk management, mean we will remain
resilient in the year ahead.
Andrew Holden
CFO
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
53
RISK REPORT
Risk management
How we manage risk
BTG operates within the information
andcommunications technology sector
intheUK and Ireland. This means we
areexposed to the risks that financial,
political, regulatory, technological and
legal events might bring – risks that could
adversely affect how or whether we
achieve our strategic, operational,
compliance and reporting objectives.
Based on our ERM framework, our
approach to risk identifies and addresses
any potential barriers to achieving our
strategic objectives and to making
themost of opportunities for
competitiveadvantage.
Our ERM-based approach
The purpose of ERM is to achieve three
key objectives:
• • Oversight – all critical risks are
identified across BTG, and managed
and monitored using a holistic
approach that is consistent with
ourapproved risk appetite
• • Ownership and responsibility – the
ownership of risk is assigned to individual
senior managers, who are responsible
for identifying, evaluating, mitigating
and reporting our risk exposure
• • Assurance – the Board, its committees,
BTG’s Executive Committee and
operational management have
reasonable assurance that we are
managing risk appropriately within
defined levels, and so that it brings
value to our organisation.
This ERM framework is the foundation of
our risk management approach. It’s tailored
to suit the way we operate – from functional
management, up through our operating
company boards to Group level. It’s about
managing risk across the organisation and
enables us to deliver our strategy.
Our risk appetite
Our ERM framework reflects our risk
appetite, which can be defined as
cautious with a low inclination for
takingrisks that may result in significant
disruption to the company’s operations.
Our appetite shapes how we make
decisions about how best to manage
each of our principal risks. We carefully
evaluate the level of operational risk
weare prepared to take.
BTG Board
Sets Group and operating
company risk tolerance and
sign-off levels
Owns Group risks, and those local
operating company risks best
managed centrally
Reviews risks using key
performance indicators and seeks
opportunities to reduce risk effects
Audit Committee
Reviews Group and operating
company risks
Reviews effectiveness of risk
management frameworks
Ensures operating company risk
processes are aligned
Reviews decisions and KPI
objectives to ensure the Board
is controlling risks effectively
Internal review
Using control
standards to
measure risk
management
and control
effectiveness
ERM
framework
External review
Provides assurance and
counters any internal
bias in evaluating risk
management framework,
techniques and control
effectiveness
Operating
companies
Operating company boards
Ensure that risks are managed appropriately, in line with Groupguidance
Set operating company risk objectives, measure risk, authorise/support
change for risk control and own board-level risks
Operating company risk committees
Including Cybersecurity Management Forum, Information Security
Management Forum, Quality and Environment Forum, and Change Boards
Provide information and KPIs and ensure operational changes reflect risk
objectives and corrective action is taken by owners
Operating company risk owners
Heads of department are responsible for ensuring risks are owned and
operated according to board direction and oversight
Internal experts
Provide expertise on risk
management, tolerance,
treatment and control;
deliver objective advice
toGroup and operating
companies; and ensure
training increases
knowledge and
understanding
Financial
risk
Strategic risk
Process and
systems risk
Operational
risk
Regulatory
risk
Our risk governance structure
54 Bytes Technology Group plc
RISK REPORT
We seek to minimise the risks from
unforeseen operational failures in our
business and have suitable mechanisms
in place to identify issues and take
necessary actions to minimise losses.
Day to day, our ERM is about:
• • Identifying negative and positive
riskcircumstances
• • Assessing how likely or serious those
risks could be
• • Creating and monitoring a strategy
torespond to those risks
• • Creating value for our shareholders
and other stakeholders
• • Helping our businesses achieve their
objectives by proactively minimising
the risk in their business plans.
Our ERM framework helps the Board to
identify risks directly, to own risks that are
beyond the risk tolerance of our operating
companies, and to collate a set of
high-impact – or principal – risks relevant
to our whole Group. In identifying risks,
the Board is supported by our executives
and managers across our business who
are experts in their respective areas – for
example, our cybersecurity specialists
monitor cyberthreats.
BTG’s directors have committed
theorganisation to a process of
riskmanagement that is aligned to
theprinciples of the UK Corporate
Governance Code, the Committee
ofSponsoring Organizations of the
Treadway Commission and the ISO 31000
Integrated Enterprise Risk Management
Framework. The ERM methodologies are
also defined through continued research
and development, and are benchmarked
against international best practice.
Although, through the Audit Committee,
our Board has overall responsibility
forrisk – including establishing and
maintaining our risk management
framework and internal control systems,
and setting our risk appetite – everyone
atBTG plays a part in protecting our
business from risk and making the
mostofour opportunities.
No matter how diligently we monitor our
environment or scrutinise sophisticated
global intelligence data, risks can appear
and accelerate with little or no warning.
We remain confident that the time,
resources and effort we have invested,
and will continue to invest, in managing
risk have prepared and equipped us to
manage threats effectively. We believe
this means we can provide our business,
people and customers with reasonable
assurance of staying secure, and so
continue to benefit from the opportunities
in our sector.
Our primary emerging risk
In 2022/23, our primary emerging risk
wasclimate change and sustainability.
InOctober 2023, the Risk Committee
agreed to elevate sustainability and ESG
to a principal risk, given ever-evolving
regulatory requirements, as well as
enhanced and more in-depth reporting
and disclosure requirements being
expected by our stakeholders, including
customers and investors (see page 62).
The climate-related physical and transition
risks remain as an emerging risk, because
these risks are not yet materially affecting
our business in the short to medium term
(see pages 44 to 52).
Our Board manages and monitors
emerging risks closely, with oversight
from the Audit Committee. We put climate
change and sustainability under particular
scrutiny in 2023/24, fully calculating our
Scope 3 emissions and submitting our
near-term and net zero carbon reduction
targets to the Science Based Targets
initiative (SBTi).
Climate change
The physical impacts of climate change
are a potential risk to our people and
facilities, and to those of our customers
and suppliers. Climate change’s effects
on the economic landscape, technology
use and regulation could also be a threat.
While we’re working to reduce our
ownimpact on the climate, as a non-
manufacturing business the greatest
contribution we can make to alleviating
climate change is by supporting our
customers to use technology in a
sustainable way – particularly by moving
their IT products and services to the cloud.
To reduce our own environmental impact,
in 2022/23 we relaunched our
Sustainability Framework. This sets out
our sustainability governance and targets,
and how we will monitor and measure our
progress. During 2022/23, as well as
submitting our targets to the SBTi, we
submitted our first scoring disclosure to
CDP. We also remain certified by the ISO
14001 environmental operating system.
Our approach supports organisations that
are committed to working with sustainable
suppliers, in line with our strategy of
delivering high-net-value solutions.
Our Board continues to analyse what
challenges could emerge from more
climate change-related legislation or
commitments by government, and
theirimpacts on this emerging risk.
Our secondary emerging risk
In 2022/23, we identified a second
emerging risk around social change,
which we reviewed in the second half of
2023/24 and still consider to be emerging.
Younger generations and post-pandemic
attitudes could change the way we work
and how we need to respond to our
people. To identify changes, we are
closely monitoring our recruitment,
attrition rate and insights from staff, and
we review this risk at every opportunity.
Keeping pace with social change
Our customer and talent pool might be
limited if we are not seen as a progressive
organisation. People, particularly of a
younger age, are looking to engage with
companies that do the right thing when
itcomes to being a responsible part of
society. As younger generations join the
workforce, we are starting to see changes
in expectations around work-life balance.
This is seen through generational and
wider cultural change, as well as since
theCovid-19 pandemic, and has led
someto reconsider their life goals.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
55
We have long identified that our staff
needmore than just to be well paid: they
need opportunities to develop, flexibility
intheir working arrangements and for
thebusiness to feel like a cultural fit.
Wecontinue to take steps to meet these
expectations, and to build on the actions
already taken – such as increasing the
initial annual leave allowance, introducing
company-wide personal development
plans for all staff and increasing maternity
pay. We have also introduced the option
for staff to take two additional wellness
days each year, plus a volunteering day.
We regularly listen to our employees
through Insights submissions and forums,
and we encourage a culture of openness.
Generational changes have also brought
more open minds, particularly in relation
to gender, race, religion, sexual orientation
and a desire to treat everyone equally – as
well as to accommodating and celebrating
difference. We already hold these values
at our core, but need to continually
monitorand keep pace with these changes.
Notdoing so could affect our ability to
attract and retain not only employees but
customers, when they also start to reflect
new social values and require their supply
chain to do the same.
Our tertiary emerging risk
In October 2023, we identified a third
emerging risk from AI and the impact this
might have on our customers and their
employees. At the moment, we consider
AI and machine learning an opportunity
for our business, as we expand sales into
areas such as Microsoft’s Copilot and
support our customers to capitalise on
this emerging technology.
However, as well as opportunities,
AIbrings several inherent risks. These
potential risks come from moral, legal and
ethical issues, relating to the information
sources that the AI technology is trained
on and extracting data from, with potential
copyright and other legal issues, and
thepotential replacement of many
rolesintheworkplace in the longer term.
We will discuss and review these through
our ERM approach to risk management
asthe technology develops and its wider
impact is better understood.
Right now, having fewer users within our
customer base would negatively affect
our profitability. And those most likely
tobe replaced with AI in the future
arepeople who work with technology,
ratherthan those who do manual work.
GenAI may also present a cybersecurity
risk because, as it develops, the
toolwillallow for more sophisticated
impersonation, such as deepfakes. These
could be used in several ways to cause
financial and reputational damage, including
more convincing phishing attacks or ‘fake’
videos conveying incorrect information.
There is uncertainty about how, where and
to what extent AI will affect society too. As
such, our business will continue to review
the risks and opportunities presented by
this and other emerging technologies.
In 2023/24, the economic situation
remained as uncertain as last financial
year, with the crisis continuing in Ukraine,
increased inflation and uncertain
geopolitics. Although we performed
strongly and managed risks well last year,
we have amended our principal and
emerging risks to account for changes
inthe market and society, and with our
vendors. We now have 14 rather than 11
principal risks, taking into account the
following changes.
• • The risks called Economic disruption
and Inflation have been amended.
Economic disruption now focuses
oneconomic impacts affecting
ourcustomers, while Inflation now
focuses on the internal effect on
ouremployees.
• • The risk called Increasing debtor risk
has expanded and been renamed
Working capital. It now includes the
financial risk of an increased aged
debt profile, as well as creditors
andthe risk of vendors changing
theirpayment terms.
• • We have expanded our definition of
the risk called Competition to include
the evolving competitor landscape,
such as through AI and marketplaces.
• • The risk called Relevance and emerging
technology now incorporates the cost
of staying current, and includes the
cost of additional resources as well
asupgrading the technologies we
useand sell.
• • We have expanded the risk called
Business continuity failure to includerisk
to and from people – like insider threats.
• • Under the risk called Attract and retain
staff while keeping our culture, we have
amended a widespread IT shortage to
a shortage in emerging areas, such as
AI, where expertise is in high demand.
• • The risk called Climate change and
sustainability has risen from being an
emerging risk to a principal risk called
Sustainability/ESG. The physical
threats from climate change will remain
as emerging, but the elevated principal
risk is about keeping up with regulatory
requirement changes and staying ahead
of expectations from stakeholders.
• • We have added a new principal risk
called Supply chain management.
Therisk is based on the time and effort
needed to manage the supply chain
given increasing focus on compliance,
audits, sustainability and reporting.
• • We have added another new principal
risk called Regulatory and compliance,
which relates to the inherent risks from
evolving regulatory and compliance
landscapes.
• • We are monitoring our new emerging
risk around the impact of AI and machine
learning. This technology has the
potential to change the internal IT and
working landscape and to present risks
from moral, legal and ethical standpoints.
Risk management continued
Our principal risks and uncertainties
56 Bytes Technology Group plc
RISK REPORT
Financial
1 Economic disruption
Risk owner CEO
The risk
This risk includes the impact of the crises in Palestine
andthe Red Sea and the continuing conflict 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
during the current cost-of-living crisis, disruption to shipping
through the Red Sea and the Israel–Palestine conflict.
These 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. Increased costs from
shipping diversions away from the Red Sea could have time
and cost implications for imported goods.
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
Risk owner MDs of subsidiary businesses
The risk
BTG faces pressure on profit margins from myriad
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.
Changes since last financial year
Increase
No change
Decrease
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
57
Financial
3 Changes to vendors’ commercial model
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. Where
vendors have changed, such as Broadcom purchasing
VMware, we have also seen AWS and Dell increasingly
embrace the reseller community. So, overall, for BTG
theseverity of this risk is unchanged.
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 materiality of this risk has not been realised yet,
butitremains a risk.
The impact
These incentives are very valuable and contribute to our
operational profits. Significant changes to the commercial
models could put pressure on our profitability.
4 Inflation
Risk owner CFO
The risk
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. This rate is above the
Bankof England’s target of 2%, although expectations
suggest it could be 2% by the second half of 2024.
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.
At the start of 2023/24, varying levels of wage increases
were rolled out for our employees, with a greater
percentage increase for lower-paid staff. This was to help
our employees maintain their standard of living and be able
to keep up with essentials such as rent and mortgage
payments, and energy and food bills.
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
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.
In 2023/24, we have seen debtor days stabilise as inflation has
reduced, but the number of days is yet to return to base level.
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.
Our principal risks and uncertainties continued
58 Bytes Technology Group plc
RISK REPORT
Strategic
6 Vendor concentration
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.
Hardware is not a core element of our business but is
asteady sector, so we monitor supply closely. We also
monitor the geopolitical situation continually and work
closely with suppliers to stay fully informed, so that we
canrespond quickly should the landscape change. With
adiverse portfolio of suppliers and vendors, we are able
tooffer alternatives to customers if there is a particular
vendor with a supply issue. Given this risk is largely driven
by geopolitical and macroeconomic factors, we maintain
awatching brief so that we can react swiftly if we need to.
The impact
Relying too heavily on any one vendor could have an
adverse effect on our financial performance, should that
relationship break down.
Geopolitically, global shortages of computer hardware,
components and chips could occur, which might limit our
and our customers’ ability to purchase hardware for internal
use. This could lead to delays in customers purchasing
software that is linked to, or dependent on, the hardware
being available. Reduced access to computer chips could
also slow down vendor innovation, leading to delays in
creating new technology to resell to customers.
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.
This risk is also heightened by changes to shipping routes,
if certain channels are made unsafe.
7 Competition
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 AWS Marketplace 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.
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59
Strategic
8 Relevance and emerging technology
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:
փ Continuing to offer them expert advice and
innovativesolutions
փ Specialising in high-demand areas
փ Holding superior levels of certification
փ 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
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.
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 – and the security operations
centre located at Phoenix’s offices provides the whole
business with 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.
Our principal risks and uncertainties continued
60 Bytes Technology Group plc
RISK REPORT
Operational
10 Business continuity failure
Risk owner CFO
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.
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
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:
փ Inflation, which is still influencing salary expectations
andwage growth
փ Skills shortage in emerging, high-demand areas,
suchas AI and machine learning
փ With remote or hybrid working becoming the norm,
potential employees in traditionally lower-paid
geographical regions being able to work remotely
inhigher-paying areas like London.
Maintaining our BTG culture also affects how we attract
andretain staff, which might be affected by growth.
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. 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
Excessive wage inflation could either drive up costs or
mean we are unable to attract or retain the talent pool
weneed to continue to deliver our planned growth.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
61
Operational
12 Supply chain management
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.
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.
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
Managing supply chains is important to the sustainability
ofthe business from a legal, financial, reputational, ethical
and environmental viewpoint.
There is a risk to our business if we engage with suppliers that:
փ Provide unethical working conditions and pay
փ Are involved in financial mismanagement and
unethicalbehaviour
փ Cause environmental damage
փ Operate in sanctioned regions.
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
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 Audit Committee.
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.
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.
Disclosures are made through several channels, including
CDP. We submitted our carbon reduction targets to the
SBTi in December 2023, 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:
փ Legal compliance, such as adhering to global standards
փ Retaining customers, as they push to reduce emissions
փ Investor relations, such as meeting criteria for ESG funds
փ Attracting and retaining employees, as younger
generations seek to work for more purpose-driven
businesses.
14 Regulatory and compliance
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 sign-offs with policy owners
to make sure policies are kept current.
Our steering committees, operating company board
meetings and BTG Board meetings are forums for raising and
discussing changes that affect multiple areas of the business.
The impact
Operational teams and processes face administrative
burdens and effects under rapidly changing regulations.
Failing to keep up with regulatory, reporting and
compliance changes could lead to fines, legal challenges
and reputational damage.
If regulatory compliance is not maintained, there are risks
to the company and to individuals, which could lead to
expensive legal challenges and reputational damage
tothebusiness among all stakeholders.
Our principal risks and uncertainties continued
62 Bytes Technology Group plc
RISK REPORT
Non-financial and sustainability
information statement
We are required to include a non-financial information statement in our strategic report, under Sections 414CA and 414CB of
theCompanies Act 2006, as amended by The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting)
Regulations 2016. We cover the information required by these regulations in Our business model page 9, Sustainability review
(pages 30 to 43), and our risk report and viability statement (pages53 to 62 and pages 64 to 65).
More about us
Here we summarise where you can find more information – in this Annual Report and on the websites of BTG, Bytes and Phoenix
– for each of the key areas of disclosure that the Companies Act 2006 requires.
Environmental and social matters
Relevant policies
This year, we provided more disclosure on BTG’s environmental and social
commitments, including again reporting on the Task Force on Climate-related
Financial Disclosures (TCFD).
We reported progress on our environmental and social approach, including
expanding our emissions reporting to all relevant ten categories of Scope 3 and
exceeding ourtarget onScope 2 by switching to renewable electricity. This year,
BTG employees spent more than 1,500 hours volunteering for local charities and
intheir communities.
For more information, see our sustainability review from pages 30 to 43 and the
TCFD section on pages 44 to 52.
BTG: Sustainability Framework; CSR
policy statement; Low-carbon action plan
Bytes and Phoenix: Environmental
matters; CSR/Sustainability
Our employees
Our positive and inclusive culture, good employee engagement, and commitment
to diversity, equality and inclusion are integral to BTG’s success. We support
initiatives to help improve diversity, equality and inclusion, with progress monitored
by senior management and the Board. Our Board acknowledges there is more we
need to do to improve diversity and we will continue with our efforts.
Employees can report whistleblowing concerns directly to the CEO or through an
independent charity offering a confidential helpline. We have a process for
investigating whistleblowing reports and our whistleblowing policy is available at
bytesplc.com. There were no whistleblowing reports this financial year.
Encouraging outcomes of our employee engagement included achieving a 71
employee net promoter score, and Bytes and Phoenix being again Great Place
toWork-certified in 2023.
For more information, see our people section on pages 32 to 35 the Board’s yearon
page 77, stakeholder engagement on page 79, and the Nomination Committee
report on pages 94 to 97.
Bytes and Phoenix: Health and safety;
Diversity, equality and inclusion; Gender
pay gap report
Respect for human life
We believe that modern slavery and human trafficking are the key human rights
areas that our operations could be affected by. Given, though, that we operate
predominantly inthe UK and Ireland, where established legislation and systems
protect human rights, we believe that this is not a material issue for BTG.
BTG: Modern slavery and human
trafficking; Supplier code of conduct
Bytes and Phoenix: Modern slavery
andhuman trafficking
Anti-corruption and anti-bribery
We operate anti-corruption and anti-bribery procedures that support compliance
with the UK Bribery Act and other legislation.
Bytes and Phoenix: Fraud, bribery
andmoney laundering
Business model and KPIs
Our business model includes non-financial inputs and outputs. Our Board regularly reviews both financial and non-financial KPIs,
which are relevant for monitoring the performance of the business and have a clear link to delivering against our strategy. We disclose
performance against our KPIs. For more information, see our business model on page 9 and our KPIs on pages 16 to 17.
Our policies are subject to periodic review, with updates made as and when required. To find out more about our policies visit
bytesplc.com/sustainability/governance, bytes.co.uk/company/corporate-policies and phoenixs.co.uk/about-us/corporate-policies.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
63
Our viability statement
Our Board of directors has evaluated
BTG’s prospects over a three-year period
from the end of the financial year, in line
with provision 31 of the UK Corporate
Governance Code.
The directors have chosen a viability
assessment covering a period of three
years to February 2027. They believe this
is the most appropriate and realistic time
over which they can anticipate events and
assess how existing risks are developing
and new risks emerging.
Operationally, this is the time over which
BTG has a view of:
• • Major customer contracts, typically
Microsoft Enterprise Agreements,
which run for three years
• • The extension of our main public
sector framework agreement
withCrown Commercial Services
(RM6098 Technology Products &
Associated Services 2 (TePAS 2))
to7 October 2027
• • The availability of external funding from
our HSBC revolving credit facility, which
runs until May 2026 andincludes an
optional one-year extension to 17 May
2027, so covering the whole of the
viability period, if required. This facility
has never been drawn against to date
and our cash flow forecasts for the next
three years show that it is unlikely to
beso in that period. BTG will consider
extending the facility if required closer
to its end date, and currently does not
foresee this being an issue.
The Board has performed a robust risk
assessment of the principal risks and
uncertainties facing BTG, as outlined
onpages 53 to 62. These are risks that
may pose a threat to our future financial
performance, our ability to meet future
commitments and liabilities as they fall
due, and the ongoing viability of our
business model.
Most recently, in light of the changes within
the Board itself, notably the resignation of
the former CEO at the end of 2023/24 and
the appointment of the new CEO in May
2024, the Board has further assessed if
there could be an associated potential loss
of revenues, if relationships with customers
or suppliers are affected, or if there could
be an adverse effect on staff and culture
more generally, which could make it harder
to retain and recruit. Having passed the
initial phase of change and publicity around
it, at an operational level we have seen no
adverse reaction from customers, vendors,
suppliers or staff to date, and any potential
negative impact is likely to diminish as we
move through the viability period. We
believe our stress tests, detailed below,
consider downsides around reducing
income that are sufficiently severe to cater
for any adverse impacts from these Board
changes, should they arise.
BTG’s gross invoiced income, gross profit
and adjusted operating profit increased
by 26.7%, 12.5% and 12.2% respectively
in 2023/24. The strong growth in gross
invoiced income reflects the success of
the business in winning large public-sector
Microsoft contracts, demonstrating our
strength and credibility when bidding
forsubstantial government software
opportunities under the Crown
Commercial Services framework
agreements. Given the competitive
tendering process involved, these sales
are typically won at reduced initial margins.
As a result, the growth in gross profit and
adjusted operating profit is lower, although
still comfortably double-digit. Over the
course of the contracts, typically three to
five years, we have a strategy and track
record of growing the profitability of those
contracts and opening up other software,
hardware or services opportunities within
those accounts. This reinforces the
ongoing viability of our business model,
because new accounts such as these
grow over the viability period.
More generally, the 2023/24 results
demonstrate our ability to grow our key
performance metrics while remaining
resilient to the impact of external
disruptions. The directors believe this is due
to our mix of customers in the corporate and
public sectors, strong relationships with our
primary vendors, the demonstrable value
we add to our customers and our highly
skilled employees establishing competitive
advantage in an increasingly digital age.
The Board reconfirmed BTG’s strategy
inNovember 2023 and central to its
conclusion that BTG and our operating
companies will continue to operate and
meet our future commitments and
liabilities over the next three years are:
• • The relatively limited impact of external
factors on customer expenditure
• • Our proven ability to secure strong
levels of customer renewals and to
grow the business by winning new
customers.
We carried out the stress tests detailed
below, which helped us make sure that
our assessment accurately reflected the
changes to our business in the past year
– such as our evolving risk management
process, and the overall industry and
economic climate.
How we stress-tested
ourbusiness
In our stress-testing, we evaluated our
viability by reconsidering:
• • The market forecast models for
ourindustry
• • Our current and future strategies
• • The potential financial impacts of
ourstated principal risks.
The principal risks were considered
individually and collectively, in the context
of global political and economic factors
and continued uncertainty around the
crises in Ukraine and the Middle East.
In assessing our viability, we applied
potential downside changes to three
keyfinancial measures – gross invoiced
income, gross profit and debtor collections
– to see how their performance would alter
if our principal risks and uncertainties were
realised. Such a realisation is considered
remote, given the robust nature of our
business model combined with the
effectiveness of our risk management
andcontrol systems and our current
riskappetite.
However, we focused on these three financial
measures because we believe they’re the
most likely to be adversely affected – and
to create a progressively negative impact
if they deteriorate continually over the
viability assessmentperiod.
We also set out our operational mitigations
below by considering the extent to which
negative impacts on the three financial
measures could be offset by freezing
future pay and recruitment of new heads
and by making savings in discretionary
spend. More automatic and immediate
mitigation is ‘built in’ because commission
payments would fall in line with the reduced
gross profit, ‘natural’ leavers would not be
replaced and lower dividend payments
would result from the reduced profits.
64 Bytes Technology Group plc
Our most extreme downside scenario,
case two below, is set within the context of
uncertainty around the current economic
conditions and geopolitical environment.
In this scenario, we considered the
potential effect of a generalised economic
downturn on our customers’ spending
patterns. We also took the most extreme
considered downside for each of the three
financial measures and considered that
only partial mitigation would be possible.
Details of our stress-testing
BTG compared a base case scenario and
two downside scenarios. In each of the
downside cases, we considered two
levels of mitigation, full and partial:
• • Base case – this was forecast using
the growth rates included in the
Board-approved budget for the
year ending 28 February 2025,
extended until 28 February 2027
• • Downside case one – this severe but
plausible scenario modelled gross
invoiced income reducing by 10%
year on year, gross profit reducing by
15% in the same period, and debtor
collection periods extending by five
days (all from June 2024)
• • Downside case two – this stress
scenario modelled both gross
invoiced income and gross profit
reducing by 30% year on year, with
debtor collection periods extending
by 10 days (again, all from June 2024)
• • Partial mitigation measures – with
theonset of both downside cases,
wemodelled immediate ‘built-in’
reduction of commission in line with
falling gross profit, freezing recruitment
of new heads and not replacing natural
leavers from September 2024, freezing
future pay from March 2025 (given
current year rises are already
committed) and freezing rises in
general overheads from March 2025
• • Full mitigation measures – in addition
to all the partial measures, these
modelled additional headcount
reductions from March 2025,
inlinewith falling gross profit.
The impacts of climate change were
considered but, because the Board and
management consider that the impacts
will be immaterial, they fall within the
current (base case) scenario.
The pay and headcount mitigations
applied in the downside scenarios are
within BTG’s control and, depending on
how severe the impacts of the modelled
downside scenarios are, the Group could
activate additional levels of mitigation.
Forexample, those relating to headcount
freezes or reductions could be
implemented even more quickly than
indicated above to respond to downward
trends because, considering the sudden
and significant falls in profitability and
cash collections modelled under both
downsides, we would not wait for a full
three months before taking action. We
would also be able to take more action
tolower our operating cost base, given
the flexibility of our business model.
A natural reduction in the level of
shareholder dividends would follow,
inline with the modelled reductions
inprofit after tax.
So the Board believes that all mitigations
have been applied prudently and are
within BTG’s control.
Our confirmation of viability
Having assessed the financial impact on
our results of these stress-tested models,
the Board concluded that our reserves of
cash, our ability to reduce spending and
to extend our revolving credit facility up
toMay 2027 – along with our projected
revenue and profitably over the review
period – would mean we could continue
trading over the next three years.
Section 172
statement
The Board embraces the principles
of the UK Corporate Governance
Code, including those aimed at
promoting transparency around
stakeholder engagement. We
consider the interests of the
Group’s investors, customers,
suppliers and vendors, and
communities and the environment
in our decision making and in how
wedeliver our strategy to achieve
long-term, sustainable success.
The Board continues to ensure it
acts in good faith and to promote
the success of the Group forthe
benefit of shareholders and,
indoing so, having regard for the
Group’s key stakeholders and other
matters set out in Section 172(1)
(a)to(f) of the Companies Act 2006.
More information on how we, as a
Board, have fulfilled our duties to
our stakeholders under Section 172
of the Companies Act 2006 can be
found on pages 78 to 82.
The Board approved the strategic
report on pages 1 to 65 of this
Annual Report on 22 May 2024.
Patrick De Smedt
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
65
An ongoing focus
onenhancing our
governance processes
Bytes Technology Group plc66
GOVERNANCE REPORT
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
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
67Annual Report and Accounts 2023/24
Patrick De Smedt
Chair
Chair’s introduction to
corporate governance
Our ongoing focus on strengthening the Board and
enhancing our governance processes meant we were well
placedfor the unexpected challenges we faced this year.
As a Board, we embrace the principles of the UK Corporate
Governance Code (the code). We’re committed to making
sure that we comply with thecode and that we continually
look to improve our systems of governance. We were
therefore particularly shocked by the actions of former CEO,
Neil Murphy, who resigned in February over undisclosed
share dealing, not least because this cameinthe wake of the
discovery in July2023 thatnon-executive director, Alison
Vincent, had notdisclosed a purchase ofshares by a person
closelyassociated (PCA) with her. Idiscussthese fully in the
highlighted section ofthisstatement on pages 69 to 70.
Here, I’d like to focus on the hard work the Board has
done throughout the year to improve our systems of
governance, and to support and welcome new Board
members. I am confident thatour work, which has
resulted in stronger governance, will help us all to support
and constructively challenge our new executive team as
they continue to deliver BTG’s impressive growth record.
Welcoming new directors to the Board
The composition of the Board was a key priority for us
during the year, as we continued to broaden our skills
and diversity. We were delighted to welcome Sam
Mudd, then MD Phoenix, to the Board as an executive
director in July at the 2023 Annual General Meeting,
with her extensive knowledge ofthe business and
ourculture. In February 2024, Sam was appointed
Interim CEO, and then CEO in May 2024.
Following Alison Vincent stepping down from her position
as a non-executive director at the end of her three-year
term, in October 2023, we moved swiftly toidentify a
suitable replacement. After a thorough recruitment
process, we arrived at a shortlist of threeimpressive
candidates, and I’m pleased that allwere women from
ethnic minority backgrounds. Wewelcomed Shruthi
Chindalur as a non-executive director in February 2024.
She is highly experienced inthe technology industry, with
a proven track record incommercial and operational
leadership. After the year end, we also announced the
resignation, with immediate effect, of Mike Phillips
asanon-executive director.
We are now looking forward to welcoming two new
independent non-executive directors on 1 June 2024:
Ross Paterson and Anna Vikström Persson. Ross will
take up the role of Chair of the Audit Committee, with
Erika Schraner stepping down from her current role
asInterim Audit Committee Chair, although she will
remain a member of the committee. Ross will also
jointhe Nomination, Remuneration and new ESG
Committees. Anna will join the Audit, Nomination and
Remuneration Committees, and will also become Chair
of the ESG Committee, which, from 1 June, will monitor
the implementation of BTG’s ESG and sustainability
strategy (see page 77 for more details).
68 Bytes Technology Group plc
GOVERNANCE REPORT
Resignation of CEO
Former CEO Neil Murphy’s resignation followed a voluntary
request for information (RFI) from the Financial Conduct
Authority (FCA) on 14 February 2024. The RFI indicated
that Neil may have conducted additional transactions in
the company’s shares that were not disclosed to the
market or the FCA since the company’s IPO. Following
this, on 21 February 2024 Neil resigned with immediate
effect, indicating that he had failed tomake disclosures
related to his share dealings. Thecompany announced
this on the same day.
It transpired that Neil had engaged in unauthorised and
undisclosed trading in the company’s shares between
January 2021 and November 2023, which the company
was notified of and announced on 23 February 2024.
This revelation came as a shock to the other Board
members, especially considering the company’s
previous investigation during 2023 into an unrelated
share dealing disclosure matter as set out below,
whichhad clearly highlighted to all Board members the
importance of accuracy and transparency in all matters
related to share dealings by persons discharging
managerial responsibilities (PDMRs) (which includes
thedirectors) andpersons closely associated
(PCAs)with them.
Subsequently, on 12 March 2024, Neil’s lawyers
provided the company with more information outlining
additional transactions between December 2021 and
November 2023, which were undertaken in the name
ofhis wife (a PCA). The company announced this on
13 March 2024. Neil, through his legal representatives,
reiterated that there were no other relevant transactions.
Given Neil’s longstanding leadership position at the
company, the Board was saddened as well as shocked
by his actions, which were entirely at odds with the
values of openness, honesty and transparency that
have been, and remain central, to the Group’s culture
and its ongoing success.
Revised directors’ shareholding information
As a result of these undisclosed trades, the company is
aware that each Annual Report and Accounts for the three
years ended 28 February 2021 (2020/21), 28 February
2022 (2021/22) and 28 February 2023 (2022/23) show
incorrect directors’ shareholding disclosures for Neil,
despite him having confirmed to the company and to the
Group’s auditors, Ernst & Young LLP (EY), as part of the
external audit, that these disclosures were correct.
Taking all the disclosed and undisclosed transactions
known by the company to date into account, the
company has produced reconciliations to its previously
announced PDMR notifications in respect ofNeil and
the disclosed positions in the 2020/21, 2021/22 and
2022/23 Annual Report and Accounts (seepages 121
to122). Through his lawyers, Neil has been provided
with those reconciliations and has confirmed that
theinformation is correct and there are no other
transactions that need to be considered. None of
thesematters had any impact on the financial position
and performance of the company as presented in those
annual reports.
The company is cooperating fully with the FCA, and will
continue to do so, and provided a response to its RFI on
8 March 2024 that pertains to the company’s processes
and procedures.
Previous investigation during year ended
29 February 2024 (2023/24)
Earlier in 2023/24, the Board, through an appointed
subcommittee, undertook an externally facilitated review
of the circumstances relating to a share purchase by a PCA
of Alison Vincent, a now former non-executive director of
the company, not being notified to the company. The
Board has since implemented the recommendations
from thatinvestigation.
On 14 July 2023, the company notified the market of a
purchase of shares by a PCA of Alison Vincent that had taken
place on 29 March 2022. The company was not duly
notified of the full details of this trade until 30 May 2023.
At that time, the company did not issue a notification to the
market regarding this trade, because the value of this PCA
transaction fell below the de minimis threshold of EUR 5,000
under Article 19(8) of the Market Abuse Regulation (EU)
596/2014 (UK MAR), which is part of English law by virtue of
the European Union (Withdrawal) Act 2018. At the company’s
Board meeting on 11 July 2023, the Board confirmed that the
company’s Securities Dealing Code did not include this
de minimis exclusion and its policy was to disclose all
PDMR dealings notified to the company to the market via
RNS. The company then issued an RNS on 14 July 2023
setting out details of this transaction.
As a result, the directors’ shareholding information in
the 2021/22 and 2022/23 Annual Report and Accounts
was incorrect by 608 shares with respect to the
shareholdings of Alison and her PCA.
Addressing undisclosed share dealings
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
69
To establish the root cause of these issues and make
recommendations for improvement, the Board appointed
a subcommittee of the Board. The subcommittee
engaged PwC to undertake independent investigative
work to establish the facts of what had happened and to
advise whether the 2021/22 or 2022/23 Annual Report
and Accounts would need to be revised. In addition,
Travers Smith LLP, the company’s external legal
counsel, provided advice as to whether certain
regulations hadbeen breached. Both firms were asked
tomake recommendations for improvements to the
company’s corporate governance around continued
training and awareness, annual reviews of governance
controls and PDMR share dealing processes. The
subcommittee also engaged with EY inrespect of
theincorrect disclosure in the directors’ remuneration
report about directors’ shareholdings in the 2021/22
and 2022/23 Annual Report and Accounts.
The subcommittee completed its work in early October
2023. The conclusion of its investigation was that the
2021/22 and 2022/23 Annual Report and Accounts did
not need to be reissued. There is, however, a prior-year
adjustment to the directors’ shareholding table in this
year’s directors’ remuneration report (see page 121).
Atthe same time, recommendations from the
subcommittee provided by PwC and Travers Smith have
been implemented, and the company is maintaining
records of ongoing activities to monitor progress.
Throughout this investigation, it was emphasised
withclarity to all directors and PDMRs that any share
dealings involving the company’s shares must be
reported to the company and the FCA, and that
clearance to deal must be sought in advance of any
trades. At no relevant time during the above investigation
did Neil Murphy disclose to the Board his own or his
PCA’s incorrect shareholding position in the 2020/21,
2021/22 and 2022/23 Annual Report and Accounts.
Outcome of investigation
Further to the announcement on 18 March 2024, the
investigation overseen by a second subcommittee of
the Board, with advice from PwC and Travers Smith,
hasnow been completed. The conclusions from the
investigation have been reviewed by the Board. In
summary, the investigation has found no evidence
thatNeil’s share dealing involved any other parties, nor
any evidence of a wider pattern of misconduct by Neil,
affecting or implicating any of BTG’s staff, customers
orsuppliers. Neil has expressed profound regret for
hisfailure to comply with regulations and the impact
ofhis actions on both BTG and his former colleagues.
BTG has reached a settlement with Neil whereby hehas
agreed to forfeit his entitlements under the Company’s
Performance Share Plan and Deferred Bonus Plan in
their entirety, meaning that no further amounts will be
received by Neil under these schemes, and that he will
repay his after-tax bonuses since IPO to the company,
through BTG’s clawback provisions. More details are
setout in the Companies Act 2006, Section 430(2B)
statement published on our website at bytesplc.com.
The investigation also carefully considered the company’s
procedures for monitoring and reporting the shareholdings
of directors, PDMRs and their PCAs, and has undertaken
a detailed review and reconciliation of the shareholdings
of current and former PDMRs. This exercise identified
minor discrepancies that have been correctly disclosed
in the directors’ remuneration report on page 121,
withrestatement of the prior period comparators where
necessary. Following this review, the opportunity has
been taken to implement additional measures to
strengthen these processes across the company.
In the Board’s opinion, this has been a thorough and
robust review of the circumstances surrounding Neil’s
resignation and his undisclosed share transactions. The
Board has sought to balance the extent and depth of this
work with the need to draw conclusions in a timely way.
Settlement arrangement for the former CEO
Settlement arrangements for Neil can be found on
bytesplc.com and in this year’s directors’ remuneration
report on page 122.
Chair’s introduction continued
Addressing undisclosed share dealings continued
70 Bytes Technology Group plc
GOVERNANCE REPORT
The appointments of Sam, Shruthi and, soon, Anna
mean we are aligned with the FCA Listing Rules of
having women represent at least 40% of the Board,
and of having at least one director from an ethnic
minority background. We also exceed the requirement
to have at least one senior role held by a woman, with
Sam as CEO and Erika as senior independent director.
Meeting or exceeding these targets is an important
milestone, but what matters more is that we continue
to focus on diversity as we expand the Board. Diversity
is about more than ethnicity and gender, ofcourse,
but these attributes tend to bring with them the
diversity of thought and mindset that’s so important
toa healthy debate around the Board table.
Training and development
forourdirectors
Developing our people through learning is an important
factor in our company’s success, and I was pleased to
note the emphasis on managerial training this year,
especially given the number of new joiners. The
company’s culture of continual learning extends to the
Board too and, during the year, we put a lot of time and
effort into training and development for our members.
As part of the audit process, our external auditor, EY,
provided the Board with an update on the UK corporate
governance landscape. OurBoard members also
enrolled in the Deloitte Academy programme, which
provides support and guidance to directors through
webinars, seminars and discussions. Meanwhile, the
chairs of our Audit,Remuneration and Nomination
Committees attended sessions with a governance
specialist tohelp them further develop in their role.
This focus on ongoing training and development
hascontinued into the new financial year, including
re-emphasising the company’s internal share
dealing processes and reporting.
Monitoring and strengthening governance
As directors, we’re always looking for ways in which
we can carry out our duties better when it comes to
governance (see pages 76 to 77 and 94 to 97).
AtBTG we have two operating businesses: Bytes
Software Services and Phoenix Software, with their
own unique business plans appropriate for their unique
customer bases. But weare still one company, and our
governance needs to reflect that. Andrew Holden,
our CFO, makes sure that where we have functional
areas that relate to both operations – for example,
technology, software development and security – we
have committees with representatives from both
businesses. We also aim to share relevant best
practice in these areas across Bytes and Phoenix.
This year, we established a legal forum at Group
level,with relevant input from our businesses.
Thisisanimportant development from a governance
perspective and will help us to better understand and
review the regulatory and compliance risks in both
parts of the organisation.
The Board is also focused on ensuring the effectiveness
of our internal controls framework. We work on this with
our internal auditor, PwC, which has all the necessary
skills to do the internal audit work for us, and we will
continue working with its team in the next financial year.
As in previous years, sustainability has continued
tobe astrong priority for the Board. BTG has a
sustainability framework and we closely monitor the
KPIs to make sure we’re on the right track. This year,
our Group sustainability manager helped drive and
coordinate efforts across the Group. We met two
important milestones in reporting on all emissions
and submitting our carbon reduction targets to the
Science Based Targets initiative.
Supporting and challenging
BTG’sstrategy
One of the Board’s key duties is to support and
challenge the executive on defining and pursuing
astrategy that will deliver long-term sustainable
success and shareholder value. As is our custom, we
held a strategy day this year with the executive team
to monitor our progress and to assess whether we
are focusing on the most important areas. Among
the issues we focused on during the year was taking
steps to address ongoing margin pressures amid
increasing competition for contracts, particularly
inthe public sector, as well as expanding our mix of
products and services,including strongly positioning
us within the emerging area of AI-enabled tools.
Our priorities for the coming year
Continuing to strengthen our governance processes
will be top of our agenda, along with supporting and
challenging our new executive team in their work to
keep delivering double-digit growth while protecting
gross margins. We will also keep a close watch on our
customer service metrics, the use of AI-enabled tools
internally and among our customers, and our progress
on ESG and sustainability. And, as always, we’ll
continue to focus on supporting our people and
theculture that is so critical to our success.
Patrick De Smedt
Chair
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
71
Board of directors
Our directors draw on a rich pool of collective
industry knowledge and skills and experience of UK
and international business, gained from senior roles
both within BTG and in other leading companies.
Patrick De Smedt
Chair
Nationality Belgian, British
Age 68
Appointed 15 October 2020
Patrick is Chair of the BTG Board and
ourNomination Committee and is a
memberof our Remuneration Committee.
Patrick has a strong track record in
international business, including 23 years
insenior roles at Microsoft. During his
twodecades at Microsoft, he founded
thecompany’s Benelux subsidiaries, led
thedevelopment of its Western European
business and served as chairman of its
Europe, Middle East and Africa region.
Since leaving Microsoft in 2006, Patrick
hasserved as chair and non-executive
director on the boards of a diverse range of
European public and private equity-backed
companies. He was previously chair of EMIS
Group plc and non-executive director and
chair of the remuneration committee of
Victrex plc, senior independent director
andchair of the remuneration committee
ofMorgan Sindall plc and Anite plc, senior
independent director of Page Group plc
andinterim chair of KCOM Group plc.
External board appointments
None
Committees
Nomination
Remuneration
Attends by invitation
Audit
Sam Mudd
Chief Executive Officer
Nationality British
Age 55
Appointed 12 July 2023
Sam brings more than 20 years’ experience
in leadership positions to the Board. Sam
joined Phoenix in November 2003, having
previously held senior roles at WordPerfect,
Novell Inc. and Trustmarque Solutions. Sam
became MD Phoenix in 2014, overseeing
aperiod of significant growth during which
Phoenix won numerous awards, including
Microsoft UK Partner of the Year 2021. She
joined the Board on 12 July 2023 and was
appointed as CEO on 10 May 2024.
In October 2020, Sam won the Industry
Achievement Award at IT reseller magazine
CRN’s Women in Channel Awards. Two years
earlier, she was named 2018 Business Leader
of the Year at the Women in IT Awards.
Outside her work with the Group, Sam
isamember of the Board of Trustees of
Scarborough’s Saint Catherine’s Hospice.
External board appointments
Saint Catherine’s Hospice Trust
Committees
Attends by invitation
Audit
Nomination
Remuneration
Andrew Holden
Chief Financial Officer
Nationality British
Age 57
Appointed 21 October 2021
Andrew brings strong financial and
commercial acumen to the Board, and has
aproven record of delivering insights into
strategy implementation and executive
decision making. In his role as CFO, he has
guided the Group, as it continues to pursue
its double-digit growth strategy.
He joined BTG as COO on 1 June 2021
fromJSE-listed technology company Altron
Limited, BTG’s former parent company,
fromwhich it demerged in 2020. He was
subsequently appointed as BTG’s CFO
anda Board member on 21 October 2021.
Andrew has extensive financial and
operational experience in the information
and communications technology sector,
having spent more than 27 years at Altron,
the last 15 years in senior leadership roles.
His most recent Altron position was that of
COO, which he held for five years, including
aperiod when he was also acting CFO.
External board appointments
None
Committees
Attends by invitation
Audit
Nomination
Remuneration
Chair
72 Bytes Technology Group plc
GOVERNANCE REPORT
Dr Erika Schraner
Senior independent director
Nationality British, American, Swiss
Age 56
Appointed 1 September 2021
Erika brings more than 25 years’ experience
in senior leadership positions to the Board of
BTG. During her executive career, she spent
more than 18 years working in Silicon Valley
and held senior professional services roles with
Ernst & Young and PricewaterhouseCoopers.
Erika earned a PhD in management science
and engineering at Stanford University.
In 1994, she began her executive career with
IBM, going on to hold roles at REL Consultancy
Group, Computer Science Corporation and
Symantec Corporation. During her tenure
atSymantec, Erika led the team responsible
for M&A in its sales and services division,
completing 16 acquisitions including the
$13.5-billion merger between Symantec
andVeritas.
Erika continued to build her transaction
experience at Ernst & Young, where she led
the firm’s technology M&A advisory services
for the Americas, and more recently with
PwC, where she was the UK leader for M&A
integration services and for technology,
media and telecommunications M&A
advisory services.
External board appointments
JTC plc, Pod Point Group Holdings plc,
HgCapital Trust plc, Videndum plc
(until19 June 2024)
Committees
Audit
Nomination
Remuneration
Shruthi Chindalur
Independent non-executive director
Nationality Indian
Age 46
Appointed 1 February 2024
Shruthi has more than 20 years’ experience
across the technology, software as a service
and advertising technology industries. She
was most recently an executive managing
director at the advertising group Criteo,
where she led EMEA and Global Indirect
Channels. Shruthi has also held a number
ofsenior commercial roles at Oracle and
LinkedIn, with responsibility for markets
across APAC, EMEA and the Americas.
She is currently a non-executive director
ofThe Access Group, a leading provider of
business management software to small
and mid-sized organisations in the UK,
Ireland and APAC.
External board appointments
The Access Group
Committees
Audit
Nomination
Remuneration
Board changes
• • Ross Paterson has been
appointed as an independent
non-executive director from
1 June 2024.
• • Anna Vikström Persson
hasbeen appointed as an
independent non-executive
director from 1 June 2024.
• • Mike Phillips resigned from
theBoard and as senior
independent director
on24 March 2024.
• • Neil Murphy resigned as
CEOand from the Board
on21 February 2024.
• • Dr Alison Vincent stepped
downfrom the Board and as
anindependent non-executive
director at the end of her three-
year term on31 October 2023.
• • David Maw retired from the
Board at the conclusion of the
Annual General Meeting on
12 July 2023, having been a
non-executive director with
theBytes Group since 2000.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
73
Board of directors continued
Board independence anddiversity
During the year, we continued to focus on independence and diversity, as illustrated inthe
charts below and set out in more detailin this governance report.
The data here reflects the position at year end. We set out more detail about changes to the
Board during the year in theNomination Committee report on pages94 t o 97.
1 At the time of appointment.
Directors scored themselves out of three for each skill.
Board composition at
29 February 2024
Independent non-executive Chair¹
Independent non-executive directors
1
Executive directors
3
2
Gender split of directors at
28/29 February
50%
29%
29%
17 %
Target 40%
2022
2021
2024
2023
Men Women
Ethnic diversity of directors at
28/29 February
17 %
0%
2024
2023
White British or other White
Asian/Asian British
Directors’ collective skills scored
out of 15
Strategy
Management
Technology
Finance
Operations
14
14
15
11
13
Board attendance
Board member
For the financial year to
29 February 2024
Patrick De Smedt 13/13
Andrew Holden 13/13
Sam Mudd
1
– appointed 12 July 2023 11/11
Erika Schraner 13/13
Shruthi Chindalur – appointed 1 February 2024 2/2
Former directors
Mike Phillips – resigned 24 March 2024 12/13
Neil Murphy – resigned with immediate effect 21 February 2024 11/11
Alison Vincent – stepped down 31 October 2023 6/9
David Maw – retired 12 July 2023 3/3
1 Sam Mudd was appointed as Interim CEO on 21 February 2024 and as CEO on 10 May 2024.
74 Bytes Technology Group plc
GOVERNANCE REPORT
Executive Committee
Sam Mudd
Chief Executive Officer
Jack Watson
MD Bytes Software Services
Nationality British
Age 40
Appointed as MD 1 March 2021
Jack joined Bytes as a new business
account executive in November 2006.
Hewas promoted to sales manager in
2012and grew his team’s sales profit
bymore than 200% in less than four
years.Hedeveloped the ‘7 steps’ sales
programme, which boosted individual
salesperformance and accelerates
newtalent in the organisation.
Bytes’s sales profitability doubled
duringJack’s five years as Sales Director,
from 2016 to 2021. During this time, he
oversaw the rollout of a new CRM system,
launched a sales management competency
framework and coaching programme, and
integrated the sales teams from Bytes
Security Partnerships, when the previously
separate business was merged with Bytes
in2020. Jack was promoted to MD Bytes
inMarch 2021.
Andrew Holden
Chief Financial Officer
Clare Metcalfe
MD Phoenix Software
Nationality British
Age 55
Appointed as MD 10 May 2024
Clare joined Phoenix in 1997, following
adecade of experience in sales and
procurement roles in the IT industry.
Havingheld a number of senior management
positions within the company, she was
appointed as Operations Director and
tothePhoenix Board in 2018. Clare has
overseen a wide range of responsibilities,
including risk, governance, operations
andsystems development.
She stepped up to be Interim MD Phoenix
on21 February 2024 and MD Phoenix
on10 May 2024, whereher passion for
innovation and transformation continues,
alongside acommitment to supporting
customers totransform digitally and
deliveron theirbusiness objectives.
Until 21 February 2024, our Executive
Committee comprised Neil Murphy, former
CEO, Andrew Holden, our CFO, Sam Mudd,
MD Phoenix and Jack Watson, MD Bytes
Software Services. Sam was appointed as
Interim CEO and Clare Metcalfe as Interim
MD Phoenix on Neil’s resignation on that
date. Sam was confirmed as CEO and
Clare as MD Phoenix on 10 May 2024.
Biographies for Sam and Andrew
canbefound on page 72.
The committee meets monthly and helps to develop and
deliverBTG’s strategy. Individual ExecutiveCommittee
membersare responsible for leading their directorates
andensuring they are run effectively and efficiently.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
75
The Board’s year
Aside from the Board changes around year end, 2023 was another
busy year for the Board, with ongoing work to strengthen our
governance processes, our annual internal review ofthe Board and
its committees’ effectiveness, and work to deepen our knowledge
ofthe fast-moving developments in AI technology.
performing. We then asked each Board
member to complete a survey sharing
theirviews on the Board’s effectiveness.
Thesurvey covered a range of questions
on issues like Board interactions and its
remit. We also asked members of our
Audit, Nomination and Remuneration
Committees to provide specific committee
feedback. A review of our Chair’s
performance for the year ended 29 February
2024 was carried out by Erika Schraner as
our senior independent director, and its
outcome reported to the Board in April 2024.
The Board review, which took place
inDecember 2023, concluded at the
timethat the Board and its committees
continued to operate effectively. Given the
Board changes that have taken place since
that review was carried out, we will pay
particular attention to its recommendations
and ensure that we carry out another
thorough evaluation in the coming year.
Key recommendations for 2024/25
In terms of areas for improvement,
recommendations included:
• • Maintaining the Board’s focus on
reviewing composition, diversity,
skillsand experience
• • Continuing to expand its knowledge
oftopics that matter most to our
customers and vendors, such as
emerging technology
• • Continuing to focus on strategy and
future direction, particularly around
customer requirements, emerging
technologies like generative AI
(GenAI), vendor offerings and
strategies, andoutcomes from
theannual strategy session
• • Providing ongoing opportunities for
the Board to hear from external
experts to challenge our thinking
• • Maintaining the company’s identity
and culture, particularly as we grow,
through succession planning,
leadership development and
talentrecruitment.
Strengthening our governance
processes
An important focus for the Board this
yearwas the externally facilitated
investigations related to the share
dealings of the former CEO and a PCA of
a former non-executive director. We set
out more details on pages 69 to 70.
Following the outcome of the investigations
about the share dealings, the Board has
reviewed and strengthened a series of
governance processes, including around
continued training and awareness and
annual reviews of governance controls. We
take any compliance failures very seriously,
and the ongoing improvement of our
governance processes will remain an
areaof the utmost importance for the
Board over the coming year.
Ongoing discussions at our
strategy day
A significant proportion of the Board’s
time each year is spent on strategy. In
November 2023, the Board held its annual
strategy day, during which it discussed
arange of key issues, including ongoing
conversations about opportunities and
risks around AI, our strategic partnerships,
and ongoing training and development.
Once again, the discussion reassured
theBoard that we have good consensus
around our top strategic priorities and
arealigned in our purpose and values.
Continuing to assess Board and
committee effectiveness
An effective Board is essential to BTG’s
success. The Board conducts a formal
internal review of its performance, as well
as that of its committees and the Chair,
each year. We are supported in this by
Lintstock, with which we have a three-year
Board effectiveness programme in place.
For this year’s review, our Chair, Patrick
DeSmedt, held one-to-one meetings
witheach of his fellow Board members to
hear their thoughts on how the Board is
The Board also spent time addressing
recommendations from last year’s
external evaluation with Lintstock. We
made good progress through the work of
our executive team and Board committees
on Lintstock’s recommendations for the
Board, and the Audit and Nomination
Committees for 2023/24, by:
• • Continuing to consider the Group
strategy and organisational structure
to help at our November 2023 Board
strategy day (as set out on the left)
• • Considering how to accurately define
andconsider practical elements to
maintain and strengthen our culture
across the Group and within our
twosubsidiaries (see pages 32 to 37)
• • Providing ongoing opportunities
forthe Board to hear from external
experts invited to present at Board
sessions to challenge our thinking
• • Continuing to focus on ensuring
diversity at all levels of the Group
(seepages 94 to 97)
• • Creating more opportunities for
ouremployees to engage with
ourexperienced female leaders
intechnology at a Board level (see
page77) and succession planning to
the next level of senior management
(seepage 95)
• • Continuing embedding enterprise
riskmanagement in our operations
(see pages 53 to 62)
• • Continuing to strengthen the way
thatwe monitor documentation
ofcontrols and actions following
internalaudits (see page 87).
76 Bytes Technology Group plc
GOVERNANCE REPORT
Hearing from our employees
For many years, David Maw played an
integral role in helping the Board hear the
views of our employees. That role was
formalised after our IPO in December
2020, when he became our designated
non-executive director for employee
engagement. The role passed to Erika
Schraner after David retired from the
Board at our Annual General Meeting in
July 2023. Since taking on the role, Erika
has met with employees at our City of
London office and worked even more
closely with Sam Mudd on the female
leadership development initiative. She
has also spent time with Jack Watson
understanding employee feedback and the
employee net promoter score. With Erika
taking on additional Board responsibilities,
the role moved to Shruthi Chindalur in
March 2024. She will continue to build on
the work done by both David and Erika in
bringing the views and perspectives of
our employees to the boardroom.
In July 2023, the Board also visited our
City of London office, which was a great
opportunity to meet the London-based
team and understand their plans to support
even greater growth of the business.
Enhancing the Board’s
knowledge of AI
We’ve seen a lot of external discussion
this year about the merits and risks
associated with the use of AI. While AI
isn’t a new concept, the speed of its
development, particularly in large
language models likeChatGPT, is
increasing rapidly.
This emerging technology presents us with
a new opportunity to support customers
– not just in providing licences, but in
helping them adopt the right security and
data management practices to use the
technology securely. There are also
opportunities for our own business to
adopt AI tools in future, and we will need to
manage the same risks as our customers.
Given all this, and the recommendation
from our internal effectiveness review
tocontinue strengthening the Board’s
knowledge of fast-moving technologies
like AI, the Board asked our Chief
Technology Officer, Dave Rawle, to give a
presentation on AI in November 2023. This
was a useful opportunity to discuss some
of the drivers behind the rapid rise in AI
development, as well as the opportunities
and risks. It was also an example of the
way that the Board draws on internal
expertise from our senior leaders to
understand key issues.
AI is a regular item at Board meetings. This
helps our directors work with the executive
team to ensure that we have the right
resources and skills in place so that we
are fully prepared to help our customers
– and ourselves – make the most of the
opportunities while mitigating the risks.
A maturing sustainability agenda
The Board has continued to increase its
focus on sustainability and is pleased to
see our agenda maturing with the help of
our Group Sustainability Manager, Lisa
Prickett. She has made good progress
inhelping to drive and coordinate work
across our two businesses. The Board
isparticularly pleased that we have now
submitted our carbon reduction targets to
the Science Based Targets initiative, and
that, for the first time, we have been able
to calculate our Scope 3 emissions across
all categories relevant to the business (as
defined by the Greenhouse Gas Protocol).
These are both important steps on our
sustainability journey. For more detail see
our sustainability review on pages 30 to 43.
Like AI, ESG and sustainability are regular
discussions points at each Board meeting
and the Board continues to monitor BTG’s
sustainability KPIs, which now form a greater
part of our senior executives’ performance
measures. We have now formalised this
work through a Board-level ESG Committee,
with effect from 1 June 2024. Chaired by
new independent non-executive director
Anna Vikström Persson, the ESG Committee
will monitor the implementation of BTG’s
ESG and sustainability strategy and provide
input to the Board and other Board
committees on those matters.
Establishing an ESG Committee is a natural
evolution of the company’s governance
arrangements, given our ongoing focus
onour climate transition strategy and
ourcommitment to achieving net zero
emissions. But this committee also allows us
to address matters concerning employees
– including diversity, equity and inclusion
atall levels of BTG – as well as customers,
partners and communities, and to oversee
BTG’s business conduct, including
corporate and commercial governance,
business ethics, anti-bribery and corruption
measures, and data privacy and security.
The ongoing improvement of our governance
processes will remain an area of the upmost
importance for the Board over the coming year.
Patrick De Smedt
Chair
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
77
Stakeholder engagement
(s.172 compliance)
Customers, suppliers and vendors, employees and investors
are core members of the BTG team, while support for
ourcommunities and the environment – which is also a
stakeholder – underpins the company’s values and purpose.
Our approach to s.172
Section 172 imposes a duty on directors
to act in a way that they consider, in good
faith, best promotes the success of the
company for the benefit of all its members.
In our decisions and actions during the
year, we, the Board, believe we promoted
the success of BTG for the benefit of its
members as a whole, while also considering
stakeholders and the matters set out in
Section 172(1) (a) to (f) of the Companies
Act 2006. We know that different
stakeholders may hold different views
about the decisions we take, and that we
sometimes need to act based on competing
priorities. Our engagement activities help
us to understand what matters most to our
stakeholders and to make fully informed
decisions in their interests.
We believe strongly in doing business
inthe right way, with all our decisions
underpinned by their impact on BTG’s five
main stakeholder groups. We describe
these groups in the tables that follow,
alongside a discussion of how we engaged
with and responded to them in the year.
Principal decisions in 2023/24
This was another busy year for the Board.
Here we set out two examples of principal
decisions we took in 2023/24 and how
weconsidered Section 172 matters in
theprocess.
Upskilling our people to use AI
During the year, the Board approved
continued investment into emerging
technologies, supporting the rollout of
Copilot, Microsoft’s AI tool, to a group
ofBTG employees. This empowers our
employees to build on their understanding
of the benefits and efficiencies that AI
brings and, in turn, enables them to
haveappropriate-level discussions
withour customers.
How the Board made its decision
As a Board, we have been monitoring the
potential of emerging technologies around
AI, which present an opportunity for
BTG– to provide ongoing expertise
tocustomers, help them consider the
potential of the technology, set up the right
security and data management practices,
and drive efficiencies within their
businesses. We considered a proposal
from management on the company’s
readiness to help customers prepare
forAI, in particular through Copilot.
We discussed how upskilling our people,
including our two MDs, in the use of this
new technology – and keeping them
uptodate with emerging technologies
generally – was key to us offering the
bestservice and advice to our customers.
We also considered that, in helping
customers use new technology to boost
their productivity, we would boost our
own. A training programme was delivered
using internal expertise to upskill employees
in the Copilot functionality that is embedded
into Microsoft Bing – which aids
productivity and finds internal and
external information more quickly.
We agreed to roll out Copilot to a group
ofemployees across Bytes and Phoenix,
to improve our own ways of working and
our understanding of the technology.
Webelieve AI products will be a big driver
for our business in the years ahead, and
considered this decision to invest in skills
internally to be in our employees’ and our
customers’ bestinterests.
Continuing to pay a special dividend
In May 2023, the Board decided to
recommend paying another special
dividend, in light of our continued strong
performance and cash generation.
How the Board made its decision
BTG’s dividend policy is to distribute 40%
of post-tax pre-exceptional earnings to
shareholders. Given the company’s
continued strong performance in the year,
we considered the option of recommending
a further cash return to shareholders in the
form of a special dividend, over and above
the full-year dividend.
As a Board, we took account of the
company’s cash position at the end of
theyear and considered it above the
levelrequired for the ongoing running
thebusiness. So, as we do with a normal
dividend, we considered the views of
ourinvestors about whether they would
support an ongoing special dividend or
would like to see us put that capital to
work in a different way – for example,
towards an acquisition, share buyback
orinvestment in the business. We
alsodiscussed whether continuing
topayspecial dividends may result in
normalising the practice and reducing
flexibility in this regard going forward.
On balance, we felt that recommending
paying another special dividend was
inthe best interests of shareholders
because, in its current form, using capital
like this is an efficient way for the company
to create value for shareholders. We
agreed to recommend a special dividend
of 7.5 pence per share, which was paid to
our shareholders in August 2023.
78 Bytes Technology Group plc
GOVERNANCE REPORT
Stakeholder engagement
Here we set out how, as the Board, we have engaged with and been influenced by the interests of different stakeholders,
aswell as by the macroeconomic and environmental factors that affect them. Our engagement activities are well established,
as is our investor community as a stakeholder group since the company’s listing in December 2020. This year, in light of
NeilMurphy’s resignation, communicating with employees was one of our first concerns.
Stakeholder
groups
How the Board stays informed What the Board has learnt is important
toour stakeholders
Employees
People are at the
heart of BTG’s
business and are
instrumental to its
continued growth
and success
Indirectly
• • Regular updates from the managing directors
andHR about talent and succession planning,
andemployee remuneration and benefits,
includingpensions.
• • Updates from management about career
development and BTG’s leadership coaching
programme, online staff feedback platforms,
quarterly whole-company meetings, employee
netpromoter score (eNPS) surveys and
engagementwith the leadership team.
• • Feedback from the Better Bytes team and the
Phoenix Sustainability Network, which lets BTG’s
people share insights, feedback and ideas, and to
constructively challenge management about how it
can improve. As a result of feedback, in 2023/24,
Bytes now includes dental health as part of its
optional employee health care plan.
Directly
• • Town halls at both Phoenix and Bytes, where then
Interim CEO Sam Mudd, CFO Andrew Holden and
other members of the leadership team discussed
the resignation of the former CEO and took questions
to reassure colleagues. We also prepared an
interview piece about Sam that went out to all
employees. For more details, see page 32.
• • The whole Board met with senior managers at the
company’s City of London office to understand the
views of staff.
• • Engagement through the Remuneration Committee,
with Alison Vincent, its Chair until October 2023,
reporting on her conversations with employees
about the effect on them of the cost-of-living crisis.
This helped inform the Board’s thinking around this
year’s salary levels.
• • Monitoring the all-employee Sharesave scheme,
which has been in place annually from June 2021
toJune 2023. As a Board, we are pleased with
thecontinued strong uptake of the scheme, with
participation by more than half our employees.
• • The views of our employees, particularly around
theongoing pressure from the cost-of-living
crisis,being shared with the Board through our
Board-appointed non-executive director with
responsibility for employee engagement.
Sam and Andrew’s honest, open approach to the
former CEO’s resignation was much appreciated by
employees, who felt the situation was no reflection on
the company or on the rest of the BTG team. As far as
we know, we’ve lost no other employees except the
former CEO as a result of this difficult situation.
We know that BTG’s people prioritise:
• • Opportunities for professional development
andcareer progression
• • A safe, diverse and inclusive working culture
• • The ability to deliver market-leading solutions
toourcustomers.
Our discussions with employees at the London office
reinforced our understanding of their desire to stay
updated about the company’s overall and M&A
strategies, its risk management and growth plans,
andactions to maintain the strong culture as the
business grows.
Employees’ physical and mental health and safety
isatop priority for us as a Board. We support the
culture of openness promoted by the leadership
team,particularly how they create opportunities
foremployees to talk directly to them.
We support the company’s continued programme
offering employees health support through qualified
internal teams and by partnering with an independent
health and wellbeing specialist – as well as the direct
confidential channels for anyone to raise personal
concerns. In 2023/24, for example, the company
invited all employees to a series of sessions about
menopause with an external speaker.
The Board and management received feedback
onthese activities, which enabled us to improve
employee engagement and take action where
required. We continued to encourage employees
touse their annual volunteering day and have been
pleased with the uptake of the EV scheme.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
79
Stakeholder engagement (s.172 compliance) continued
Stakeholder
groups
How the Board stays informed What the Board has learnt is important
toour stakeholders
Customers
Building trusted
relationships
withcustomers,
based on a deep
understanding of
their needs, is
critical to BTG’s
strategy
Indirectly
• • Feedback from BTG’s account and sales teams
meetings with customers in person and at virtual
events, including tradeshows and conferences,
andthrough social media and podcasts.
• • Feedback and insights from management about
BTG’s clients’ strategies and future investment
plans, through contract reviews and feedback
fromthe company’s customer success teams.
• • Feedback from management’s interactions with
customers in roundtable and summit events,
andother events.
Directly
• • Annual customer experience survey, which is sent
tocustomers, requesting honest feedback. Results
are reported to the Board against the results of the
previous year to track progress.
• • Interactions between the CEO and customers about
what they want to see from BTG’s products and
services from an operational and sustainability
perspective. Major feedback is discussed with
management and the Board.
• • Erika Schraner met with several Phoenix customers
to hear about their AI strategy and needs.
Based on the feedback we receive, customers look
toBTG for:
• • Effective and cost-efficient technology sourcing,
adoption and management across software, and
security and cloud services
• • Help to identify their software needs, select and
deploy appropriate software products, manage
licence compliance and, ultimately, optimise their
software assets
• • Guidance and expertise on emerging technologies,
especially AI and generative AI.
Numerous customer events were held during the year,
in person or virtually, which helps BTG keep up to date
with what is most important to customers.
BTG often screens customers for reputational and
financial risks to identify issues that could damage its
reputation or finances, and flags any material issues
with us at Board level.
As with employees, our customers really valued the
open and honest way that Sam discussed the former
CEO’s resignation with them, and, as far as we are
aware, we have lost no business as a consequence.
Suppliers
andvendors
BTG’s well-
established
relationships with
suppliers and
vendors helps it to
provide the best
solutions and
support for
employees and
customers
Indirectly
• • Updates from management keep us informed
aboutthe major third parties with which the
company does business, including its suppliers,
banks and regulators.
The integrity of supplier arrangements – particularly
robustness of supply – is a key consideration. The
company screens all major third parties for reputational
and financial risks to make sure there are no apparent
issues that could damage its reputation or finances.
BTG clearly documents terms and conditions, including
service levels, payment terms and working practices.
Directly
• • This year, executive directors continued to engage
directly with vendors and partners at industry
events, through specific company-directed
engagements and in interactions around solutions
and services. The CEO gave the Board updates on
these engagements.
• • BTG also held close engagements with suppliers
and vendors about changes within their programme
and pricing structures. They discussed how the
company and Board could best manage
interactions and relations with customers.
Our non-executive directors have long-standing
relationships within the industry, which includes
material vendors and partners that the Group works
with on a daily basis.
Based on these updates, the Board understands
howimportant to suppliers and vendors a close and
mutually beneficial relationship with BTG is. Equally,
the Board’s strategy and decision making are
informed by developments in technology, which
highlight the importance of maintaining strategic and
trusted partnerships with the world’s most successful
software companies.
80 Bytes Technology Group plc
GOVERNANCE REPORT
Stakeholder
groups
How the Board stays informed What the Board has learnt is important
toour stakeholders
Investors
BTG’s investors
own the company
and have made
afinancial
commitment to
itssuccess
Indirectly
• • Insights from the regular engagement between the
CEO, CFO or members of the senior leadership
team with the company’s larger shareholders
andpotential investors.
• • Regular market announcements and presentations
from the company’s investor relations team, as well
as feedback from its discussions with investors and
through the investor relations section on BTG’s website.
• • Feedback from the executive directors’ in-person
and virtual roadshows that they hold following key
announcements, including the company’s full-year
and half-year results.
• • Insights from the follow-up one-to-one
conversations the executive directors hold
withinvestors and analysts following these
announcements.
• • Regular analysis of shareholder and analyst
sentiment and of peers.
Directly
• • Our Board Chair, Patrick De Smedt, met this year
with several institutional investors with a particular
interest in governance and sustainability matters.
They discussed BTG’s long-term sustainability goals
and developments in governance. Towards the end
of the year, a number of discussions were also held
by Patrick with investors around the circumstances
surrounding the resignation of the former CEO and
the number of trades in the BTG’s shares that
hadnot been disclosed to the company or the
market in compliance with the PDMR disclosure
requirements, and the subsequent appointment
ofSam Mudd as interim CEO at the time.
• • As our new Remuneration Committee Chair, Erika
Schraner led the engagement around our revised
remuneration policy. This included writing to our
largest investors and to proxy agencies, letting them
know the highlights of the proposed updated policy
and seeking their input, which led to individual
discussions where requested. We also consulted with
our external remuneration specialists on the revised
policy. This policy, relevant for the next three-year
cycle, will be presented for shareholder approval
atour Annual General Meeting (AGM) in July 2024.
Our Chair, senior independent director and committee
chairs are available to meet with shareholders during
the year.
The AGM is a key opportunity for shareholders and
Board members to meet face to face to discuss the
company’s annual performance, strategy and any
other matters shareholders wish to raise. We look
forward to welcoming and meeting shareholders
atthis year’s meeting.
As a Board, we understand that investors are
interested in a wide range of issues about BTG,
including the implementation of its strategy, and its
financial and operational performance, governance,
remuneration, acquisitions and capital allocation.
The directors are aware of their duty to treat members
as a whole fairly, with Board decisions taken with all
members’ long-term interests in mind. We maintained
strong engagement with our shareholders in 2023/24,
particularly in light of the unexpected change in our
leadership team.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
81
Stakeholder engagement (s.172 compliance) continued
Stakeholder
groups
How the Board stays informed What the Board has learnt is important
toour stakeholders
Community and
environment
BTG recognises
that it is part of the
communities in
which it operates
and strives to make
a meaningful
contribution to
sustainable
environments
Indirectly
• • Briefings from management keep Board members
informed that BTG’s operations, products and
services are aimed at not adversely affecting the
environment and should positively contribute to
thecommunities in which the company operates.
As part of its social responsibility, the company
continues to develop a more diverse workforce and
partner with organisations that share its values. BTG
provides engaging and well-paid local employment,
minimises its impact on the environment by using raw
materials, natural resources and energy responsibly,
and works to reduce waste and harmful emissions,
components and by-products.
A corporate social responsibility programme, with
clear objectives, is in place across both BTG’s
operating companies. In 2023/24, for example,
oneofits actions was to donate 140 BTG pre-owned
laptops to Lifeshare, the largest homeless charity in
Manchester. BTG’s Manchester team then donated
their time to set them up for the charity.
Some of the key developments reported to the Board
in2023/24 included our second disclosure to the
CDPand continuing disclosures through the ISS ESG
framework. We also hit a milestone by submitting
ourcarbon reduction targets to the SBTi.
Directly
As a Board, we continued to support fundraising
events, employee fundraising matching and
volunteering days. Such days are initiated within
thebusiness to benefit various charities and causes.
Our CFO, Andrew Holden, led by example this year,
using his annual volunteer day to support one of the
company’s local charity partners.
We also continued to support management’s
carbonreduction efforts, supporting a salary
sacrificescheme to help employees participate
inanelectric vehicle programme.
We support the company to encourage employees
tovolunteer for charities and provide support for
various social and environmental causes. The
company supports employees’ efforts by making
charitable donations and by giving them paid time
offto volunteer.
82 Bytes Technology Group plc
GOVERNANCE REPORT
Audit Committee report
Introduction from our Interim Chair
In BTG’s third year as a FTSE 250 company,
we have witnessed exceptional business
performance alongside unforeseen events.
internal control and risk management
procedures operated effectively
throughout 2023/24 and, where control
compliance weaknesses were identified
in respect of undisclosed share dealings,
we mandated improved controls be
implemented. IT security risk, in respect
of data security breaches around the
Group’s own data and that held on behalf
of third parties, remained a key theme.
We provided assistance to the two
subcommittees appointed by the Board
to investigate compliance with regulatory
standards (see pages 69 to 70 for more
details). In this capacity, we reviewed the
subcommittees’ recommendations
relating to the Annual Report and
Accounts 2023/24 and, with Travers
Smith, our external general counsel,
assessed the potential non-compliance
with the regulations. The committee
remains steadfast in its commitment to
helping the company toachieve ongoing
improvements in governance practices
aligned with ourshareholders’
expectations.
As a committee, we were encouraged
bythe Financial Reporting Council’s (FRC)
approach to the UK Corporate Governance
Code (the code), as reflected in the
updated 2024 code released in January
2024. The 2024 code will now come into
effect for us in the year ending 28 February
2026, with the Board’s declaration on the
effectiveness of material controls applied
in the year ending 28 February 2027. As
detailed in this report, we have already
initiated preparations for anticipated
changes in the code, and we will continue
to work to address the provisions outlined
in the 2024 code.
Reflecting on our 2022/23 reporting,
theBoard, Audit Committee and BTG
finance team were pleased that the FRC,
in its Review of Corporate Governance
Reporting published in November 2023,
positively recognised aspects of the
Group’s reporting.
Throughout this period, the Committee has
remained vigilant in overseeing the integrity
of financial and narrative reporting, and the
efficacy of risk management and internal
control procedures, while also providing
support to the Board in governance and
compliance matters.
I assumed the role of Interim Audit
Committee Chair on 25 March 2024
following Mike Phillips’ resignation from
the Board. I wish to express my gratitude
to Mike for his valuable contributions to
the Audit Committee during his tenure at
BTG. I also extend a warm welcome to
Ross Paterson, who will be joining us as
the new Audit Committee Chair, and Anna
Vikström Persson, who will be joining us
as a new committee member, both from
1 June 2024.
Much of the Audit Committee’s work this
year has revolved around our duties to
oversee BTG’s financial and narrative
reporting, as well as internal control and
risk management systems, compliance
and fraud, and internal and external audits.
In May 2023, we oversaw the renewal of
BTG’s revolving credit facility with HSBC.
In October 2023 and February 2024, the
committee considered the process by
which management evaluates internal
controls across the business. We were
satisfied that the process meets the
requirements of the Group in ensuring that
Committee composition
At year end, the Audit Committee
comprised Mike Phillips (then as Chair),
Shruthi Chindalur and me. Post-period,
following Mike’s resignation, the
committee comprises Shruthi Chindalur
and me as Interim Audit Committee Chair,
until Ross Paterson joins as permanent
Audit Committee Chair on 1 June 2024.
From that date, I will revert to my role as a
member of the committee. Anna Vikström
Persson will also join us as a new
committee member from 1 June 2024.
A strong collaborative
approachto internal audit
The committee continued to be impressed
with the open, collaborative relationship
between the BTG team and our internal
auditor, PwC, during their second full year
working together. PwC has continued with
its systematic, disciplined approach to
evaluating and improving the effectiveness
of our risk management, internal controls
and governance processes. Accordingly,
PwC delivered its 2023/24 plan as agreed,
and the committee approved its new plan
for 2024/25.
PwC’s scope of work has continued to
develop, broadening the range of risks and
controls that it reviews and taking a deeper
dive into more specific business areas. All
internal audit work is initially reviewed by
the relevant operational teams to verify
accuracy and completeness before it is
shared with the Board and findings
presented to our committee. While the
composition of PwC’s engagement team
changed towards the end of the year, we
retained continuity with our engagement
lead partner, who reports directly to the
committee and will continue to have direct
access to me whenever required.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
83
Audit Committee report continued
Relationship with our
externalauditor
EY was appointed as our external auditor
at IPO and this is the fourth year that EY’s
audit partner, James Harris, has signed
the auditor’s report. We are satisfied that
EY remains independent and objective in
its work and happy with the quality of the
audit plan and related reports for the
2023/24 audit. We are pleased with the
quality of service, the competence of
staff, and their understanding of the
business and related financial risks.
James has direct access to me, as Interim
Chair, whenever required, as he did during
the year to the former Chair. We have held
regular and transparent communication
to foster trust, alignment on objectives
and expectations, and solid and timely
discussion of audit findings. The Audit
Committee continues to have an open,
collaborative relationship with James
andhis team. On several occasions, the
committee as a whole met EY, without
management present, to discuss matters.
Given we have not reached the 10-year
threshold with EY, there is no requirement
to retender the external audit for 2025/26.
We have recommended to the Board that
it presents a resolution to shareholders to
reappoint EY for 2024/25 because of the
benefits we see in continuity, especially
given the change of Audit Chair, and
because we are satisfied with the quality
and efficiency of the audit.
2024/25 will be James’s fifth year as lead
audit partner on BTG, his last permissible
year under the FRC Revised Ethical
Standard 2019, so will be standing down
after next year’s audit. In the coming
months, under the guidance of the new
permanent Audit Chair, the committee will
assess 2025/26 options to either maintain
EY as our external audit provider with a
replacement audit partner or to invite
proposals for the appointment of a new
external auditor.
We are committed to a high-quality
external audit and, ahead of the 2023/24
audit, we approved EY’s work plans and
estimated fees for 2023/24. A full
breakdown of EY’s fees, for audit and
non-audit services, for 2022/23 and
2023/24 can be found on page 89.
We remain open to suggestions and
recommendations to improve our
financial and business reporting, financial
processes and internal controls, and to
consider the regulatory and reporting
insights shared by the EY team on
relevant topics from time to time.
Governance
The Board takes its governance
responsibilities very seriously and
leverages the help from PwC’s internal
audit team as well. For the two compliance
investigations, separate PwC teams were
retained to do independent fact-finding,
and to provide an assessment of
governance robustness and advice on
improvement opportunities. These
investigations were governed by two
subcommittees reporting to the Board
and separate from the Audit Committee.
For more information on the investigations
and their outcomes, see pages 69 to 70.
The Audit Committee, with Travers Smith,
our external general counsel, reviewed
the subcommittees’ recommendations
relating to the Annual Report and
Accounts 2023/24 and the associated
prior year restatements made in the
directors’ remuneration report.
During the year, the committee
underwent a performance assessment
asan integral component of the Board’s
annual evaluation process (see page 76
for more details). Overall, the feedback
was positive, with the work with the
internal and external auditors receiving
the highest ratings. Having reviewed the
results of the committee’s performance
assessment, the Board affirms the
effective functioning of the committee.
The committee also oversaw the
evaluation of the external auditor. The
questionnaire reflected the requirements
of the FRC’s Minimum Standard for Audit
Committees. The Minimum Standard,
while not yet mandatory, does ask audit
committees to consider the culture of the
auditor (among all other usual matters,
such as skill, quality and robustness of
the audit). In summary, the committee
continues to be confident in the external
auditor’s independence, effectiveness
and ability to provide rigorous review and
challenge. Consequently, we believe EY
is well suited to perform the company’s
audit for 2024/25.
Preparing for regulatory change
While the UK Government’s decision to
withdraw many of the proposed reforms
surprised us, as it did the rest of the
market, the committee welcomes these
developments. Additionally, we appreciate
the FRC’s decision to maintain a principle-
based approach and its comply-or-
explain framework in the 2024 code.
Although we are not required to declare
the effectiveness of the Group’s material
controls under the 2024 code until
2026/27, the committee is already
considering this aspect. Over the
comingyear, both our primary subsidiary
companies will implement new accounting
systems. Consequently, the committee will
collaborate with management to ensure that
the scoping and development process is
mindful of our future reporting obligations.
During 2022/23, PwC undertook efforts to
document controls pertaining to all major
transactional workflows. In 2023/24, we
expanded this initiative by conducting a
separate review to document controls
concerning general IT systems tax and
governance. Management has adopted
PwC’s associated documentation and
continues to implement remedial actions.
The documentation on general IT controls
is reviewed by EY as part of its external
audit work relating to ISA 315 (Revised)
Identifying and Assessing the Risks of
Material Misstatement.
Focusing on continual
improvement as we grow
BTG continues to mature and grow,
delivering an excellent set of results this
year. Its position in the market means we
remain confident in the company’s ability
and business strength. As it continues to
mature, we will stay focused and ensure we
keep improving our governance, processes
and controls, so they continue to support
greater efficiency and oversight across the
entire Group. The Audit Committee has a
key role to play in this and we look forward to
continuing our work over the next 12 months.
Erika Schraner
Interim Audit Committee Chair
22 May 2024
84 Bytes Technology Group plc
GOVERNANCE REPORT
Significant issues considered in relation to the accounts
Accounting judgements
Issue Key uncertainties and judgements Review and challenge by the committee Conclusion
Revenue recognition
Misstatement of revenue
recognised at or near
the year end
The Group transacts high
volumes of customer orders
across multiple vendor
products and manysoftware
licensing programmes.
Within eachincome stream,
management has made
judgements focused on
determining when the
Group’s performance
obligations are satisfied and
the point at which revenue
should be recognised,
including the accounting for
accrued and deferred
revenue. This is most
sensitive at or near the
year end.
As new product areas and licensing
programmes are introduced by vendors,
theGroup reviews its revenue recognition
policy at least annually to ensure that it is being
applied appropriately and consistently across
the Group.
During the year, the committee engaged with
management in its assessment of the policy,
and received detailed monthly reports from
management on business performance, which
include revenue and gross profit trends against
budget and previous periods, to help identify
anomalies that may indicate amismatch of
revenue and costs.
The committee concluded
that there isaconsistent
understanding and
application of the revenue
recognition policy across
the Group, with processes
in place to minimise
cut-off errors that may
result in revenue being
reported in the wrong
period.
Rebate receivable
Misstatement of rebate
receivable in the
reported results
The Group has significant
rebate income across
multiple vendors and
different rebate schemes,
which gives rise to large
rebates receivable balances
at year end. This is because
rebates are collated and
paid by vendors and
suppliers up to 90 days
following the year end.
Judgement is therefore
required by management to
estimate the Group’s rebate
receivable at the end of the
financial year.
The committee reviewed the Group’s policy and
procedures in relation to recognising supplier
and vendor rebates at the year end and
discussed with the management team any
significant changes to rebate schemes during
the year.
The committee concluded
that the Group has
appropriate knowledge
and processes in place
toensure rebates
areaccurately and
completely accounted
forin the correct period,
including materially
accurate estimates of
therebate receivable
atthe year end.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
85
Audit Committee report continued
Accounting judgements continued
Issue Key uncertainties and judgements Review and challenge by the committee Conclusion
Going concern
andviability
Assessment of
appropriateness of the
going concern basis for
preparing and presenting
the financial statements
Assessment of the basis
for confirming our
longer-term viability and
appropriateness of the
period chosen
In continuing to adopt a
going concern basis for
preparing the financial
statements for the period
ended 29 February 2024,
the directors have reviewed
and made judgements
around a range of factors
that couldaffect future
tradingand cash flows.
This included considering
the Group’s exposure to its
principal risks were they to
materialise, especially in the
context of the wider
challenging economic
conditions and geopolitical
environment.
The directors have also
reviewed the extension
ofcash forecasts beyond
the going concern period to
confirm the Group’s viability
over a longer term.
The committee considered the appropriateness
of the key assumptions underpinning the Group’s
going concern assessment, in particular around
economic factors such as high inflation and
interest rates during the year, along with any
wider affects from the invasion of Ukraine and
conflict in theMiddle East, and the impact of
these onthe business and the businesses of
itscustomers. Most recently, the committee
assessed possible adverse impacts on
relationships with customers, vendors
andstaffarising from the governance
investigations that have taken place.
The committee also considered the sensitivities
modelled under a range of downside scenarios
to reflect increasing risks and the associated
mitigations to offset them.
In one aspect of mitigation, the committee
oversaw work in May 2023 to cancel and
replace BTG’s revolving credit facility (RCF)
with HSBC, which was due to expire in
December 2023. Following discussions with
HSBC, we entered a new three-year RCF on
similar terms running to May 2026, with the
option for a one-year extension to May 2027.
The availability of the new RCF up to this
laterdate supported the committee and
management in choosing to assess future
viability over a three-year period, and also
alignedto many major customer and framework
agreements running over a similarterm. The
committee considered the appropriateness of
the key assumptions used by management to
produce the extended forecasts as the basis for
preparing the Group’s viability statement.
The committee concluded
that management had
considered a wide range
of potential adverse
impacts to future trading
and cash flows and applied
these in a reasonable
range of downside
scenarios across both the
going concern and viability
assessment periods.
The committee also
noted, in respect of the
recent governance issues,
that the key relationships
with customers, vendors
andstaff exist at the
operating company levels,
where, to date, there has
been no visible impact. It
also expects the possible
riskof there being any
impact diminishing as
weprogress through the
going concern and
viability periods.
It also reviewed the
associated disclosures
inthe year-end financial
statements and annual
report and the outputs
ofthe external auditor’s
review to satisfy itself that
the going concern and
viability conclusions were
both appropriate.
Financial statements and reporting
Issue Key matter Review and challenge by the committee Conclusion
Directors’
remuneration report
During the year, a
number of issues came
to light regarding shares
held by executive and
non-executive directors
having been misstated
inthe prior-year Annual
Report and Accounts
A key responsibility of the
committee is to ensure the
integrity of BTG’s financial
reporting as a whole across
all areas of the Annual Report
and Accounts. Where
necessary, this includes
restating information
previously reported in the
prior period if it transpires that
it was not correct at the time.
Such errors in the prior-year
reporting for 2022/23 were
identified in respect of the
holdings in BTG shares at
28 February 2023 by the
former CEO and two
non-executive directors.
See background on pages
69 to 70 and details in the
tables on pages 121 to122.
During the year, the committee engaged with
the two Board subcommittees to understand
the background to the prior-year misreporting,
the reasons this had arisen andtosatisfy itself
that the full extent of themisstatements had
been identified andchallenged.
With these facts established, the committee
worked with management, the Board and
otherBoard committees to ensure that full and
comprehensive disclosures were made relating
to the matters across all relevant sections of the
governance report for 2023/24, including updating
any incorrect shareholding figures in the directors’
remuneration report (DRR) in respect of the prior
year and noting that these had been restated.
For the largest differences, relating to the former
CEO, the committee ensured the fullest available
disclosure was shown in the DRR by providing
reconciliations of the reported (incorrect) holdings
to the revised (correct) ones, and checking that
this information provided in the DRR was
consistent with that previously released to the
market via RNS (see pages 69 to 70).
The committee concluded
that the matters had been
satisfactorily, and
independently,
investigated by the Board,
that the facts had been
gathered and explained,
and that the financial
reporting for 2023/24
within the Annual Report
and Accounts reflected
the details of the matter.
This included restatement
of prior-year figures where
necessary to enable the
integrity, accuracy and
completeness of BTGs
financial reporting for the
2023/24 financial year.
86 Bytes Technology Group plc
GOVERNANCE REPORT
Strengthening our financial
reporting and internal controls
This year, the committee focused on
several significant areas of financial
reporting and internal control, including
financial, operational and compliance
controls. For example, we:
• • Reviewed BTG’s financial statements
and assessed whether suitable
accounting policies were adopted
andwhether management made
appropriate estimates and judgements
• • Reviewed the detailed scenarios and
assumptions behind the going
concern basis of accounting and
longer-term viability
• • Monitored the effectiveness of BTG’s
enterprise risk management (ERM)
and internal control systems, and
received detailed reports and
presentations on principal risk
tolerance levels and management
• • Oversaw the implementation of the
internal audit plan for 2023/24 and
approved the new plan for 2024/25
• • Continued to support the strong
finance leadership team with insights
from PwC’s experience within BTG
and from other organisations
• • Reviewed and approved the selection
process for the new order processing
and accounting system in Bytes
andupgraded accounting system
inPhoenix
• • Reviewed the Annual Report and
Accounts 2023/24 and half-year results
for the six months to 31 August 2023
• • Approved PwC’s support for
management in documenting key
controls in financial processes
• • Reviewed recommendations from the
separate investigations pertaining to
financial controls and monitored the
implementation of improved controls
for share dealings and share register
analysis, with continued monitoring
planned as an ongoing process.
Membership
At the year end, the Audit Committee
comprised three independent non-
executive directors who have a
combination of recent and relevant
financial experience and competence
inaccounting, risk management and
governance. As a whole, the committee
has expertise that is relevant to the
technology sector in which BTG operates.
Mike Phillips is a qualified chartered
accountant and has previous experience
as CFO of a number of UK-listed
companies. Erika Schraner has recent
relevant financial experience as a result of
her previous executive work and her roles
as chair of the audit committee of UK-listed
companies, and considerable technology
sector experience. Shruthi Chindalur, who
joined the Board and the committee on
1 February 2024, also has considerable
expertise in the technology sector.
For the purposes of the code, Erika is
currently the designated financial expert.
Biographies for all the committee
members are set on out pages 72 to 73.
As explained on page 100, changes
among our directors meant we did not
comply with provision 24 of the code
during the period from Alison Vincent
stepping down from the Board on
31 October 2023 until Shruthi Chindalur’s
appointment on 1 February 2024 because,
during that time, the Audit Committee only
comprised two independent non-executive
directors (Mike Phillips and Erika Schraner).
Following Mike’s resignation from the
Board as an independent non-executive
director on 24 March 2024, we are not
compliant with provision 24. However, this
will be resolved on 1 June 2024 when two
new independent non-executive directors
join us: Ross Paterson as Audit Committee
Chair and Anna Vikström Persson as a
member of the Audit Committee.
How the committee operates
Our committee generally meets on the
same day as Board meetings, to make
interacting with the other directors as
efficient and effective as possible. Our
external auditor, EY, and internal auditor,
PwC, are invited to attend our meetings,
asare the other members of the Board and
the Group Company Secretary. Depending
on the agenda, other members of senior
management are also invited.
During 2023/24, we met nine times.
These meetings include those held one
week before our main half-year and
year-end results meetings to consider
reports from the auditors and management
teams. This ensures that any material
aspects relating to the results are raised
and addressed by the committee in an
efficient way.
The Board receives monthly financial
reports for BTG and, at each Board
meeting, the CFO provides a written and
verbal report on our financial performance
and outlook. This gives members a good
understanding of the Group’s financial
performance and a platform to ask
questions and challenge management.
Additional financial information and
management reports are provided
aroundfinancial reporting periods.
Committee attendance
Committee member
For the financial year to
29 February 2024
Mike Phillips, Chair
1
(in-period)
9/9
Erika Schraner,
Interim Chair
2
(post-period)
9/9
Shruthi Chindalur,
appointed
1 February 2024
2/2
Alison Vincent,
stepped down
31 October 2023
4/6
1 Chair until 24 March 2024 and throughout
thereportingperiod.
2 Interim Chair since 25 March 2024,
post-reporting period.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
87
Audit Committee report continued
This year we benefited from a series
ofmeetings with key members of the
management teams of Bytes and Phoenix,
as part of Board engagement sessions.
Our committee has reviewed and
approved its terms of reference, which
were set on 30 November 2020 as part
ofour IPO process, and these were last
updated on 21 February 2024. We have
also agreed a schedule of items for each
of our planned meetings for the 2024/25
financial year, with two of these dedicated
to risk management.
Responsibilities
The Audit Committee’s principal
responsibilities, as delegated by the
Board, remained unchanged this year.
They include oversight, assessment
andreview of:
Financial statements and reporting
• • The integrity of BTG’s financial
reporting as a whole and any formal
announcements relating to its financial
performance, including any significant
judgements contained in them
• • BTG’s assessment of its going
concern and longer-term prospects
and viability.
External auditor
• • The effectiveness of the external
auditprocess, with consideration
ofrelevant UK professional and
regulatory requirements
• • Developing and implementing policy
on the supply of non-audit services
bythe external auditor and approving
relevant work
• • Obtaining comfort that the external
auditor is independent and objective.
Internal auditor
• • The relationship with the internal
auditor, advising on its effectiveness
• • Considering and approving the
internal audit review plan, the
outcome of audit reviews and
associated actions.
Risk management and
internalcontrols
• • The effectiveness of BTG’s internal
financial controls, risk management
and internal control systems,
including the activities of the internal
audit function, and supporting an
agenda of continuous improvement
• • Reviewing BTG’s finance and risk
management policies for ensuring
regulatory and legal compliance
• • Identifying and assessing principal
and emerging risks and risk exposures
• • The effectiveness of anti-fraud and
bribery systems, and whistleblowing
arrangements where employees
andthird parties can raise concerns
inconfidence.
Other responsibilities
As well as these responsibilities,
thecommittee:
• • Supports the Board in discharging its
responsibilities to comply with the code
• • Advises the Board on proposed
full-year and half-year financial results
and periodic reporting, and related
announcements
• • Reviews the annual and half-year
financial statements and accounting
policies, and internal and external
audits and controls
• • Recommends to the Board the payment
of final, interim and special dividends
• • Assesses the effectiveness of
financial reporting procedures
• • Advises the Board on the outcome
ofthe external audit and whether it
considers the Annual Report and
Accounts, when taken as a whole,
isfair, balanced and understandable
and provides the information
necessary for shareholders to assess
BTG’s position and performance,
business model and strategy
• • Makes recommendations to
theBoardon the appointment,
reappointment or removal of
theexternal or internal auditors
• • Approves both the external and
internal auditors’ fees and terms
ofengagement
• • Maintains strong relationships with
theBoard, executive management
and the external and internal auditors
in the execution of their respective
responsibilities
• • Reports to the Board on how the
committee has discharged its
responsibilities during the year.
External auditor
The external auditor is a key stakeholder
in helping the committee fulfil its oversight
role for the Board. This year, in addition
toits core audit work and as highlighted
already, the external auditor also reviewed
the results of the investigations relating to
the undisclosed share trades as part of its
overall audit process.
For its core audit work, during the year EY
presented to the committee its detailed
audit plan for 2023/24, which outlined its
audit scope, planning materiality and
assessment of key audit risks. The
committee also received reports from EY
on its assessment of the accounting and
disclosures in the financial statements,
including observations around financial
controls where identified, and was
satisfied that the audit work remained
appropriate to BTG’s business.
EY attends each committee meeting,
receiving all committee papers in advance
and, during the year, the committee met
with EY without management present.
Outside formal meetings, EY’s audit
partner, James Harris, had direct access
to the committee Chair throughout the
year and continues to do so, to raise any
matters of concern or clarification.
The committee and auditor have been
able to spend more time working together
face to face this year, which has enabled
more proactive teamwork and efficient
engagement. Two workshop sessions
were held during the year between BTG’s
finance team and the external auditor. Both
workshops included sessions with our EY
external audit team, which was a good
opportunity to keep sharing knowledge
ofour business, processes, policies and
lessons from previous audits, and to
support an efficient 2023/24 audit.
88 Bytes Technology Group plc
GOVERNANCE REPORT
Our committee approved EY’s fees for
theexternal audit with the total recurring
fee element increasing from £718,700
in2022/23 to £766,822 in 2023/24,
representing an increase of 6.7% and
reflecting an inflationary increase in
EY’sunderlying costs.
Both years also included an element of
non-recurring fees. The higher amount in
2023/24 was substantially in connection
with the two investigations into unreported
share dealings and associated governance
matters (see pages 69 to 70) and totalled
£415,000. The costs of the investigations
were approved by the subcommittees
reporting directly to the Board, reflecting
EY’s workin reviewing the outputs of the
investigations and potential impacts,
including the incorrect disclosures of
directors’ shareholdings in previous
annual reports and the consequent
prior-year adjustment in the directors’
remuneration report for 2023/24.
The rest of the non-recurring fees
in2023/24covered EY’s review of
theminority interest investment in
technologycompany Cloud Bridge.
The committee assesses the quality,
effectiveness, objectivity and
independence of EY’s annual audit,
andseeks feedback from the Board.
Thecommittee concluded that EY had
provided appropriate focus and challenge
throughout the audit and had remained
objective and independent. The
committee once again recommended
EY’s reappointment as BTG’s auditor
andthat the directors determine its
remuneration. This will be proposed
atthe2024 Annual General Meeting.
Non-audit services
It is the Board’s policy that all proposals
from EY for any non-audit services must
be approved in advance by the committee
and must not be prohibited by the FRC
Revised Ethical Standard 2019. EY may
only provide such services if its advice
does not conflict with its statutory
responsibilities and ethical guidance. The
committee is aware of the requirements of
the Statutory Auditors and Third Country
Auditors Regulations 2016. The regulations
cap non-audit services in any financial year
at less than 70% of the average audit fees
paid on a rolling three-year basis.
The ratio between audit and non-audit
services performed by EY during the year
was 10.7:1 (2022/23: 6.8:1) and non-audit
services in the year were 8.5% compared
with the cap of 70%.
Audit risks and areas of focus
As part of its audit planning process, EY
advised our committee of the key audit
risks and other areas of audit focus.
Key audit risks
• • Misstatement of revenue recognised
at or near year end
• • Management override of controls
• • IFRS 15 revenue presentation
anddisclosure
• • Misstatement of rebate receivable to
overstate reported results at or near
the period end.
Other areas of audit focus
• • Going concern and viability
• • Accounting for share-based payments
• • Impairment of goodwill
• • Group consolidation and presentation
• • Accounting for the Cloud Bridge
acquisition
• • Risk arising from the investigation
onunauthorised and undisclosed
share trading.
Our committee has the authority to
request that additional areas are
reviewedshould the need arise.
External auditor fees
2023/24 2022/23
Consolidated Group and parent company £268,281 £251,114
Subsidiary audits £3 97,417 £ 372,18 6
Half-year review (non-audit services) £101,124 £95,400
Total recurring fees £766,822 £718,700
Non-recurring (investigation reviews) £415,000 £–
Non-recurring (other) £5,000 £29,500
Total non-recurring fees £420,000 £29,500
Total fees £1,186,822 £748,200
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
89
Audit Committee report continued
Working with the external auditor
The committee approved EY’s terms
ofengagement and reviewed the
effectiveness of the external audit
through the year-end reporting period.
We assessed the auditor’s performance,
based on our evaluation and feedback
from senior members of BTG’s finance
team, across a range of relevant topics.
We concluded that the auditor showed
appropriate focus, critical analysis and
challenge on the key audit areas and
applied robust challenge and scepticism
throughout the audit. We recommended
to the Board, which, in turn will
recommend to shareholders in a
resolution at our 2024 Annual General
Meeting, that EY should continue as
external auditor.
The external auditor reported to the
committee on its independence from
BTG, in line with all UK regulatory and
professional requirements, and confirmed
that the objectivity of the audit partner
and staff is not impaired. The committee
also confirmed that BTG has adequate
policies and safeguards to ensure EY
remains objective and independent.
Internal controls and risk
management systems
The management of risk is treated as a
critical and core aspect of our business
activities. Although the Board has
ultimate responsibility for establishing
and maintaining BTG’s internal control
and risk management systems, ensuring
the Group has robust risk identification
and management procedures in place,
certain risk management activities are
delegated to the level that is most capable
of overseeing and managing the risks. On
behalf of the Board, the committee keeps
the adequacy and effectiveness of the
company’s internal financial controls and
risk management systems under review,
and assesses and approves the Annual
Report statement concerning internal
control and risk management. This
includes assessing principal and emerging
risks and the viability statement. As part of
its internal audit this year, PwC confirmed
to the committee that BTG’s internal
controls have been appropriately
documented for the areas reviewed.
For more on our risks and mitigation and
our risk management framework, see the
risk report on pages 53 to 62. To gain a
comprehensive understanding of the risks
facing the business and management,
thecommittee periodically receives
presentations from senior managers
andexternal advisors.
We have also followed the code’s key
requirements on risk management and
control. For example, this year, as the
code requires, the Board has:
• • Continued to implement our ERM
framework and policy
• • Carried out a robust assessment of
our risk appetite, and principal and
emerging risks
• • Confirmed that we have completed
this assessment in our Annual Report,
along with describing our principal
risks and indicating how we identify
emerging risks and manage or
mitigate risks
• • Monitored and reviewed the
effectiveness of our material risk
management and internal control
systems and summarised this
effectiveness review in our
AnnualReport.
Assessing our principal risks
twicea year
The Board carries out a robust
assessment of BTG’s principal risks twice
a year. This considers the risks that could
threaten our business model, future
performance, solvency or liquidity, and
the Group’s strategic objectives over the
short to medium term. Our principal risks
are documented in a schedule that
includes a comprehensive overview of the
key controls in place to mitigate the risk
and the potential impact on our strategic
objectives, KPIs and business model.
Given its importance, changes to BTG’s
risk register can only be made following
approval from the committee or the Board.
We outline changes to the principal risks
during the year on page 56.
Risks that are not principal to BTG are
documented within the risk registers of
our two primary subsidiaries, which are
overseen by the Executive Committee.
The Audit Committee received updates
on material aspects relating to these risk
registers at intervals during the year.
Inaddition, risks that are considered
keyindicators of changes in BTG’s
riskprofile, or deviation from the Board’s
risk tolerance level, are identified and
reported to the committee.
Following our review – and with the
exception of controls over share dealings
and share register analysis, for which
improvements have already been
madeand are otherwise ongoing – the
committee confirmed to the Board that
itis satisfied BTG’s internal control and
risk management procedures operated
effectively throughout the period and
arein accordance with the FRC’s
Guidance on Risk Management, Internal
Control and Related Financial and
Business Reporting.
The committee continues to use the
Group’s ERM framework and policy
andour risk appetite framework.
OurERMapproach determines our
overall principles, requirements and
responsibilities for a sound approach to
risk management and an effective and
continual internal control assurance
framework within the business.
90 Bytes Technology Group plc
GOVERNANCE REPORT
The committee also assessed the Group
risk register – which consolidated the risk
registers of BTG, Bytes and Phoenix –
during the year. This included the
underlying methodologies, inherent risk
scores (IRS) of the identified risks and
what mitigation, if any, could be applied to
the IRS depending on the classification of
green, amber and red. Green (low) risks
can be accepted without mitigation,
amber (medium) risks should be mitigated
where possible and red (high) risks must
be mitigated as much as possible. Once
mitigations are taken into account,
management scrutinises the net red risks
to determine if they are compatible with
the Group’s risk appetite.
Our committee formally reviews the
Group risk register twice a year, using a
consistent process, to identify the
likelihood and business impact of any
material or emerging risk, as well as any
mitigating factors or controls. A robust
assessment of the principal and emerging
risks facing the Group was carried out by
management – and reviewed and
incorporated into the register by the
committee – during the year.
The boards of directors of Bytes and
Phoenix have implemented internal
controls and processes to deliver financial
control and reporting, including controls
incorporated into their underlying
systems. On a day-to-day basis, the
Group system of internal control is
managed and coordinated by our CFO.
At our meetings in October 2023 and
February 2024, the committee
considered the process by which
management evaluates internal controls
across the business. IT security risk, in
respect of data security breaches around
the Group’s own data and that held on
behalf of third parties, remained a key
theme. So too were the broader
challenges in the macroeconomic
environment, caused by issues such as
the conflicts in Ukraine and the Middle
East and the cost-of-living crisis.
Our business continuity plans (BCPs) for
Bytes and Phoenix remain robust and
wecontinue to embed an annual BCP
management cycle as part of our overall
risk management process, to continually
track, review and evolve our plans.
For 2024/25, the Board at the
recommendation of the Audit Committee
agreed that the following areas of risk
remain relevant and should be reviewed
and assessed:
• • Cybersecurity risk of breaches
ofBTG’s own data and that held
onbehalf of third parties
• • Factors linked to high interest
rates,supply chain constraints and
geopolitical uncertainty – given
theirsignificant impact on the global
economy, customer behaviours and
associated cash flows, and the
carrying amount of assets and
projected future cash flows in the
context of going concern and
impairment assessments
• • People- and culture-related risks,
inparticular the ability to continue to
attract and retain talented people or to
maintain the unique nature of our culture
• • Increasingly competitive environment
and evolving vendor landscape
leading to pressure on margins
• • Non-compliance- and governance-
related risks.
Going concern and
viabilitystatements
The committee considered BTG’s going
concern and viability statements at our
meeting in May 2024. We also challenged
the nature, quantum and combination of
the unlikely but significant risks to our
business model, future performance,
solvency and liquidity, which were
modelled as part of the scenarios and
stress-testing for our viability statement.
As part of this review, we considered our
financial forecasts position to the end of
August 2025 for going concern and, over
the next three years for viability, conducted
a principal risk assessment and analysed
the impact of sensitivities on cash and
available funding, individually and
collectively, in a reasonable worst-case
scenario. These scenarios considered
the mitigating actions we could take.
We are satisfied that our going concern
statement, on page 131 of the directors’
report, and Our viability statement, on
pages 64 to 65 of the strategic report,
havebeen prepared appropriately.
Internal audit
Our internal audit function’s main task
isto support the Board to protect BTG’s
assets, reputation and sustainability. The
internal auditor provides independent
assurance about the adequacy and
effectiveness of the Group’s internal
controls and risk management systems.
This year marked PwC’s second full year
as BTG’s internal auditor and once again
the committee reviewed and approved
the internal audit charter. This provides
the framework for how internal audit is
conducted in BTG and was created to
formally establish its purpose, authority and
responsibilities. The committee approved
the internal audit plan for 2023/24, which is
designed to support BTG’s organisational
objectives and priorities and identify the
risks that could prevent the Group from
meeting those objectives.
In all, PwC carried out five audit reviews
across both our two primary subsidiaries
and, while these identified several areas
for continued improvement, found no
material issues or areas of concern.
Before each review, PwC holds a planning
meeting to understand the context,
keystakeholders, audit objectives and
timeframes. Together with our CFO, it also
reviews areas of particular importance to
the committee to ensure the scope of the
audit meets the committee’s expectations.
So that we can continually improve our
internal audit processes, PwC considers
a range of feedback and issues as part
ofits planning process each year. This
includes gathering views from our senior
executives and managing directors of
ourtwo primary subsidiaries, as well as
considering previous areas of internal
audit focus and their results, and the
most significant risks that we face as
anorganisation.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
91
Audit Committee report continued
Following up on internal
auditreviews
The committee receives a report on
internal audit activity at each scheduled
meeting and monitors the status of
internal audit recommendations and
management’s responsiveness to their
implementation. The committee keeps
other Board committees updated on the
outcome of any reviews that fall within
their areas of responsibility. To ensure
management completes actions from
internal audit reviews in a timely manner,
PwC follows up on the completion and
implementation of critical, high and
medium findings after their nominated
completion date and examines supporting
data to validate the information provided.
PwC also carries out follow-up reviews
with management if unsatisfactory
conclusions are reached. We will continue
to strengthen the way we monitor actions
following internal audits.
The committee approved the internal
audit plan for 2024/25 at our meeting in
December 2023. It includes six planned
reviews instead of five, which includes
reviews of cybersecurity, budgeting and
forecasting, and payroll for both
operatingcompanies.
As mentioned, a separate PwC team
assisted BTG with the two investigations,
with their recommendations addressed
directly by the Board.
Effectiveness review
of the internal auditor
As planned, we conducted a formal
review of the effectiveness of the internal
auditor and internal audit process
following year end. The review looked at
several areas, including the qualifications
and expertise of PwC’s team, the depth
and breadth of our internal audits, and the
quality of planning.
Overall, the committee is satisfied with
the way PwC manages our internal audit
function. The team’s extensive combined
experience means it can draw on subject
matter expertise from within the wider
PwC ecosystem. It also meets with the
senior BTG team each month to
understand the changes and challenges
in the business and engages with the
committee Chair in advance of committee
meetings. PwC also meets regularly with
our external auditor to exchange
knowledge on the risk and control
environment and to coordinate plans
whereappropriate.
At the start of any review, PwC holds
scoping meetings with key stakeholders
to agree the depth and breadth of the
internal audit, and to ensure the scope
covers the risks identified during the
planning stage while focusing on the
mostrelevant areas. All significant audit
findings remain ‘open’ until approved by
our CFO with input from the committee.
Reporting
As part of BTG’s financial reporting cycle,
it is the committee’s primary responsibility
to review the quality and appropriateness
of the annual and half-year financial
statements with the management team
and external auditor. For the period under
review, we focused on:
• • The quality, appropriateness and
completeness of our significant
accounting policies and practices
andany resulting revisions
• • The reliability of processes underlying
the integrity of our financial reporting
• • The clarity, consistency and
completeness of our disclosures,
including compliance with relevant
financial reporting standards and
other reporting requirements
• • Significant issues where management
judgements and/or estimates were
material to our reporting, or where
discussions took place with the
external auditor to reach a judgement
or estimate
• • The committee’s advice to the Board
on the long-term viability statement
• • Ensuring that full and comprehensive
financial and narrative disclosures
were made relating to the undisclosed
share dealings across all relevant
sections of the governance report
for2023/24, including updating any
incorrect shareholding figures in the
directors’ remuneration report in
respect of the prior year.
The committee received reports from
management on the identification of
critical accounting judgements,
significant accounting policies and
theongoing application of accounting
standards in financial year-end reporting.
Dividends and
distributablereserves
During the year, we took steps to ensure
that our distributable reserves within the
Group and company are appropriate for
the declaration of dividends. The
committee reviewed BTG’s dividend
policy and confirmed that 40% of post-tax
but pre-exceptional earnings would be
distributed to shareholders as
normaldividends.
We declared an interim dividend of
2.7 pence per share paid to shareholders
and are pleased to announce a proposed
final dividend for the year ended
29 February 2024 of 6.0 pence per share.
Considering the cash position at the
year end against our forecasted capital
requirements for 2024/25, we have also
proposed a special dividend of 8.7 pence
per share.
Both dividends are subject to shareholder
approval at our Annual General Meeting
on 11 July 2024. If approved, these would
both be payable on 2 August 2024 to
shareholders who were on the register
on19 July 2024.
92 Bytes Technology Group plc
GOVERNANCE REPORT
Fair, balanced and
understandable statement
The committee considered this Annual
Report as a whole, and the processes
andcontrols underlying its production,
inlight of the requirement that it must
befair, balanced and understandable.
This included making sure that we
addressed the areas listed below.
Process
• • All team members involved in the
process were properly briefed on the
fair, balanced and understandable
requirement.
• • The core team responsible for
coordinating content submissions,
verification, detailed review and
challenge had the necessary
experience to carry out their work well.
• • The committee received drafts early
enough to review and comment in a
timely manner.
Content
• • The report includes accurate key
messages, market and performance
reviews, principal risks and all other
financial and narrative disclosures
required for good corporate
governance.
• • The report is balanced in describing
potential challenges and
opportunities and includes relevant
forward-looking information.
• • Information in the different parts of the
report is consistent.
• • The report is written concisely, without
unnecessary verbiage, and avoids
jargon as far as possible.
• • Senior management confirmed that
they believe that the information
included about their respective areas
of responsibility is fair, balanced and
understandable.
On the basis of this review, we
recommended to the Board that this
Annual Report is indeed fair, balanced
and understandable, and gives readers
the information they need to assess the
Group’s position and performance,
business model and strategy.
Looking forward
During 2024/25, our committee will
remain focused on the key areas of
responsibility delegated to it by the
Board, which include:
• • Onboarding our new Audit
CommitteeChair and our
othernewcommittee member
• • Continuing to seek appropriate
assurance across all areas of the
business, with a particular focus
onBTG’s principal risks, control
environment and approach to
financialreporting, taking into
accountdevelopments in reporting
responsibilities and the ongoing
consideration of TCFD and other
climate-related reporting requirements
• • Monitoring progress on the
implementation of the new
systemsinBytes and Phoenix
• • Reviewing the external audit
strategycoming into EY’s fifth
yearasBTG auditor
• • Conducting an analysis between
current practice and the new Minimum
Standard for Audit Committees
• • Supporting BTG’s continuing
governance improvement initiatives.
We welcome questions from
shareholdersabout the committee’s
activities. If you wish to discuss any
aspect of this report, please contact us
through our Group Company Secretary at
wk.groenewald@bytes.co.uk.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
93
Nomination Committee report
Introduction from our Chair
We have worked hard to ensure that this year’s Board
changes supportgrowth while enhancing diversity.
Appointing new directors
I was delighted to welcome Shruthi, who
joined the Board in February 2024 and is
also a member of our Audit, Nomination
and Remuneration Committees. She
brings a wealth of commercial and
operational experience in the
technologysector to the role.
Her appointment followed a thorough
recruitment process, including
recommendations from Women on
Boards and The 350 Club, which are
otherwise independent of BTG, and from
our individual Board members. We also
considered references from our Board
members, as part of our longlist of
applicants. We then narrowed that to seven
final candidates – all women and allfrom
ethnic minority backgrounds, andwith a
variety of skills and experience in areas like
strategy, ITservices and HR. The Board
debated themerits of each candidate and
the committee interviewed all seven.
The committee prepared a comprehensive
induction programme for Shruthi, in line with
guidance from The Chartered Governance
Institute UK & Ireland. Itincluded:
• • Meetings with management, the Chair
and directors, and external advisors
• • Visits to key sites
• • Information to understand the business
and its strategy, its governance
processes and the year ahead.
We also welcomed Sam Mudd as an
executive director in July 2023, with her
extensive knowledge of the business
andour culture. Having the right skills
atexecutive level means that we have
natural succession plans in place, an
approach that was invaluable to ultimately
appointing Sam as CEO in May 2024.
Meanwhile, we are looking forward to
welcoming two more independent
non-executive directors on 1 June 2024:
Ross Paterson and Anna Vikström Persson.
Ross will take up the permanent role of
Chair of the Audit Committee, and join
theNomination, Remuneration and new
ESG Committees. Anna will join the Audit,
On former CEO Neil Murphy’s resignation
on 21 February 2024, we put in place our
succession plans, with Sam Mudd
immediately stepping in as Interim
CEO.Following a diligent selection
process, we then appointed Sam to the
permanent role of CEO on 10 May 2024.
When Alison Vincent stepped down in
October 2023, Dr Erika Schraner became
Chair of our Remuneration Committee.
Erika has been a member of the committee
since September 2021, so has played an
active role in our remuneration approach
for more than two years. After Mike Phillips’
resignation with immediate effect in March
2024, Erika assumed the role of senior
independent director. She also stepped
inas Interim Audit Committee Chair, for
which I extend my thanks and appreciation.
During the year, Erika also took on the role
of non-executive director designate for
employee engagement, after David Maw
retired from the Board at our Annual General
Meeting (AGM) in July 2023 – arole that,
following Erika taking on additional Board
responsibilities, moved to non-executive
director Shruthi Chindalur in March 2024.
Nomination and Remuneration Committees,
and also become Chair ofour ESG
Committee (see page 77 formore details).
Reviewing Board composition
tosupport growth
Board changes provide a good
opportunity to discuss overall composition
and ensure that we have the right balance
of skills to provide the necessary support
and challenge to help our senior executives
and wider management team successfully
deliver our strategy.
While that strategy has supported our
rapid growth and significantly increased
the market value of our business in just
three years, our focus has naturally been
on establishing BTG as a listed company,
putting the policies, processes and
culture in place to set us up for continued
growth. We see lots of opportunities to
keep growing but, to do that successfully,
we are now starting to shift that focus out
to the next three to five years.
On Sam’s appointment, we had three
executive directors on our Board, which
was a deliberate choice on our part, even
if somewhat uncommon. It was designed
to support our broader work in executive
development and succession planning –
which remain standing items at every
committee meeting. The combination of
three executive directors on our Board
and Alison’s departure meant that, for the
year ended 29 February 2024, we did not
comply with provisions 11, 24 and 32 of the
UK Corporate Governance Code (code)
for three months, although we resolved
this with Shruthi’s appointment.
As we set out in the Compliance with the UK
Corporate Governance Code section on
page 98, the resignation of Mike Phillips
after year end means that, at the date of this
report, we do not comply with the code
provisions 24 and 32. Our appointment on
1 June 2024 of Ross as Audit Committee
Chair and Anna as a member of the Audit
Committee, with both also appointed as
members of the Remuneration Committee,
will however, resolve this.
94 Bytes Technology Group plc
GOVERNANCE REPORT
Selecting our new Board members
In considering a candidate’s potential as a new Board member, the Nomination Committee considers a number of matters:
What skills gaps do
we want to fill as a
priority with our new
appointment?
Should our new
Board member be
internal or external?
How can we make
progress in our
diversity goals?
Will our new
candidate bring a
broad perspective
to the Board?
Can we demonstrate
career potential
toBoard level from
within the company?
Skills
gaps
Internal/
external
Diversity
goals
Broad
perspective
Career
potential
Ongoing focus on diversity
So far, I’ve only talked about diversity
interms of skills, but the committee
considers many aspects of this important
topic – including gender and ethnicity.
Itisone of the most common questions
among our shareholders and another
area that the committee discusses at
meetings. This year, that included
reviewing and discussing the
recommendations of the new FTSE
Women Leaders Review (the successor
tothe Hampton-Alexander and Davies
Reviews) and the Financial Conduct
Authority’s (FCA) new Listing Rules.
Given the changes to our Board this year,
women represented 60% of our Board at
the date of this report, meaning we are
aligned to the FCA Listing Rules to have
women represent at least 40% of the
Board and to have at least one director
who is from a minority ethnic background.
We also have women in the roles of CEO
and senior independent director. While
our priority will always be on making sure
we have the right person with the right
skills in the right role, our decisions on
future appointments will, of course, be
informed by the Listing Rules. This year
we also reviewed and updated our
diversity policy to ensure it is aligned
withthe regulatory changes.
Meanwhile, women now represent 50% of
our Executive Committee. We want to do
more to maintain that percentage, so I’m
pleased that Sam launched a new female
leadership acceleration programme,
initially within Phoenix. She also introduced
a coaching programme for younger women
in the team, which her successor Clare
Metcalfe, as MD Phoenix, will continue,
and had put enhancing flexible working
benefits on the agenda.
Supporting ongoing Board
development and reinforcing
governance requirements
Board and executive-level development
has continued to be a key area for the
committee. This year, that included a good
session with our external auditor, EY, on the
evolving corporate governance landscape,
and a session with EY’s economist to
discuss broader economic trends.
The Board held a session in April 2024 with
our legal counsel to refresh our members’
knowledge of the regulations and
requirements around share dealing and
directors’ duties. During the year, we also
introduced a new share dealing portal,
and set up an online training platform via
the Deloitte Academy to help our Board
members strengthen their knowledge in
areas such as governance and regulatory
processes and developments.
Staying focused on our priorities
to support future growth
Looking forward, I would like to see
thecommittee sharpen its focus on
developing our senior management team,
supporting the new executive team in
developing our senior managers, to
ensure we have the skills in place to
continue BTG’s growth. The committee
had a good discussion with the executive
directors on this subject, looking at our
opportunities to drive this initiative in line
with BTG’s growth aspirations and how we
might work with Bytes and Phoenix’s
external training specialists to create a
suitable programme in this area.
Everything that the committee has done
this year has been in service of that
longer-term outlook that I mentioned. And
Iexpect Board composition and executive
development to remain our primary focus
inthe coming 12 months. I look forward to
continuing these discussions with my fellow
committee members over the next year.
Patrick De Smedt
Chair
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
95
Nomination Committee report continued
• • Review the time commitment and
independence of the non-executive
directors, including potential conflicts
of interest
• • Deliver succession planning for the
Board and senior executives, including
recruitment, talent development,
identifying potential internal or
external candidates, and making
recommendations to the Board
• • Ensure that all new Board members have
an appropriate and tailored induction,
and that training and development is
available to existing members.
This year, we focused again on the
composition and diversity of our Board
and succession planning, which we
discuss in this report.
Becoming more diverse
As well as being the right thing to do,
establishing a truly diverse leadership
team ultimately benefits our stakeholders
by enabling us to perform better. On our
committee’s recommendation, the Board
has a Board and Senior Management
Diversity Policy, which was reviewed in
March 2024. In that review, we updated
the policy to set a percentage target for
senior management positions that will be
occupied by ethnic minority executives
byDecember 2027, as in line with the
Parker Review.
This target now sits alongside the policy
revisions we made in 2021/22 to meet the
recommendations from the FTSE Women
Leaders Review to:
• • Aspire to having at least 40% female
directors on the Board and senior
leadership team by the end of the
2025/26 financial year
• • Consider appointing at least one
woman in the Chair, senior
independent director, CEO or CFO
role by the end of 2025/26
• • Consider candidates for non-
executive director roles from diverse
gender and ethnic backgrounds
• • Develop a pipeline of diverse,
high-calibre candidates by
encouraging a range of employees
with different ethnic, gender and
experiential backgrounds to take on
additional responsibilities and roles.
The policy was updated and approved by
the Board and is available at bytesplc.com.
Our Nomination Committee works to
ensure that we have the right executive
and non-executive leaders to deliver
ourstrategic plans and maximise our
business potential – now and in the future.
As part of this, we focus on three
complementary elements: ensuring
appropriate leadership and succession
planning for our Board and senior
management, overseeing the
development of a diverse and inclusive
succession pipeline, and promoting
BTG’s long-term sustainable success
inthe interests of our stakeholders.
Each year, we review and approve our
committee terms of reference, which
areavailable at bytesplc.com.
Our responsibilities
Our committee’s main responsibilities are to:
• • Regularly reassess the composition of
the Board and committees – including
size, skills, knowledge, experience
and diversity – to ensure they
remainappropriate, and to make
recommendations for changes,
asnecessary, to the Board
• • Review the criteria for identifying
andnominating candidates for
appointment to the Board, based on
the specification for a prospective
appointment, including the required
skills and capabilities
• • Identify and nominate candidates for
Board approval to fill Board vacancies
when they arise, considering other
demands on directors’ time
• • Lead the process regarding
appointments to the Board,
includingthat of the Chair
With the changes to the Board this year,
women represented 60% of our Board at
the date of this report. That means we are
aligned with the FCA Listing Rules to have
women represent at least 40% of the
Board and to have at least one director
from a minority ethnic background.
We now also have women in the roles
ofCEO (Sam) and senior independent
director (Erika). This is a significant
milestone, because they contribute to
thediversity of thought and mindset that
we value so highly at BTG. Our priority,
ofcourse, will always be to ensure we
have the right person in the right role,
andthe requirements will continue
toinform our future appointments.
Committee attendance
Committee member
For the financial year to
29 February 2024
Patrick De Smedt 7/ 7
Alison Vincent
1
3/4
Mike Phillips
2
7/ 7
Erika Schraner 6/7
Shruthi Chindalur
3
N/A
1 Alison Vincent stepped down from the committee
on31 October 2023.
2 Mike Phillips resigned from the committee on
24 March2024, following the financial year end.
3 Shruthi Chindalur was appointed to the committee on
1 February 2024. There were no meetings held from the
date of appointment until the end of February 2024.
Focus areas for
2024/25
In the coming year, our committee
will continue to monitor its compliance
with the code and, with the Board,
review succession plans to continue
to enhance the cultural diversity and
skills balance across the business.
This will include:
• • Building on our directors’ skills
matrix to ensure they continue to
support BTG’s growth strategy
and will maximise the potential
of the business
• • Considering and recommending
the election and re-election
ofdirectors at our AGM in
July2024
• • Continuing our succession
planning process at Board and
senior management levels
• • Supporting the ongoing
development of the Board,
inparticular Sam in her role
asCEO
• • Overseeing the appointment
ofthe new Audit Committee
Chair and the new ESG
Committee Chair
• • Continuing to develop the
leadership capabilities of the
wider senior management team
and to promote diversity across
the business.
96 Bytes Technology Group plc
GOVERNANCE REPORT
Our Board and executive diversity data
The following tables provide data on gender and ethnicity across our Board and senior management team as at the date of this
report. The information was collected on a self-reporting basis.
Number of
Board members
Percentage
of the Board
Number of senior positions on the
Board (Chair, SID, CEO, CFO)
Number in the
Executive Committee
Percentage of senior
management team
Gender
Men 2 40% 2 2 50%
Women 3 60% 2 2 50%
Not specified/prefer not to say – – – – –
Ethnicy
White British or other White
(including minority-white groups) 4 80% 4 4 100%
Mixed/multiple ethnic groups – – – – –
Asian/Asian British
1 20% – – –
Black/African/Caribbean/
BlackBritish – – – – –
Other ethnic group, including Arab
Not specified/prefer not to say – – – – –
Independence of non-executive
directors and potential conflicts
of interests
Our committee reviewed the
independence and potential conflicts
ofinterests of the non-executive directors
in line with the UK Corporate Governance
Code (code). On 7 March 2024, we
concluded that Patrick De Smedt,
ErikaSchraner and Shruthi Chindalur
areindependent and continue to make
independent contributions and effectively
challenge management.
Following changes to the Board’s
composition during the year, we did not
comply with provisions 11 and 24 of the code
for three months. This was addressed in
February 2024 when we appointed
ShruthiChindalur as an independent
non-executive director. Shruthi is also
amember of our Audit, Nomination
andRemuneration Committees.
The Board’s immediate focus is now on
bringing together the skills and experience
of all the new members of the Board and
ensuring we work together for the benefit
of the company. This will help us ensure
we strike the right balance between our
deliberate approach to supporting
executive development and succession
planning and to complying with regulatory
expectations, as set outinour policy.
Managing succession planning
We manage succession planning in line
with the Group’s relevant policies. These
are aligned with regulatory requirements
around diversity targets and with the
company’s growth aspirations, which
weconsider in relation to the skills and
expertise that we need or will need in
future at Board level.
During 2023/24, we continued to evaluate
BTG’s succession planning for senior
executive roles. This included assessing
the strengths of senior managers, areas
that need improvement and plans to
address those areas. We identified
immediate and long-term candidates
among internal leaders who would be ready
to take on an enhanced role if needed, and
whether more training and development
would be required. We also dedicated
specific time to our female leadership
initiatives, to provide more momentum
todiversifying our manager positions.
We also again assessed the existing
succession planning for our executive
Board member roles, and continued our
efforts to establish formal succession plans
for each of our non-executive positions.
Reviewing our Board and
committees’ performance
After carrying out our first external Board
evaluation in 2022/23, using external
consultancy Lintstock, this year we ran
aninternal evaluation. Our Chair had
one-to-one discussions with each Board
member and Lintstock helped us to
develop a Board evaluation survey,
withwhich we sought feedback from the
Board and each committee. A separate
survey was developed for the Chair.
Lintstock took the survey feedback and
prepared a report for us, as it did last year.
For more information on the overall findings
and recommendations of the evaluation,
see page 76 and our regular areas of focus
on page 96.
The Chair, with support from the Group
Company Secretary, monitors progress
– made during Nomination Committee
meetings and one-to-one sessions
between the Chair and executive and
non-executive directors – on implementing
the recommendations, which is then
reported to the Board through feedback
from the Chair and CEO.
We will hold another internal evaluation
this financial year, completing Lintstock’s
three-year Board Development
Programme.
At the same time, our committee is always
working on its regular areas of focus (see
page 96), which is managed through its
workplan activities during the year.
Reviewing our Chair’s performance
Working with Lintstock, our senior
independent director – with input from
Board colleagues – appraised Patrick De
Smedt’s performance as Chair during the
year. The findings of this review were
shared with the Board, and concluded
that the Chair continues to guide the
Board effectively.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
97
Compliance with the UK
CorporateGovernance Code
For the year ended 29 February 2024, weapplied the
principles of the 2018 UK Corporate Governance Code.
We complied with all the provisions of the 2018 UK Corporate
Governance Code (code) during the financial year and up to the
date of this report, with three exceptions:
• • Following Alison Vincent stepping down from the Board as an
independent non-executive director on 31 October 2023, we
were not compliant with provisions 11, 24 and 32 for three months
until the appointment of Shruthi Chindalur as an additional
independent non-executive director on 1 February 2024.
• • Following Mike Phillips’ resignation with immediate effect
from the Board as an independent non-executive director on
24 March 2024, we are not compliant with provisions 24 and
32. However, this will be resolved on 1 June 2024 whentwo
new independent non-executive directors join us: Ross
Paterson as Audit Committee Chair and a member of the
Remuneration Committee, and Anna Vikström Persson as
amember of the Audit and Remuneration Committees.
The code is available in full on the FRC’s website at frc.org.uk.
1. Board leadership and company purpose
A. The Board’s role Our Board’s objective is to create and deliver BTG’s long-term sustainable success, supported by
the right culture and behaviours, to generate value for shareholders and contribute to wider society.
Our governance framework ensures that we have a robust decision-making process and a clear
structure within which decisions can be made and strategy delivered.
Our delegation of authority matrix ensures that decisions are taken by the right people at the right
level with accountability up to the Board. This enables an appropriate level of debate, challenge and
support in the decision-making process. We continue to be led by an effective Board, which ensures
that the most relevant topics are discussed at meetings throughout the year. The Board’s main
activities are detailed on pages 76 to 7 7.
B. Purpose, culture
and strategy
The Board has overall responsibility for establishing BTG’s purpose, culture and strategy and,
indoing so, delivering our long-term sustainable success and generating value for shareholders.
Central to this role is the need for the Board collectively to set the right ‘tone from the top’, in living
and upholding our values, encouraging open and honest debate, and behaving ethically. The Board
places great importance on ensuring that its conduct and decision making are appropriate for the
businesses andsector in which we operate, and in line with our culture.
Our Board is committed to delivering our strategy and to advancing our purpose: empowering
andinspiring our people to fulfil their potential, so they can help our customers make smarter buying
decisions and meet their business objectives through technology. The Board discusses company
culture during its meetings and regularly reviews reports from the CEO, CFO and senior management
that provide insight into the culture across the organisation. The Chair also receives regular updates
from management around culture. Together, this helps to promote behaviours throughout the
business to align with BTG’s purpose, culture and strategy.
C. Resources and
controls
The Board ensures that BTG has the necessary resources to meet its objectives and to continually measure
its performance against them. Through the Audit Committee, it oversees BTG’s control environment and
risk management frameworks. The Board’s agenda is set to deal with those matters relating to BTG’s
strategic plan, risk management and systems of internal control, and corporate governance policies.
D. Stakeholder
engagement
Our key stakeholders play an important role in the successful operation of our business. Our Board is
fully aware of, and takes seriously, its responsibilities to them under Section 172(1) of the Companies
Act 2006. Our Board members are mindful of the potential effect on our stakeholders when
considering the company’s strategy or other activities.
Board members take an active role in engaging with shareholders and wider stakeholders.
Non-executive directors are available to meet shareholders and discuss their concerns in person at
the Annual General Meeting (AGM). They also attend investor calls when requested and are invited to
attend relevant industry events.
We have a designated non-executive director who takes responsibility for employee engagement.
This role engages with staff, including operational managers. Senior managers are also given
opportunities to present at Board meetings and so engage with Board members in a different setting.
This work contributes to our strong employee net promoter score (eNPS), which was 71 this year.
We provide more information about how we consider all stakeholders’ views in our decision making
on pages 78 to 82.
98 Bytes Technology Group plc
GOVERNANCE REPORT
E. Workforce
engagement
Former non-executive director David Maw was our designated non-executive director for employee
engagement for the first half of the financial year. He engaged with staff at scheduled intervals, set up
specific discussions for the Board and reported back on his engagement activities. Retiring from the
Board in July 2023, he handed over to Erika Schraner. As part of her transition, Erika visited our
London office twice during the year to meet with employees, and had an opportunity to engage with
employees at Phoenix Software. Shruthi Chindalur then took on the role in March 2024, as Erika
assumed more Board responsibilities, and will continue the positive work done by David and Erika.
As part of our actions to advance employee engagement, the Board will also conduct an All Hands
session at our Bytes office in Leatherhead during this financial year.
Our whistleblowing policy sets out means for employees and third parties to raise concerns in
confidence, either to one of our whistleblowing officers or directly to our independent Chair. We
offerwhistleblowing guidance through an independent charity, offering a confidential helpline, and
have a process for investigating whistleblowing reports and our whistleblowing policy is available
atbytesplc.com. Therewere no whistleblowing reports this financial year.
2. Division of responsibilities
F. Role of the Chair Our Chair, Patrick De Smedt, leads the Board. He determines the agendas for meetings, manages
the meeting timetable and encourages open and constructive dialogue during meetings, inviting the
views of all Board members.
Patrick was considered independent when he was appointed. We review the status of all our
independent non-executive directors each year and confirm that each continues to be independent.
G. Composition of
the Board
Provision 11 of the code recommends that for companies within the FTSE 350 at least half the board,
excluding the chair, should be non-executive directors whom the board considers to be
independent. The company was not compliant with provision 11 during the period from Alison Vincent
stepping down on 31 October 2023 until Shruthi Chindalur’s appointment on 1 February 2024
because, during this time, the Board comprised the Chair, three executive directors and two
independent non-executive directors.
With Shruthi’s appointment, at year end the Board consisted of three independent non-executive
directors and three executive directors, as well as an independent non-executive Chair. The roles of
the Chair and CEO are clearly defined, with their role profiles being reviewed as part of the Board’s
annual governance review.
The Chair is responsible for effective leadership of the Board and for maintaining a culture of
openness and transparency at its meetings. The CEO has day-to-day responsibility for the effective
management of BTG’s business and for ensuring that Board decisions are implemented.
Our Board has agreed a clear division of responsibilities between its leadership function – supported
by our corporate governance framework – and the executive leadership of the business. To ensure
that no individual has unrestricted powers of decision making and no sub-group of directors can
dominate the Board, we have defined responsibilities clearly in our role statements and in the
mattersreserved for the Board. Committee terms of reference determine the authority given to
eachBoard committee.
For more on our Board composition, leadership and role statements see pages 72 to 73. The
responsibilities of our Chair, CEO and senior independent director, and our Board and committees,
are set out on page 132 and at bytesplc.com.
H. Non-executive
directors’ role
and time
commitment
Our non-executive directors scrutinise the performance of the executive management team and hold
it to account against agreed objectives. Our Chair holds discussions with the non-executive directors
without the executive directors being present, a practice that continued in the past year.
Our senior independent director serves as a sounding board for the Chair and is available as an
intermediary for our other directors and shareholders. For the year ended 29 February 2024, our
Chair’s performance appraisal was done through our senior independent director, with input from
external advisor Lintstock, and was concluded in May 2024.
Regular Board and committee meetings are scheduled throughout the year to ensure directors allocate
sufficient time to discharge their duties effectively. A non-executive director role generally takes up
at least 24 days a year, after the induction phase, plus additional time to prepare for each meeting.
Directors are also required to regularly update and refresh their skills, knowledge and familiarity with
the company, and attend additional Board, committee or shareholder meetings at certain times.
Before appointing a candidate, the Nomination Committee assesses that person’s commitments,
including other directorships, to ensure they have enough time for the role. The committee
reassesses the directors’ time commitments every year to ensure they each still have time for their
role; the Chair also does this periodically as part of his role. Our directors must obtain approval
before taking on additional external appointments.
I. Role of the
Company
Secretary
The Group Company Secretary is secretary to the Board and also oversees BTG’s legal function.
Their responsibilities include ensuring the Board has the information, time and resources to
discharge its duties and to function effectively and efficiently. They provide briefings and
guidanceto the Board on governance, legal and regulatory matters and facilitates induction
programmes for new directors.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
99
Compliance with the UK CorporateGovernance Code continued
3. Composition, succession and evaluation
J. Appointments to
the Board and
succession
planning
The Board, with the Nomination Committee’s support, continually reviews its own composition and that of
its committees, and considers succession planning, diversity, inclusion and governance-related matters.
The Nomination Committee has overall responsibility for leading the process for new Board
appointments. It also ensures that these appointments bring the required skills and experience to
theBoard to assist in developing and overseeing BTG’s strategy. The committee makes sure all
appointments are made on merit, having evaluated the capabilities of all potential candidates
againstthe requirements of the Board and considered all types of diversity, including gender.
For more details, see our Nomination Committee report which can be found on pages 94 to 97.
K. Skills, experience
and knowledge of
the Board
As part of our succession planning, the Nomination Committee considers the balance of skills,
experience and knowledge our Board needs to work effectively and help BTG deliver its strategic
goals. Find all the details of our directors’ tenure, skills and experience on pages 72 to 74.
L. Board evaluation In line with the need to undertake an externally facilitated evaluation every three years, we have
committed to a three-year Board effectiveness programme with external advisor Lintstock. The
programme includes one Board review with interviews followed by two survey-based reviews.
During the year, BTG again worked with Lintstock around its Board evaluation process, which
consisted of tailored surveys and one-on-one discussion by the Chair with Board members.
Lintstockprovided feedback to the Chair and the senior independent director in January 2024,
followed by its report to the Board in February 2024. The Board then agreed actions for 2024/25
tofurther strengthen the way it operates. The Chair and Group Company Secretary are managing
these actions, which we set out on pages 76 to 7 7.
4. Audit, risk and internal control
M. Internal and
external audit
The Board receives regular updates on audit, risk and internal control matters, with the Audit
Committee having detailed oversight and reporting its findings to the Board.
Provision 24 of the code recommends that the audit committees of companies within the FTSE 350
should comprise a minimum of three members, all of whom should be independent non-executive
directors. The company was not compliant with provision 24 during the period from Alison Vincent
stepping down from the Board on 31 October 2023 until Shruthi Chindalur’s appointment on
1 February 2024 because, during that time, the Board excluding the Chair, only comprised two
independent non-executive directors (Mike Phillips and Erika Schraner) and so the committee only
comprised two independent non-executive directors. Following Mike Phillips’ resignation from the
Board as an independent non-executive director on 24 March 2024, the company is again not
compliant with provision 24. However, this will be resolved on 1 June 2024 when two new independent
non-executive directors join us: Ross Paterson as Audit Committee Chair and Anna Vikström Persson
as a member of the Audit Committee.
The Audit Committee report on pages 83 to 93 sets out more about audit, risk management and
internal control, and the committee’s work. The report also includes details about how the committee
assesses the effectiveness and independence of EY – our external auditor – and PwC, our internal
auditor, which reports to the Audit Committee about progress against audit reviews and identifies
areas of our control environment for review.
N. Fair, balanced and
understandable
assessment
In light of the context in which we are reporting this year, the Board has undertaken a broader review
of the narrative in this Annual Report to ensure the proper disclosures and prior-year adjustments
inrelation to the previously undisclosed directors share transactions have been made and that the
report, taken as a whole, is fair, balanced and understandable. The Board considers this report to
befair, balanced and understandable and to provide the information necessary for shareholders to
assess BTG’s position and performance, business model and strategy. The Board’s assessment is
described on pages 132 to 133.
O. Risk management
and internal
control framework
Our Board is accountable to our stakeholders for ensuring BTG is managed appropriately. It sets
theGroup’s risk appetite, satisfies itself that its financial controls and risk management systems
arerobust, and ensures that it is adequately resourced.
A description of the principal risks facing the Group is set out on pages 56 to 62. This shows how the
directors have assessed the prospects of the company, over what period and why they consider that
period to be appropriate (our viability statement on pages 64 to 65).
100 Bytes Technology Group plc
GOVERNANCE REPORT
5. Remuneration
P. Remuneration
policies and
practices
Provision 32 of the code recommends that the remuneration committees of companies within the
FTSE 350 should establish a remuneration committee of independent non-executive directors with a
minimum membership of three. In addition, the chair of the board can only be a member if they were
independent on appointment and cannot chair the committee. The company was not compliant with
provision 32 during the period from Alison Vincent stepping down from the Board on 31 October
2023 until Shruthi Chindalur’s appointment on 1 February 2024 because, in that time, although the
committee comprised three independent non-executive directors – Mike Phillips, Erika Schraner
andPatrick De Smedt – Patrick is also the Board Chair and so excluded from the membership
composition for purposes of compliance with the code. Following Mike Phillips’ resignation from
theBoard as an independent non-executive director on 24 March 2024, the company is again
notcompliant with provision 32. However, this will be resolved on 1 June 2024 when two new
independent non-executive directors join us: Ross Paterson and Anna Vikström Persson,
bothasnew members of the Remuneration Committee.
Our Board, supported by the Remuneration Committee, ensures that our remuneration policies
support BTG’s strategy and promote long-term sustainable success. Executive remuneration is
aligned to the successful delivery of our long-term strategy and considers overall BTG remuneration
policies and practices. This includes linking executive remuneration ever-more closely with the
achievement of our sustainability targets for 2024/25.
Our proposed updated directors’ remuneration policy will be submitted for a binding shareholder
vote at our upcoming AGM in July 2024. It will take formal effect from the date of the AGM, subject
toshareholder approval. The policy will replace the one most recently approved by shareholders at
the AGM in July 2021. It will apply for three years from the date of approval, unless a new policy is
presented to shareholders before then. The updated directors’ remuneration policy can be found
infull on pages 108 to 115 of this Annual Report.
Q. Executive
remuneration
The Remuneration Committee is responsible for setting the remuneration for executive directors.
Nodirector is involved in deciding their own remuneration. See our directors’ remuneration report
formore on our remuneration policy and how it is implemented.
R. Remuneration
outcomes and
independent
judgement
Details of the composition and work of the Remuneration Committee are set out in the directors’
remuneration report on pages 116 to 127.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
101
Directors’ remuneration report
Introduction from our Chair
With another year of strong business growth and high employee and
customer satisfaction, the main priority for the committee in 2023/24
was to review and ensure that BTG’s remuneration policy, practices
and outcomes fully support the company’s strategy and culture.
On behalf of the Board, I am pleased
topresent the directors’ remuneration
report for the year ended 29 February
2024. Having been a member of the
committee since 1 September 2021,
Iwasdelighted to assume the role of
Remuneration Committee Chair from
1 November 2023.
During my first months as Chair, the
committee worked diligently, resiliently
and at pace. We undertook a review of
theremuneration policy for the executive
director team to ensure that BTG’s
remuneration policy, practices and
outcomes fully support the company’s
strategy and culture. This review was
completed in the context of market
andgovernance best practice. The
committee also consulted with our largest
shareholders, obtaining a coverage
ofmore than 55% of our issued share
capital. In line with regulations, we are
seeking shareholder support and approval
for this revised policy at the 2024 Annual
General Meeting (AGM). A summary of
theproposed changes to the directors’
remuneration policy is set out below and
onpages 108 to 115.
With the sudden resignation of Neil
Murphy in February 2024, the committee
put in place a remuneration package for
Sam Mudd as our Interim CEO and
established proposed settlement terms
for Neil. We also reviewed and approved
the reconciliations relating to the
previously announced persons
discharging managerial responsibility
(PDMR) and persons closely associated
(PCA) notifications that the company
issued about Neil and former non-
executive director Alison Vincent, and
those relating to the disclosed position
inprevious annual reports and accounts.
Details of these issues were released to
the market by RNS on 18 March 2024
andare set out and explained further
onpages 69 to 70.
Despite the complexities we have faced
inthe past months, we have remained
steadfast in adhering to the policy approved
by our shareholders at the 2021 AGM. Our
unwavering commitment has always been to
act in the best interests of our shareholders
and other business stakeholders.
Board changes
As outlined on pages 69 to 70, Neil resigned
as CEO and from the Board with immediate
effect on 21 February 2024. The same day,
the Board announced that Sam Mudd, MD
Phoenix and already an executive director,
would become Interim CEO. Subsequently,
on 10 May 2024, I was delighted that we,
asaBoard, appointed Sam as CEO.
All remuneration-related aspects of
theseBoard changes are in line with our
approved policy and are set out in detail
on pages 108 to 115. Neil received
nofurther remuneration following his
resignation andall his share awards were
forfeited immediately. We have reached
agreement to claw back the cash bonuses
paid to Neil since our IPO. Find more
details on pages 121 to 122.
The package for Sam as our Interim CEO
and then as CEO is explained on page 126.
Future-proofing our
remuneration policy
As I mentioned, we will seek to renew our
shareholder-approved three-year directors’
remuneration policy at our 2024 AGM.
BTG has taken a balanced, considered
approach to reviewing its remuneration
framework to ensure it continues to attract,
incentivise, reward and retain the top-tier
talent essential for the sustained and
profitable growth of the business. We remain
committed to BTG’s ethos of rewarding
performance and to carefully benchmarking
executive director compensation against
other senior management roles within both
the company and the broader workforce.
The executive team and
Board care deeply about
fairness, meritocracy
and aligning executive
remuneration with that
of our employees. The
new remuneration policy
aims to future-proof BTG
for continued growth.
Dr Erika Schraner
Remuneration Committee Chair
102 Bytes Technology Group plc
GOVERNANCE REPORT
For our executive directors, incentive
opportunities have remained unchanged
since the IPO. Given this, total remuneration
– looking at our fixed and variable pay
opportunities together – is low for what is
now an established FTSE 250 company.
Since IPO, the company performance
hasbeen strong, and its market cap has
broadly doubled inthe period.
The dichotomy between current executive
director remuneration levels and company
size, complexity and performance
prompted healthy discussions among
committee members when we reviewed
our directors’ remuneration policy. All
members of the Board agreed at the end
of these discussions that preserving BTG’s
culture and values remained of paramount
importance. The committee therefore
proposes to keep the pay structure of the
remuneration framework intact. Our
proposed changes for executive directors
within our revised policy are accordingly
limited and intended to better align
remuneration levels with the growth,
sizeand complexity of the company –
andthe broader industry.
Bar exceptional events, we anticipate that
we will continue to raise our executive
directors’ salaries only in line with, or
below, the annual salary review increases
awarded to our salaried staff over the next
three-year policy period.
The committee, however, considers it
appropriate to increase the maximum
opportunities for the variable elements
ofremuneration. Aligning with our core
principles, which emphasise performance
and meritocracy, our proposed new policy
increases the maximum award opportunity
in the annual bonus from 100% to 150% of
base salary for our CEO and CFO roles.
However, we advocate taking a disciplined,
step-by-step approach to implementing
this increase. In 2024/25, the committee
intends to cap the maximum annual bonus
opportunity at 125% of base salary for
theCEO, CFO and for the Interim CEO
roles (see page 106 and page 126).
We are taking the same approach to the
Performance Share Plan (PSP) for our
CEO and CFO roles, raising the policy
maximum to 200% of base salary (from
150%), which is aligned with market
benchmarks, but implementing any
changes in practice on a phased basis.
Accordingly, in 2024/25, PSP awards will
be held at prior-year levels of 150% of
base salary for the CEO and the CFO
roles and 100% of base salary for the
Interim CEO role. For Sam this means that
her PSP will be pro-rated between the
Interim CEO and CEO roles for the year.
Together, these changes provide an
overall incentive potential that we
consider to be more appropriate for
executive directors of a company of BTG’s
scale and ambition, that is aligned with
other FTSE 250 companies and that will
be more competitive in the market.
Seeking shareholder
feedbackonour policy
The Board approved the committee’s
remuneration policy recommendations in
January 2024 and, in the same month, we
shared our plans in a letter to our top 15
shareholders representing more than
55% of our issued share capital.
After Neil’s resignation, the committee
deliberated the proposed policy changes
in the context of this development – which
occurred after discussions about those
policy changes had happened at the
committee and the Board, and after they
had been communicated to our top
shareholders. We concluded that the
proposed changes were largely unaffected
by the change in CEO and were, in fact,
now even more crucial to enable the
company to pay appropriately in the next
three-year policy period. These proposed
changes remain advantageous in both the
short and longterm, aligning with the
long-term trajectory of the business.
As Chair of the Remuneration Committee,
I would like to thank our shareholders for
their feedback during the consultation
process and reassure them that the
committee remains committed to listening
to their views on all remuneration matters.
Remuneration outcomes
for2023/24
For 2023/24, the CFO and former CEO
were eligible for a maximum annual bonus
opportunity of 100% of their base salary,
while the MD Phoenix was eligible for a
maximum annual bonus of 85% of salary
(pro rata from appointment to the Board).
While Sam was appointed as Interim CEO
on 21 February 2024, her remuneration
inthis role only started on 1 March 2024,
at the start of the new financial year.
The 2023/24 performance for all three
executives was assessed based on a
balanced scorecard of financial and
non-financial metrics, which for the
CFOand former CEO was 80% based
onadjusted operating profit and 20%
based on key strategic objectives.
The MD Phoenix’s bonus had similar
weightings between financial and
non-financial metrics, but with the
majority of the maximum bonus potential
for 2023/24 weighted to Phoenix
performance – 65% of salary out of the
total 85% of salary possible – and with the
balance of 20% of salary subject to the
same BTG Group-level scorecard as
applied to the CFO and former CEO.
Following his resignation on 21 February
2024, Neil was not eligible for a 2023/24
annual bonus.
As a result of this year’s performance,
ourCFO received an annual bonus payout
of 55% of salary (also 55% of the maximum
bonus) and the MD Phoenix received a
payout of 54% of salary from appointment
(63% of the maximum bonus). More details
of performance against the targets are set
out on page 118. In line with our Deferred
Bonus Plan, these bonuses will be paid
two-thirds in cash and one-third in shares,
deferred for two years.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
103
The committee considered the
appropriateness of these outcomes
following the end of 2023/24. While we
noted that the adjusted operating profit
had been reduced because of the
non-operational costs associated with
theinvestigations, we determined that
thisimpact should still be included in
calculating the annual bonuses, without any
adjustment. The bonuses therefore reflect
our reported performance against target by
our continuing executive directors.
For the executive directors, no PSP
awards were due to vest for performance
in 2023/24, with the first such vesting due
in 2024/25. We will report on this for our
continuing executive directors next year.
To recognise the contribution of certain
employees to our success and to ensure
key employees are retained and motivated,
restricted share awards were made to
280of our people on listing in December
2020. This was followed by more awards
of market value share options under our
Company Share Option Plan (CSOP)
inJune 2021 and June 2022. The
committee was pleased to see that 90%
of employees who were granted restricted
share awards at the point of IPO three
years ago were still with BTG at the date
ofvesting in December 2023 and able to
exercise their awards.
Pay arrangements for 2024/25
The executive directors’ salaries
increased by 4.5% from 1 March 2024
inline with increases for our salaried
employees. Following these increases,
the salaries of Andrew as CFO and Sam
as CEO are £348,926 and £308,275
respectively. In addition, Sam, for the
period she was Interim CEO only, was
paid a salary supplement of £91,725 a
year, starting on 1 March 2024, increasing
her salary to £400,000 in total. Sam’s
salary from her appointment as CEO on
10 May 2024 is set as £421,000, reflecting
the substantial responsibilities of her role
within the organisation’s strategic
priorities, while still being below the
FTSE250 median.
Pension contributions for our executive
directors will be up to 4.0% of salary,
remaining in line with the level provided to
the majority of our employees.
Subject to approval of the new policy, the
annual bonus opportunity will be 125% of
salary for the CEO and CFO for 2024/25.
This will continue to be based on adjusted
operating profit (80% weighting) and
ESG-related and other key strategic
objectives (20% weighting). For the
period Sam was Interim CEO during
2024/25 up to 9 May 2024, her annual
bonus will be calculated from the total of
her continuing base salary as MD Phoenix
and the Interim CEO salary supplement
(£400,000 in total). From 10 May 2024,
Sam’s bonus will be calculated against
her new salary of £421,000 as CEO from
that date.
The award level under the PSP in 2024/25
will be 150% of salary for the CEO and
CFO. Sam’s 2024/25 PSP award will be
calculated based on 100% of her
continuing salary as MD Phoenix in
2024/25 (£308,275 a year) up to 9 May
2024 only, and then 150% of her CEO
salary from 10 May 2024. As for previous
awards, vesting will be subject to
performance conditions based on
earnings per share (75% weighting) and
relative total shareholder return (TSR)
(25% weighting), measured over three
years, and will be subject to a two-year
post-vesting holding period.
Alongside the executive director reviews,
the policy for non‐executive director fees
was reviewed by the Board in consultation
with FIT Remuneration Consultants LLP
(FIT), its independent remuneration
advisor, to ensure the policy remains
appropriate and reflects the increase in
responsibilities and FTSE 250 market
practice. Our company Chair’s fees and
the fees of our non-executive directors
were reviewed and increased for 2024/25
and are set out on page 127.
Additionally, the actions taken by the
non-executive directors in recent months
have involved work beyond their normal
duties in leading specially established
Board subcommittees investigating
undisclosed share dealings by former
directors (see pages 69 to 70). We have
paid additional non-executive directors’
fees in accordance with our remuneration
policy – calculated on an equivalent pro
rata day rate for continuing non-executive
director work – for this additional work.
The Board regards the payment of these
fees as appropriate and fully in
shareholders’ best interests.
Looking ahead to 2024/25
Over the next 12 months, the committee
will focus on:
• • Securing shareholder approval
atthe2024 AGM for our new
remuneration policy
• • Ensuring that the 2024/25 annual
bonus plan continues to drive
performance and reward sustainable
growth and is set against appropriate
financial and non-financial targets
• • Granting PSP awards in 2024 with
stretching EPS and TSR
performanceconditions
• • Reviewing updates to the UK
Corporate Governance Code 2024
and addressing gaps as appropriate.
As BTG continues to grow, the
committeewill focus on ensuring that the
remuneration structure and packages
remain fit for purpose and guided by
ourcompany strategy and values.
Wewillcontinue to take a disciplined,
performance-driven approach to
compensation, and I look forward to
continuing that discussion with my
committee colleagues over the coming
year and listening to stakeholders’ input.
Directors’ remuneration report continued
104 Bytes Technology Group plc
GOVERNANCE REPORT
At the 2024 AGM, shareholders will be
asked to approve two resolutions related
to remuneration matters:
• • A resolution to approve the directors’
remuneration report, which is the
normal annual advisory vote on
thisreport
• • A resolution to approve the updated
directors’ remuneration policy, which,
as explained earlier, is the normal
binding three-year vote on this matter.
The committee welcomes all input on
remuneration matters. If you have any
comments or questions on any element of
the directors’ remuneration report or on
the proposed changes to our directors’
remuneration policy, please email me
through our Group Company Secretary at
wk.groenewald@bytes.co.uk. We are
grateful for the guidance and support we
have received from our shareholders on
remuneration matters in the past year.
In closing, I would like to thank our
shareholders for their continued support
and engagement during the year. I hope
you will join the Board in supporting our
directors’ remuneration policy and
directors’ remuneration report at the
AGMon Thursday, 11 July 2024.
Erika Schraner
Remuneration Committee Chair
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
105
Directors’ remuneration report continued
Remuneration at a glance
Our pay principles
• • Clear and simple
• • Aligned with the interests of shareholders
andother stakeholders
• • Performance-related and linked to our KPIs
• • Competitive but not excessive
• • Aligned with our culture and values.
Implementing our policy in 2024/25
The following table shows how we intend to apply the policy for 2024/25 for our two executive directors, including Sam’s
remuneration for both Interim CEO role to 9 May 2024 and CEO role from 10 May 2024, subject to approval at the 2024 AGM.
Fixed pay Salary փ Interim CEO: combined salary of £400,000, including a
salarysupplement of £91,725 a year payable to Sam Mudd
forthe period of acting as Interim CEO during 2024/25 up to
9 May 2024
փ CEO: £421,000 from 10 May 2024
փ CFO: £348,926 (increased by 4.5%, from 1 March 2024)
Pension փ Interim CEO, CEO and CFO: 4% of salary (for the Interim
CEO, calculated including salary supplement for the period
ofacting as Interim CEO)
Benefits փ Medical and life insurance
Annual bonus Maximum փ Interim CEO, CEO and CFO: 125% of salary (for the Interim
CEO, calculated including salary supplement for the period
ofacting as Interim CEO)
Performance measures փ Adjusted operating profit (80%)
փ Key ESG-related and other strategic objectives (20%)
Operation փ One-third deferred into shares for two years
փ Recovery and withholding provisions operate
Performance share plan Award level փ CEO and CFO: 150% of salary
փ Interim CEO: 100% of salary (calculated excluding
salarysupplement)
Performance measures փ Adjusted earnings per share (75%)
փ Relative total shareholder return (25%)
Operation փ Performance measured over three years
փ Two-year additional holding period applies to vested awards
փ Recovery and withholding provisions apply
Share ownership
guidelines
In-employment guideline փ 200% of salary
Post-cessation guideline փ 200% of salary to be held for two years post-employment
Current shareholding
(based on 2023/24 salary)
փ CEO: 2.42 times salary
փ CFO: 1.22 times salary
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Implementing our policy in 2023/24
The following charts show the actual levels of remuneration earned by the executive directors for 2023/24 relative to the
maximum potential remuneration that was available.
2023/24 remuneration outcomes versus policy maximum
0 100 200 300 400 500 600 700
Andrew Holden (CFO)
2023/24
Maximum
Actual
Sam Mudd (CEO)
2023/24
Maximum
Actual
Fixed pay Annual bonus
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107
Directors’ remuneration report continued
Proposed new remuneration policy
In this section, we present our proposed
updated directors’ remuneration policy,
which will be submitted for a binding
shareholder vote at our upcoming AGM
scheduled for Thursday, 11 July 2024.
Itwill take formal effect from that date,
subject to shareholder approval. The
policy will replace the one most recently
approved by shareholders at the AGM on
22 July 2021. It will apply for three years
from the date of approval, unless a new
policy is presented to shareholders
before then. On approval, all payments
todirectors will be consistent with the
approved policy.
What we considered in
determining our policy
The main goal of our remuneration policy
is to promote the Group’s long-term
success. To do this, our Remuneration
Committee adheres to the following
principles:
• • Remuneration packages should be
clear and simple
• • Arrangements should be closely
aligned with the interests of
shareholders and other key
stakeholders and should conform
tohigh standards of corporate
governance – with the UK Corporate
Governance Code (code) a core source
• • Remuneration should align with,
andsupport, our values and
entrepreneurial culture
• • A significant proportion of
remuneration should be based on
performance-related components
• • Rewards should be subject to
achieving challenging performance
targets based on measures linked
tothe Group’s KPIs and the best
interests of stakeholders
• • Salaries, and the overall level of potential
remuneration, should be competitive
but not excessive when compared with
companies of a similar size, scale and
geographical reach. They should be
sufficient to recruit, retain and motivate
individuals of the calibre needed to
deliver long-term success.
Aligning with the code
In designing our policy, and planning how
to implement it, the committee has sought
to meet the highest standards of corporate
governance. Our approach has been
particularly informed by the code,
andwehave taken full account of its
remuneration-related provisions when
reviewing and amending this policy. We
illustrate this below, where we describe
how we sought to comply with the six
factors in provision 40:
1. Clarity – Our remuneration framework
supports financial delivery and the
achievement of strategic objectives,
aligning the interests of our executive
directors and shareholders. Our
proposed new policy is transparent
and has been well communicated to
our senior executive team. It will also
be clearly articulated to our
shareholders and representative
bodies – both on an ongoing basis
and during consultation, if any
changes are considered necessary.
2. Simplicity – Our framework has been
designed to be straightforward to
communicate and operate.
3. Risk – Our incentives have been
structured to align with the Board’s
system of risk management and risk
appetite. Inappropriate risk-taking
isdiscouraged and mitigated by,
forexample:
փ A balance of fixed pay to
performance-related incentive pay
and through multiple performance
measures based on a blend of
financial and non-financial targets
փ Deferring a proportion of annual
bonus into shares and operating
apost-vesting holding period for
the Performance Share Plan (PSP)
փ Significant in-employment
andpost-employment
shareholding guidelines
փ Robust recovery and
withholdingprovisions.
4. Predictability – Our incentive plans
have individual caps, with share plans
also subject to market-standard
dilution limits. The committee has
fulldiscretion to alter the payout
levelor vesting outcome to ensure
payments are aligned with our
underlying performance.
5. Proportionality – Our approach is
underpinned by the principle that
failure should not be rewarded.
Thereis a clear link between individual
awards, strategic delivery and our
long-term performance. This is
demonstrated, for example, by the
connection between executive
directors’ arrangements and their
building and maintaining meaningful
levels of shareholding; through linking
our incentive measures and our KPIs;
by our ability for, and openness to,
using discretion to ensure appropriate
outcomes; and through the structure
of our executive directors’ contracts.
As mentioned, our committee reviews
formulaic incentive outcomes and may
adjust them in light of overall Group
performance and our wider employee
remuneration policies and practices.
6. Alignment to culture – Our policy is
aligned to our dynamic, can-do
culture and strongly held values.
Thecommittee strives to embed a
sustainable performance culture at
management level that can cascade
throughout our business. The Board
sets the framework of KPIs against
which we monitor the company’s
performance, and the committee
linksthe performance metrics of
ourincentive arrangements to those
indicators. We are also keen to foster
a culture of share ownership, so
operate employee share schemes
across the Group.
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Considering shareholders’ views
As a committee we are committed to
ongoing dialogue with shareholders, and
we welcome feedback on our directors’
remuneration. We have and will
continueto seek to engage with major
shareholders and their representative
bodies about changes to the policy. We
will also consider shareholder feedback
on remuneration-related resolutions
following each year’s AGM. This,
alongwith any additional feedback we
receive – including about any updates to
shareholders’ remuneration guidelines –
will be considered as part of our annual
review and implementation of our
remuneration policy.
The committee also actively monitors
changes in the expectations of institutional
investors and considers good practice
guidelines from institutional shareholders
and shareholder bodies.
As part of our review of the current policy,
the committee conducted a comprehensive
shareholder consultation exercise.
Feedback was sought from shareholders
holding more than 55% of shares in issue,
as well as from the main shareholder
representative bodies. The feedback,
which was largely positive, was invaluable
in informing our final proposals.
Assessing the Group-wide
employment environment
Our committee closely monitors the pay
and conditions of the wider workforce
andhas drawn on the Group-wide policy
for staff in designing the directors’
remuneration policy. While employees
arenot formally consulted directly on the
design of the policy, the Board engages
with our people more broadly through
CEO townhall sessions and the like,
andthrough the non-executive director
for employee engagement, Shruthi
Chindalur. We also receive regular
updates on remuneration arrangements
and employment conditions across the
Group from our HR functions.
Differences in pay policy between
executive directors and employees
The overall approach to employee reward
is a key reference point when setting
executive directors’ remuneration. As with
the executive directors, to attract and
retain employees our general practice is
to recruit staff at competitive market levels
of remuneration, incentives and benefits,
in line with national and regional talent
pools. When reviewing our executive
directors’ salaries, our committee pays
close attention to pay and employment
conditions across the wider workforce.
Our current expectation is that we will
continue to raise our executive directors’
salaries only in line with or below our
annual salary review levels for our salaried
staff over the three-year policy period.
The pension contribution for current and
future executive directors will be no higher
than for most of our people. All employees
can earn commissions and/or annual
bonuses. Commissions are earned
against challenging monthly targets,
whilebonuses are paid for exceptional
performance against personal, team
orcompany objectives.
We intend to continue fostering a culture
of share ownership across the Group: all
employees, including executive directors,
will have the opportunity to participate in
the UK HMRC-approved Save As You
Earn (SAYE) share incentive plan that we
operate. We also make discretionary
share awards to selected employees.
The key difference between executive
directors’ and employees’ reward is
that,at senior levels, remuneration is
increasingly long term and ‘at risk’, with
an emphasis on performance-related pay
linked to business results and share-
based remuneration. This ensures that
senior-level remuneration will increase
ordecrease in line with business
performance and aligns the interests of
executive directors and shareholders. In
particular, performance-based long-term
incentives only go to the most senior
executives, because they are considered
to have the greatest potential to influence
overall performance levels.
Changes to our remuneration policy
Our proposed new policy intends to retain
the overall structure of our remuneration
framework.
Details of the substantive changes
proposed in the new policy, along with
supporting rationale, are set out in the
introduction from our committee Chair
onpages 102 to 103. In summary, the
material changes we are proposing are:
• • Increase in annual bonus maximum
policy limit – The policy limit to date
has been 100% of salary. We are
proposing to increase this to 150%
ofsalary for the CEO and CFO.
However, in the first financial year
ofthe new policy period (2024/25),
the maximum will be lower than the
policy limit, at: 125% of salary for
theCEO and CFO.
• • Increase in PSP policy limit – To date,
the policy limit in normal
circumstances has been 150% of
salary. We propose to increase this to
200% of salary for the CEO and CFO.
However, in the first financial year
ofthe proposed new policy period
(2024/25), the maximum award will
belower than the policy limit and will
be maintained at 150% of salary for
the CEO and CFO.
All other elements of the new policy are
materially unchanged from the prior policy.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
109
Directors’ remuneration report continued
Policy table for directors
The table below sets out the main components of the proposed new policy, together with information on how they will operate,
subject to shareholders’ approval at our 2024 AGM. The committee has the discretion to amend remuneration to the extent
described in the table and text below.
Policy table for executive directors
Base salary
Purpose and link to strategy Operation Maximum opportunity Performance measures
To provide competitive
fixed remuneration.
To attract and retain
high-calibre executives.
Salaries are usually
reviewed annually, with
any increases typically
effective on 1 March.
Salaries are generally
setafter considering:
• • Pay and conditions
elsewhere in the Group
• • Overall Group
performance
• • Individual performance
and experience
• • Progression within
therole
• • Competitive salary
levels in companies of
abroadly similar size,
scale and complexity.
While there is no prescribed maximum salary
or increase, rises will normally be in line with
the typical range awarded (in percentage
ofsalary terms) to employees generally.
Larger salary increases may be awarded
totake account of individual circumstances,
such as where:
• • An executive director has been promoted
or had a change in scope or responsibility
• • The committee sets the salary of a new
hireat a discount to the market level,
andaseries of planned increases can
beimplemented in the next few years to
raiseit to the appropriate market position,
subject to individual performance
• • The committee considers it fitting to adjust
salaries to reflect a significant increase
inthe size or complexity of the Group.
Increases may be implemented over a time
period that the committee deems appropriate.
Although there are no
formal performance
conditions, any increase
in base salary is only
implemented after
carefully considering an
individual’s contribution
and performance, as
well as factors in this
table’s Operation
column.
Benefits
Purpose and link to strategy Operation Maximum opportunity Performance measures
To provide competitive
fixed remuneration.
To attract and retain
high-calibre executives.
Executive directors are entitled to benefits,
including medical and life insurance.
Executive directors will be eligible for any other
benefits that are introduced for employees
generally on broadly similar terms, and for
otherbenefits that might be provided based
onindividual circumstances, if the committee
decides it is appropriate.
For external and internal appointments or
relocations, BTG may pay certain relocation
orincidental expenses as appropriate
(foruptotwo years from recruitment).
Any reasonable business-related expenses
canbe reimbursed (and any related tax met
ifdetermined to be a taxable benefit).
Executive directors can also participate
in all-employee share plans on the same
basisasother employees.
Given it is not possible
to calculate in advance
the cost of all benefits,
amaximum is not
predetermined.
The maximum level
ofparticipation in
all-employee share
plans is subject to the
limits imposed by the
relevant tax authority.
Not applicable.
Pension
Purpose and link to strategy Operation Maximum opportunity Performance measures
To provide employees
with long-term savings
to allow for retirement
planning.
The Group may offer
participation in a defined
contribution pension plan or
permit executive directors
to take a cash supplement
in lieu of pension up to the
same value.
The maximum defined contribution or cash
allowance in lieu of pension is limited to the
contribution level available to most other
employees (in percentage-of-salary terms,
currently 4% of salary).
Not applicable.
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Annual bonus
Purpose and link to strategy Operation Maximum opportunity Performance measures
Rewards achievement
ofannual financial and
business targets aligned
with the Group’s KPIs.
Bonus deferral
encourages long-term
shareholding, supports
retention and discourages
excessive risk-taking.
Awards are based on performance,
typically measured over one year.
Any payment is discretionary and
payout levels are determined by
thecommittee after the year end
based on performance against
pre-set targets.
Bonuses are normally paid in cash
except one-third of any bonus,
which is deferred into shares,
typically for a two-year period.
Dividends or dividend equivalents
may accrue on deferred shares.
The vesting of deferred shares
isnot subject to additional
performance conditions.
The annual bonus plan includes
provisions that enable the
committee (in respect of both the
cash and the deferred elements
ofbonuses) to recover or withhold
value in the event of certain defined
circumstances – that is, in cases
such as misconduct, material
misstatement of financial results,
error in calculation of a bonus
andreputational damage.
The maximum annual
bonus opportunity for
the CEO and CFO is
150% of salary.
For the first financial
year of the policy
period(2024/25), the
maximum opportunity
for incumbents will be
125% of salary for the
Interim CEO, CEO and
CFO roles.
Targets are set annually with
measures linked to our strategy and
aligned with key financial, strategic,
ESG-related and individual targets.
The performance measures applied
may be financial or non-financial,
corporate, divisional or individual, and
in such proportions as the committee
considers appropriate. The committee
would, however, expect to consult with
its major shareholders if it proposed
materially changing the current
performance measures applied for
the annual bonus (or the relative
weightings between such measures)
in subsequent financial years.
A graduated scale of targets is set
foreach measure, with no payout
forperformance below the threshold
level. For our main profit measure in
a year, 25% of the amount available
for that measure can be payable at
threshold level.
The committee has the discretion
toamend the payout should any
formulaic outcome not reflect its
assessment of overall business
performance.
Performance share plan
Purpose and link to strategy Operation Maximum opportunity Performance measures
To incentivise executive
directors and deliver
long-term performance-
related pay, with a clear
line of sight for
executives and
directalignment with
shareholders’ interests.
Awards will be in the form of share
options, conditional shares or
otherforms that have the same
economic effect.
Awards will be granted with vesting
based on achieving performance
conditions set by the committee,
with performance normally
measured over at least three years.
Awards will be subject to a two-
year holding period following the
end of the performance term, with
shares typically not being released
to participants until the end of the
holding period.
Dividends or dividend equivalents
may accrue on awards to the extent
they vest.
The PSP includes provisions that
enable the committee to recover or
withhold value in the event of certain
defined circumstances – that is, in
cases such as misconduct, material
misstatement of financial results,
error in calculation of a performance
outcome and reputational damage.
The normal maximum
PSP award for the CEO
and CFO is 200% of
salary in a financial year.
For the first financial
year of the policy
period(2024/25), the
maximum PSP award
forincumbents will be
150% of salary for the
CFO and CEO roles
and100% of salary for
the Interim CEO role.
The normal maximum
willonly be exceeded
inexceptional
circumstances, such
aswhen a new executive
director is recruited, and
is subject to an overall
limit of 300% of salary
ina financial year.
PSP performance measures
mayinclude, but are not limited
to,financial, TSR, strategic and
ESG-related objectives.
The committee retains the discretion
to set alternative measures and
weightings for awards over the
lifeofthe policy.
Targets are set and assessed by
thecommittee at its discretion.
A maximum of 20% of any element
vests for achieving the threshold
target, with 100% for maximum
performance.
The committee has the discretion
toamend the vesting level should
anyformulaic outcome not reflect
itsassessment of overall business
performance.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
111
Directors’ remuneration report continued
Policy table for non-executive directors
Non-executive directors’ fees
Purpose and link to strategy Operation Maximum opportunity Performance measures
To attract high-calibre
individuals and
appropriately reflect
knowledge, skills
andexperience.
Fees are normally reviewed annually,
considering factors such as the time
commitment and contribution of the role and
market levels in companies of comparable
sizeand complexity.
The Chair is paid an all-inclusive fee for all
Board responsibilities.
Fees for the other non-executive directors may
include a basic fee and additional fees for other
responsibilities – for example, chairing Board
committees or holding the office of senior
independent director.
BTG repays any reasonable expenses that a
non-executive director incurs in carrying out
their duties, including travel, hospitality-related
and other modest benefits, and related tax
liabilities, if appropriate.
In exceptional circumstances, if there is a
temporary yet material increase in the time
commitments for non-executive directors, the
Board may pay extra fees on a pro rata basis
torecognise the additional workload.
Non-executive directors cannot participate in
any of the Group’s incentive arrangements.
There is no prescribed
maximum fee or
maximum fee increase.
Increases will be
informed by internal
benchmarks such as
the salary increase for
employees generally,
with, in addition, due
regard to the factors
inthis table’s
Operationcolumn.
Not applicable.
Understanding performance measures
Annual bonus performance measures are selected annually to
align with the Group’s KPIs and strategic imperatives, and with the
interests of our shareholders and other stakeholders. Financial
measures – for example, operating profit levels, grossmargin
increase and year-on-year growth – will normally influence most
of the bonus, with any remainder based on strategic, ESG-related
and/or personal objectives designed toensure executive
directors are incentivised across a range ofKPIs.
Target performance is typically set in line with the year’s
business plan, with the threshold to stretch targets set around
the plan, based on a sliding scale that reflects relevant
commercial factors. Only modest rewards are available at
threshold performance levels, with rewards at stretch requiring
material outperformance of the business plan. Details of the
specific measures used for the annual bonus for 2023/24 are
set out in the annual report on remuneration on page 118.
PSP performance measures will be selected to:
• • Provide a robust and transparent basis on which to measure
the Group’s performance
• • Link remuneration outcomes to delivery of the business
strategy over the longer term
• • Provide strong alignment between senior management and
shareholders.
The policy provides for committee discretion to alter the PSP
measures and weightings from year to year. This is to ensure
that itcan continue to measure performance appropriately, if
the Group’s strategic ambitions evolve over the life of the policy.
When setting performance targets for the bonus and PSP, the
committee will consider a number of different factors. These
may include the Group’s business plans and strategy, external
forecasts and the wider economic environment.
The committee retains the discretion to amend the bonus
payout and to reduce the PSP vesting level, if any formulaic
outcome does not reflect its assessment of overall business
performance over the relevant period.
Flexibility, discretion andjudgement
The committee operates the annual bonus and PSP according
to the rules of each respective plan. Consistent with market
practice, this includes discretion around how certain parts of
each plan operate, including:
• • Who participates in the plan, and thequantum and timing
ofawards andpayments
• • Determining the extent of vesting
• • Treatment of awards and payments on a change of control
orrestructuring of the Group
• • Whether an executive director or senior manager is a good/
bad leaver for incentive plan purposes and if the proportion
of awards that vest do so atthe time of leaving or at the
normal vesting date(s)
• • How and whether an award may be adjusted in certain
circumstances – for example, for a rights issue, acorporate
restructuring or specialdividends
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• • What the weighting, measures and targets should be for
theannual bonus plan and PSP awards from year to year
• • The ability, within the policy, to adjust targets and set
different measures or weightings for the applicable annual
bonus plan and PSP awards, if the committee determines
that the original conditions are no longer appropriate or
donot fulfil their initial purpose. Such changes would be
explained in the subsequent directors’ remuneration report
and, if appropriate, be discussed with our major shareholders
• • The ability to override formulaic outcomes in line with policy.
All assessments of performance are ultimately subject to the
committee’s judgement. Any discretion exercised, and the
rationale, will be disclosed in the annual report on remuneration.
Legacy arrangements
If this proposed new remuneration policy is approved, BTG has
the authority to honour any previous commitments entered into
with current or former directors – such as paying a pension or
unwinding legacy share schemes or historic share awards – that
remain outstanding.
Shareholding guidelines
To continue to align executive directors’ and shareholders’
long-term interests, the Group operates share ownership
guidelines. These require executive directors to build up and
maintain (as relevant) a level of shareholding in the Group
equivalent to 200% of salary. This guideline will apply while the
executive directors are in post and for two years afterwards.
Illustrative applications of our policy
The following table and graphs illustrate the application of the proposed new policy in the first year of the three-year policy period
for our executive directors for 2024/25 on an annualised basis. It shows the split of remuneration between fixed pay, annual bonus
and PSP on the basis of minimum remuneration, remuneration for performance in line with the Group’s expectations and maximum
remuneration – with both no share price appreciation and with 50% share price growth.
In illustrating the potential reward, the following assumptions have been made:
Fixed pay Annual bonus (including any amount deferred) PSP (normal policy level)
Minimum performance
Fixed elements of
remuneration only –
basesalary (being the
salary effective from
1 March 2024), estimate
ofbenefits payable for
2024/25 and pension
contributions for2024/25
of 4% of salary.
No annual bonus awards No vesting
Performance
in line with
expectations
50% of maximum opportunity
awarded for achieving target
performance – that is, 62.5%
ofsalary.
20% of maximum award vesting
for achieving target performance
– that is, equivalent of 30%
ofsalary.
Maximum
performance
100% of maximum
opportunityawarded
forachieving maximum
performance– that is, 125%
ofsalary.
100% of maximum award vesting
for achieving maximum
performance – that is, equivalent
of 150% of salary.
Maximum
performance
plus 50% share
pricegrowth
100% of maximum award vesting
for achieving maximum
performance plus hypothetical
share price growth of 50%.
Notes to the methodology:
• • Annual bonus includes amounts deferred into shares
• • PSP is measured at face value – that is, with no assumption of dividends or share price growth (other than in the fourth scenario)
• • Any potential amounts relating to all-employee share schemes have been excluded.
Chief Executive Officer
Minimum
100%
£439,000
On target
53% 32%
15%
£828,000
Maximum
27% 33% 40%
£1,597,000
Maximum with growth
23% 28% 33% 16%
£1,912,000
Chief Financial Officer
Minimum
100%
£364,000
On target
53% 32%
15%
£687,000
Maximum
27% 33% 40%
£1,323,000
Maximum with growth
23% 28% 33% 16%
£1,585,000
Fixed pay Annual bonus PSP Share price growth
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
113
Directors’ remuneration report continued
Recruitment remuneration
The policy aims to attract individuals of sufficient calibre to lead
the business, deliver BTG’s strategy effectively and promote our
long-term success for the benefit of our shareholders and other
stakeholders. When appointing a new executive director, the
committee seeks to ensure that arrangements are in the best
interests of the Group and to not pay more than is appropriate.
The committee will consider several relevant factors. These
mayinclude the calibre and experience of the candidate,
theirexisting remuneration package and their specific
circumstances, including from where they are recruited.
When hiring a new executive director, the committee will
typically align the remuneration package with the policy
outlined. It may include other elements of pay that it considers
are appropriate; however, this discretion is capped and subject
to the following principles and limits:
• • New executive directors will be offered a basic salary in line
with the policy. This will consider such factors as external
market forces, the individual’s expertise, experience and
calibre, and their current level of pay. Where the committee
has set the salary of a new appointment at a discount to the
market level until proven, the individual may receive an uplift
or a series of planned increases to raise the salary to the
appropriate market position over time.
• • For both external and internal appointments, the committee
may agree that we will meet relocation and incidental
expenses as appropriate.
• • Annual bonus awards, PSP awards and pension
contributions would not be above the levels stated in the
policy table on pages 110 to 112.
• • Depending on the appointment’s timing, the committee may
set different annual bonus performance conditions for the
first year of performance. A PSP award can be made following
an appointment (assuming BTG is not in a close period).
• • Where a position is filled internally, any ongoing
remuneration obligations or outstanding variable pay
elements will be allowed to continue according to the
original terms, adjusted as relevant to the appointment.
• • The committee may also offer additional cash or share-
based buy-out awards when it considers it is in the best
interests of BTG (and therefore shareholders) to take
account of remuneration given up at the individual’s former
employer. This includes the use of awards made under 9.4.2
of the Listing Rules. Such awards would represent a
reasonable estimate of the value foregone and reflect, as far
as possible, the delivery mechanism and time horizons and
whether performance requirements are attached to that
remuneration. Shareholders will be informed of any such
payments at the time of appointment or in the next Annual
Report. The value of buy-out awards is not capped.
• • For the appointment of a new Chair or non-executive
director, the fee arrangement would be set according to the
approved remuneration policy.
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Service contracts and letters of appointment
BTG’s policy is that executive directors should normally be employed under rolling service contracts with notice periods of no more
than 12 months (from each party).
All non-executive directors have letters of appointment on a rolling annual basis, which may be terminated with one month’s notice
by either party. All director appointments are subject to Board approval and election and re-election by shareholders at each AGM.
Key details of the service contracts and letters of appointment of the current directors can be found in the annual report on
remuneration, and copies of executive directors’ service contracts and non-executive directors’ letters of appointment are
available for inspection at our registered office during normal business hours.
Payments for loss of office
The principles underpinning how we determine payments for loss of office are set out below:
Payment in lieu of notice BTG may terminate a contract with immediate effect with or without cause by making a payment, in
lieu of notice, of base salary. The default approach will be to make the payment in lieu of notice by
monthly instalments, with reductions for any amounts received from providing services to others
during this period. However, the committee retains the discretion to make the payment as a lump
sum. There are no obligations to make payments beyond those disclosed in this report.
Annual bonus This will be at the discretion of the committee on an individual basis. The decision as to whether
toaward an annual bonus in full or in part will depend on a number of factors, including the
circumstances of the individual’s departure and their contribution to the business during the relevant
annual bonus period. Any amounts paid will be prorated for time in service during the annual bonus
period and will, subject to performance, be paid at the usual time (although the committee retains the
discretion to pay the annual bonus award earlier). Any bonus earned for the year of departure and,
ifrelevant, for the prior year, may be paid wholly in cash at the committee’s discretion.
On a change of control, annual bonuses will either continue for the full year or be paid to the time
ofcompletion on a pro rata basis.
Deferred bonus awards The extent to which any unvested deferred bonus award will vest will be determined according to
therules of the deferred bonus plan.
If a participant leaves BTG for any reason (other than summary dismissal, in which case the award
willlapse), the award will usually continue until the normal vesting date. The committee retains the
discretion to remove awards when the participant leaves.
On a change of control, awards will generally vest on the date that control changes, unless the
committee permits (or requires) awards to roll over into equivalent shares in the acquirer.
Performance Share Plan The extent to which any unvested award will vest will be determined according to the rules of the PSP.
Any outstanding awards will ordinarily lapse. However, in good leaver cases, awards will generally
vest subject to the original performance condition and time proration and the holding period will
continue to apply. For added flexibility, the policy allows the committee to decide not to prorate
(ortoprorate to a different extent) if it decides it is appropriate, and to allow vesting to be triggered
atthe point of leaving, rather than waiting until the end of the performance period.
On a change of control, any vesting of awards will be subject to assessment of performance against
the performance conditions and will normally be prorated.
Mitigation The committee strongly endorses the obligation on an executive director to mitigate any loss on early
termination and will seek to reduce the amount payable on termination where appropriate. The committee will
also take care to ensure that, while meeting its contractual obligations, poor performance is not rewarded.
Buy-out awards Where a buy-out award is made under the Listing Rules, the leaver provisions would be determined
at the time of the award.
Other payments BTG may pay outplacement and professional legal fees incurred by executives in finalising their
termination arrangements, where appropriate. It may also pay any statutory entitlements or settle
compromise claims in connection with a termination of employment, in the best interests of the
company. Outstanding savings/shares under all-employee share plans would be transferred in
accordance with the terms of the plans.
External appointments
BTG recognises that its executive directors may be invited to become non-executive directors of other companies, and that
suchappointments can broaden a director’s experience and knowledge to the Group’s benefit. Subject to approval by the Board,
executive directors are allowed to accept non-executive appointments, provided that they are not likely to lead to conflicts of interest.
The committee will consider its approach to fees received by executive directors for external non-executive roles as they arise.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
115
The committee’s role
andcomposition
The Board is ultimately accountable for
executive remuneration and delegates
this responsibility to the Remuneration
Committee. The committee is responsible
for developing and implementing a
remuneration policy that supports BTG’s
strategy and for determining executive
directors’ individual packages and terms
of service, together with those of other
members of senior management
(including the Group Company Secretary).
When setting the remuneration terms for
executive directors, the committee
reviews and considers wider employee
reward and related policies. It also takes
close account of the remuneration-
related provisions of the UK Corporate
Governance Code (code).
The committee is formally constituted and
operates with written terms of reference,
which are available at bytesplc.com.
In the year, the committee comprised
Erika Schraner (Chair), Patrick De Smedt,
Mike Phillips and Shruthi Chindalur. As
announced during the year, Alison Vincent
stepped down from the Board and as
Chair of the committee on 31 October
2023, while Shruthi Chindalur joined the
Board and the committee on 1 February
2024. All the other members of the
committee were members throughout
theyear ended 29 February 2024. The
committee met seven times during the
year, with full attendance at all meetings.
Provision 32 of the code recommends that
a board should establish a remuneration
committee of independent non-executive
directors with a minimum membership
ofthree. In addition, the chair of a board
can only be a member ifthey were
independent on appointment and cannot
chair the committee. During the period,
the company was not compliant with
provision 32 from Alison Vincent stepping
down from the Board on 31 October 2023
until Shruthi Chindalur’s appointment on
1 February 2024 because, in that time, the
Board only comprised two independent
non-executive directors, excluding
PatrickDe Smedt as Board Chair.
Post-period, Mike Philips resigned from
the Board and committee on 24 March
2024. Ross Paterson and Anna Vikström
Persson will join the committee as new
members from 1 June 2024.
At the committee’s invitation, the Group’s
executive directors, the Group Company
Secretary (who acts as committee secretary)
and FIT, BTG’s retained remuneration
consultants, also attend its meetings. The
executive directors are consulted on matters
discussed by the committee unless these
relate to their own remuneration. Advice or
information is sought from other employees
and from FIT where the committee feels it
would assist its decision making.
The committee is authorised to take
suchinternal and external advice as it
considers appropriate in carrying out its
duties, including appointing external
remuneration advisors. During the year,
itwas assisted by FIT. FIT was appointed
by the Board in September 2020 and
provided advice during the year on
general remuneration matters, and on
thedesign and implementation of the
policy. Fees paid to FIT for advising the
committee during the year to 29 February
2024 were £69,365 (excluding VAT),
charged on a time/cost basis. FIT did not
provide any other services to BTG during
the year to 29 February 2024. FIT is a
member of the Remuneration Consultants
Group and, as such, voluntarily operates
under its code of conduct on executive
remuneration consulting in the UK. The
committee is satisfied that FIT’s advice
was objective and independent.
The committee carried out the following
significant activities during the 2023/24
financial year:
• • Undertook a comprehensive review of
the executive directors’ remuneration
arrangements and prepared a revised
directors’ remuneration policy, which
will be put to shareholders for
approval at the 2024 AGM
• • Sought the views of our major
shareholders and the main voting
agencies on our proposals for the
revised policy as part of a
comprehensive consultation exercise
• • Reviewed and approved remuneration
packages for the current executive
directors
• • Determined the terms of the MD
Phoenix’s package on her promotion
to the Board
• • Approved the annual bonus outcomes
for the 2022/23 financial period
• • Reviewed and approved the terms
ofthe 2023 PSP awards
• • Oversaw the PSP, CSOP and SAYE plans,
including the vesting of the IPO-related
PSP awards in December 2023
• • Monitored corporate governance
developments, in particular the
publication of the new code
• • Monitored external market practice,
and developments in the governance
expectations of institutional shareholders
and shareholder representative bodies
• • Determined the treatment of
remuneration for the former
CEOfollowing his resignation
• • Established the remuneration package
for the Interim CEO and CEO following
the resignation of the former CEO
• • Reviewed and approved the
reconciliations relating to the
previously announced PDMR and
PCAnotifications that the company
issued about Neil Murphy
• • Reviewed and approved the
reconciliations relating to the
disclosed position in previous
annualreports and accounts.
Directors’ remuneration report continued
Annual report on remuneration
Committee attendance
Committee member
For the financial year to
29 February 2024
Erika Schraner 7/ 7
Patrick De Smedt 7/ 7
Alison Vincent
1
2/2
Shruthi Chindalur
2
2/2
Mike Phillips
3
7/ 7
1 Alison Vincent stepped down from the committee
on31 October 2023.
2 Shruthi Chindalur was appointed to the committee
on1 February 2024.
3 Mike Phillips resigned from the committee
on24 March2024, after the end of the financial year.
116 Bytes Technology Group plc
GOVERNANCE REPORT
Since the end of the 2023/24 financial year, the committee has:
• • Determined the outcomes under the annual bonus plan for the year ended 29 February 2024
• • Agreed the annual bonus structure for the year ending 28 February 2025
• • Agreed the award levels and performance targets for the PSP grants to be made to eligible participants in 2024.
The information that follows has been audited (where indicated) by BTG’s auditor, EY.
Single total figure of remuneration for each director (audited)
The table below reports the total remuneration for BTG directors during the year ended 29 February 2024.
Directors’ total remuneration
£
Base salary/
fees
Benefits
1
Annual
bonus
Long-term
incentives
2
Pension
3
Tot al Total fixed Total variable
Executive directors
Sam Mudd
4
2023/24 187,95 7 530 101,114 – 6,368 295,969 194,855 101,114
2022/23 – – – – – – – –
Andrew Holden 2023/24 333,900 816 184,544 – 13,356 532,616 348,072 184,544
2022/23 318,000 675 298,920 – 12,720 630,315 331,395 298,920
Neil Murphy
5
2023/24 406,000 5,658 – – 4,017 415,675 415,675 –
2022/23 390,000 15,684 366,600 – 4,017 776,301 409,701 366,600
Non-executive directors
Patrick De Smedt 2023/24 187,2 0 0 – – – – 187,2 0 0 187,2 0 0 –
2022/23 187,2 0 0 – – – – 187, 20 0 187, 20 0 –
Shruthi Chindalur
6,7
2023/24 6,233 – – – – 6,233 6,233 –
2022/23 – – – – – – – –
David Maw
8,9
2023/24 21,672 – – – – 21,672 21,672 –
2022/23 59,280 – – – – 59,280 59,280 –
Mike Phillips
7,10
2023/24 86,050 – – – – 86,050 86,050 –
2022/23 72,800 – – – – 72,800 72,800 –
Erika Schraner
7,9
2023/24 92,13 3 – – – – 92,13 3 92,13 3 –
2022/23 52,000 – – – – 52,000 52,000 –
Alison Vincent
11
2023/24 41,600 – – – – 41,6 0 0 41,6 0 0 –
2022/23 62,400 – – – – 62,400 62,400 –
Total 2023/24 1,362,745 7,0 0 4 285,658 – 23,741 1,67 9,14 8 1,393,490 285,658
2022/23 1,141,680 16,360 665,520 – 16,737 1,840,297 1,174,777 665,520
1 Non-salary benefits include the provision of private medical insurance, life insurance and long-service awards.
2 No performance-related PSPs were capable of vesting for performance ending in the period.
3 The amount of employer contribution based on a percentage of base salary.
4 Joined the Board on 12 July 2023. All remuneration amounts for 2023/24 are prorated over the period from this date.
5 Resigned from the Board on 21 February 2024 and received no further remuneration from that date. The base salary for 2023/24 includes £7,875
holiday pay. On 9 May 2024 the Company entered into a settlement agreement with Neil Murphy, under which the cash portion of his bonus since IPO
(net of tax) amounting to £274,825, will be clawed back. The figures included in the table do not include this clawback as a deduction. The portion of
Neil’s post- IPO bonus which had been deferred into share options, none of which had vested at the time of his resignation, was forfeited. Further details
on the settlement agreement are included on page 122.
6 Joined the Board on 1 February 2024.
7 Includes additional fees (Shruthi Chindalur £1,900, Mike Phillips £13,250, Erika Schraner £32,000) for work on specially established Board
subcommittees investigating undisclosed share dealings by former directors – see more detail on pages 69 to 70.
8 Retired from the Board on 12 July 2023.
9 Includes prorated annual fee for role as designated non-executive director for employee engagement.
10 Resigned from the Board on 24 March 2024.
11 Stepped down from the Board on 31 October 2023.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
117
Directors’ remuneration report continued
Annual bonus for the year ended 29 February 2024 (audited)
For the 2023/24 financial year, executive directors were eligible for an annual discretionary bonus, for which performance
objectives with suitably challenging 12-month goals were set at the beginning of the period. These comprised measures based
80% on operating profit (adjusted for amortisation and share-based payment charges) and 20% on key strategic objectives
composed of three ESG-related metrics, each weighted at 5%, and a cash conversion metric, also weighted at 5%. Each of the key
strategic objectives had a straightforward stretch target. This was considered appropriate because the objectives were
quantitative measures and their weightings not material in isolation. The committee also evaluated each objective with
consideration to industry standards and the company’s specific context. No discretionary adjustments were made to the annual
bonus outcome for the year.
The maximum annual bonus payable for the CFO and former CEO was 100% of salary, against which:
• • the CFO earned a bonus of 55% of maximum (see the BTG Group-level scorecard)
• • the former CEO was not eligible for a 2023/24 annual bonus following his resignation on 21 February 2024.
The MD Phoenix was eligible for a maximum bonus of 85% of salary in the role of executive director (pro rata from appointment to
the Board), with the majority of the maximum bonus potential for 2023/24 weighted to Phoenix Software’s performance – 65% of
salary out of the total 85% of salary possible – and with the balance of 20% of salary subject to the same BTG Group-level
scorecard as applied to the CFO and former CEO.
The MD Phoenix earned a bonus of 54% of salary and 63% of the maximum 85% of salary available, split as follows:
• • 55% of the 20% of salary available under the BTG Group-level scorecard (11% of salary)
• • 66% of the 65% of salary available under the Phoenix entity-level scorecard (43% of salary)
The metrics within the BTG Group-level annual bonus scorecard and the related performance outcomes were as follows:
Performance metric
Proportion of
bonus determined
by metric
Threshold performance
(25% of max payable)
Target performance
(50% of max payable)
Stretch performance
(100% of max payable)
Actual
performance
Bonus
earned
(% of max for
this element)
Bonus
earned
(% of salary)
Adjusted operating
profit (£m)
80% 58,350 64,834 68,075 63,300 44% 35%
Key strategic objectives
Proportion of bonus
determined by
metric N/A N/A Target
Actual
performance
Bonus
earned
(% of max)
Bonus
earned
(% of salary)
Cash conversion 5% – – > 100% 104.3% 100% 5%
Employee
satisfaction (eNPS)
5% – – > 60 71 100% 5%
Customer
satisfaction (NPS)
5% – – > 60 82 100% 5%
ESG rating
(ISSQuality Score)
1
5% – – ≤ 3 3 100% 5%
Strategic
objectives total
20% 100% 20%
Total 100% 55% 55%
1 As per ISS Quality Score methodology, where 1/10 equates to a higher level of environmental and social disclosure, and to a lower level of governance risk.
The metrics within the Phoenix entity-level annual bonus scorecard, in which only the MD Phoenix participated in 2023/24, were:
• • Phoenix adjusted operating profit (85% weighting)
• • Key strategic objectives for Phoenix (15% weighting), comprising two Phoenix-level financial objectives and two Phoenix-level
NPS measures.
The targets and related performance levels attained for 2023/24 on the Phoenix bonus scorecard remain commercially sensitive at
the time of publication of this report, but the combined outcome across all metrics was equivalent to 66% of the maximum amount
available to the MD Phoenix.
For all executive directors, two-thirds of the bonus is paid in cash and one-third will be deferred in shares, which will vest after a
two-year period.
118 Bytes Technology Group plc
GOVERNANCE REPORT
PSP awards vesting in the year (audited)
There were no long-term incentive awards capable of vesting in relation to performance during the year.
PSP awards granted in the year (audited)
The table below provides details of share awards made to the executive directors on 1 June 2023. The awards made to Neil Murphy
on 1 June 2023 were forfeited immediately on his resignation on 21 February 2024:
Date of award Type of award
Basis of award
(% of salary)
Number of shares
under award
1
Face value of
award (£’000)
% vesting at
threshold
End of vesting
period
Sam Mudd
2
1 June 2023 Nil cost option 100% 60,300 295 20% 31 May 2026
Andrew Holden 1 June 2023 Nil cost option 150% 102,400 501 20% 31 May 2026
Neil Murphy
3
1 June 2023 Nil cost option 150% 125,600 614 20% 31 May 2026
1 The number of awards was calculated using a share price of £4.89, which was based on the company’s average closing share price on 26, 30 and 31 May 2023.
2 Awarded prior to appointment as executive director on 12 July 2023.
3 Awards were made on 1 June 2023 but were forfeited immediately on resignation on 21 February 2024.
The PSP awards granted on 1 June 2023 are subject to a combination of performance conditions, being adjusted earnings per
share (EPS) and relative total shareholder return (TSR) compared with the constituents of the FTSE 250 (excluding real estate and
equity investment trusts) measured over a three-year performance period. The targets are set out here:
Measure Weighting Performance period Targets
Adjusted EPS 75% Three financial years to
28 February 2026
1
Adjusted EPS of 22.43 pence (20%
vests) rising on a straight-line basis to
50% vesting for 26.45 pence and on a
straight-line basis again to full vesting
for achievement of 29.39 pence
Relative TSR versus constituents of
the FTSE 250 (excluding real estate
and equity investment trusts)
25% Three financial years to
28 February 2026
Median (20% vests) rising on a
straight-line basis to full vesting
forupper-quartile performance
1 The adjusted EPS target is based on performance in the final year of the performance period.
In addition, the committee retains discretion to reduce the overall PSP vesting level (potentially to zero) if it considers that the
underlying business performance of the company does not justify it.
A two-year holding period will apply to any awards vesting, and recovery and withholding provisions will apply in line with our
approved policy.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
119
Directors’ remuneration report continued
Executive directors’ share options outstanding at the year end (audited)
Details of share options outstanding at the financial year end are shown in the following table.
Scheme
No. of options
at 28 February
2023/date of
joining
Options
granted
inyear
Options
forfeited
inyear
Options
exercised
in year
No. of options
at 29 February
2024
Date of
grant
Share price
at date of
grant
Exercise
price
Date from
which
exercisable Expiry date
Sam Mudd
1
PSP 133,851 4,004 0 0 137,8 5 5 17 December
2020
£3.43 £0.01 17 December
2023
16 December
2030
CSOP
2
50,000 0 0 0 50,000 1 June
2021
£5.00 £5.00 1 June
2024
31 May
2031
SAYE
2
4,500 0 0 0 4,500 22 June
2021
£4.53 £4.00 1 August
2024
1 February
2025
PSP 52,230 0 0 0 52,230 1 June
2022
£4.53 £0.01 1 June
2025
31 May
2032
PSP 0 60,300 0 0 60,300 1 June
2023
£5.16 £0.01 1 June
2026
31 May
2033
Andrew Holden
CSOP
3
45,000 0 0 0 45,000 1 June
2021
£5.00 £5.00 1 June
2024
31 May
2031
SAYE
3
4,500 0 0 0 4,500 22 June
2021
£4.53 £4.00 1 August
2024
1 February
2025
DBP
4
10,305 0 0 0 10,305 1 June
2022
£4.53 £0.01 1 June
2024
1 December
2024
PSP 102,580 0 0 0 102,580 1 June
2022
£4.53 £0.01 1 June
2025
31 May
2032
DBP
5
0 20,376 0 0 20,376 1 June
2023
£5.16 £0.01 1 June
2025
1 December
2025
PSP 0 102,400 0 0 102,400 1 June
2023
£5.16 £0.01 1 June
2026
31 May
2033
Neil Murphy
6
DBP
4
25,537 0 25,537 0 0 1 June
2022
£4.53 £0.01 N/A N/A
PSP 125,800 0 125,800 0 0 1 June
2022
£4.53 £0.01 N/A N/A
DBP
5
0 24,989 24,989 0 0 1 June
2023
£5.16 £0.01 N/A N/A
PSP 0 125,600 125,600 0 0 1 June
2023
£5.16 £0.01 N/A N/A
Key:
PSP: Performance Share Plan
DBP: Deferred Bonus Plan
CSOP: Company Share Option Plan
SAYE: Save As You Earn Plan (Sharesave)
1 Sam Mudd was promoted to the Board on 12 July 2023. All PSP, CSOP and SAYE awards were made before she joined the Board.
The share options shown under the 17 December 2020 PSP at 29 February 2024 include 8,225 dividend equivalent options of which 3,326 were
grantedon 4 August 2023 and 678 were granted on 1 December 2023. The closing awards vested during the year but have not yet been exercised.
2 The face value of the CSOP award granted was £250,000 based on the share price at the date of grant.
The face value of the SAYE was £20,385 based on the share price at the effective date of 22 June 2021.
3 The face value of the CSOP award granted was £225,000 based on the share price at the date of grant.
The face value of the SAYE was £20,385 based on the share price at the effective date on 22 June 2021.
4 The face value of the DBP awards granted to Neil Murphy and Andrew Holden on the date of the grants was £115,683 and £46,682, respectively.
Thesegrants are not subject to any other performance conditions.
5 The face value of the DBP awards granted to Neil Murphy and Andrew Holden on the date of grant was £128,943 and £105,140 respectively.
Thesegrants are not subject to any other performance conditions.
6 All the share awards held by Neil Murphy were forfeited immediately on his resignation on 21 February 2024.
The closing share price of the company’s ordinary shares at 29 February 2024 was 557.5 pence, and the closing price range
during the year ended 29 February 2024 was 360.6 pence to 657.0 pence.
120 Bytes Technology Group plc
GOVERNANCE REPORT
Statement of directors’ shareholding and share interests (audited)
The following table shows the interests of directors and those connected to them in BTG’s ordinary shares at 29 February 2024.
Allthe share options held by Neil Murphy were forfeited immediately on his resignation on 21 February 2024.
No. of shares
owned outright
(restated)
No. shares
owned outright
No. options
vested,
unexercised,
and not subject
to performance
1
No. options
unvested
and not subject
to performance
No. options
unvested
and subject to
performance
Shareholding as
% of salary at
29 February
2024
Shareholding
guideline as
% of salary
Company
shareholding
guideline met
Current directors
28 February
2023/
date of joining
29 February
2024/
date of leaving
Sam Mudd
2
76,958 81,548 137,85 5 54,500 112,5 3 0 242% 200% Yes
Andrew Holden 72,990 72,990 0 8 0,181 204,980 122% 200% No
Patrick
DeSmedt
3
92,592 102,592 0 0 0 N/A N/A N/A
Mike Phillips 74,074 20,000 0 0 0 N/A N/A N/A
Erika Schraner 10,037 10,037 0 0 0 N/A N/A N/A
Shruthi Chindalur 0 0 0 0 0 N/A N/A N/A
Former directors
David Maw
4
17,8 6 5 17,8 6 5 0 0 0 N/A N/A N/A
Alison Vincent
5
6,686 6,686 0 0 0 N/A N/A N/A
Neil Murphy
6,7
4,051,036 2,890,369 0 0 0 3,969% 200% Yes
1 PSP awards granted at IPO on 17 December 2020 (including 8,225 dividend equivalent options).
2 Sam Mudd joined the Board with effect from 12 July 2023. The opening number of shares is stated at the date of appointment to the Board.
3 Patrick De Smedt’s shareholding has been restated for one fewer share at 28 February 2023 for a misstatement on the prior-year disclosed amount.
4 David Maw retired from the Board with effect from 12 July 2023 – the number of shares and share interests is at the date of retiring from the Board.
5 Alison Vincent stepped down from the Board with effect from 31 October 2023 – the number of shares and share interests is at the date of stepping
down from the Board. As disclosed on 14 July 2023, persons closely associated (PCA) with Alison Vincent bought 608 ordinary shares in the company.
This purchase was not previously disclosed at the time because of an administrative error, so the amount shown for 28 February 2023 has been restated
to include these 608 shares. Her shareholding has also been restated for one fewer share at 28 February 2023 for a misstatement on the prior-year
disclosed amount.
6 On 21 February 2024, the company announced that Neil Murphy had resigned with immediate effect because of undisclosed share dealings.
Thenumber of shares and share interests is at the date of resigning from the Board. His undisclosed share dealings were released to the market
byRNSon 23 February 2024 and undisclosed dealings in the name of a PCA of Neil Murphy were released to the market by RNS on 13 March 2024.
Hisshareholding as at 28 February 2023 has been restated in the table above to reflect the undisclosed 264,667 shares.
7 Subsequent to the RNS releases noted above for Neil Murphy, it has also come to our attention that the initial notification of shareholding for Neil Murphy
on 18 December 2020, at the time of the BTG IPO, was understated by 151 shares. This comprised one share allocated to him on the incorporation of
BTG plc, and 150 shares being the conversion of his shares in Altron (the Group’s previous owner) to BTG plc shares after redemption of the minimum
25% required under the terms of the demerger. His shareholding as at 28 February 2023 has been restated in the table above to reflect the 151 shares
previously excluded at that date.
The interests of those directors holding a position on the Board at the year end did not change between 29 February 2024 and the
date of signing the Annual Report and Accounts for 2023/24, except that this has not been confirmed in relation to Mike Phillips,
since his resignation on 24 March 2024.
Neil Murphy’s shareholdings
As explained on pages 69 to 70 and in the footnotes above, Neil Murphy’s undisclosed share dealings mean that the directors’
shareholding information in each of the company’s annual reports for the three years ended 28 February 2023 were incorrect, and
that the declarations Neil provided to our external auditors, EY, in relation to his shareholding were misrepresented.
Taking into account all the disclosed and undisclosed transactions known by the company to date in respect of Neil Murphy and his
PCA, and the omission of the initial 151 shares allocated at IPO, the company has produced the following reconciliations:
• • From the previously announced PDMR notifications issued by the company in respect of Neil to the correct position at each date
• • From the disclosed positions in the Annual Report and Accounts 2020/21, 2021/22 and 2022/23 to the correct position at each date.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
121
Directors’ remuneration report continued
Neil Murphy’s PDMR announcements
This presents the shareholding announced at each date and the correct revised holding that should have been reported, so at all
dates the announced holding was less than the actual holding.
Date
Announced
new PDMR
holding at this date
Announced
change in
holding at this date
Unannounced
initial notification
correction
Unannounced
trades since last
PDMR notification
Unannounced
revised correct
holding at this date Note
Announced
holding versus
revised correct
holding at this date
18 December 2020 4,19 0, 9 41 – 151 – 4,191,0 9 2 (151)
17 January 2022 3,69 0,941 (500,000) – 235,085 3, 92 6,17 7 1 (235,236)
9 January 2023 3,735,424 44,483 – 93,322 4,063,982 2 (328,558)
2 February 2023 3,786,218 50,794 – (63,740) 4,051,036 3 (264,818)
23 June 2023 2,836,218 (950,000) – 326 3 ,101,3 62 3 (2 65 ,14 4)
28 November 2023 2,890,218 54,000 – (264,993) 2,890,369 3 (151)
Annual Report disclosures
Financial year
Disclosure
date
Disclosed
holding
Initial notification
correction
Cumulative
undisclosed trades
correction
Revised
correct holding Note
Disclosed holding
versus revised
correct holding
2020/21 28 February 2021 4,19 0,9 41 151 8,852 4,19 9,9 4 4 (9,003)
2021/22 28 February 2022 3,690,941 151 26 7,4 21 3,958,513 1 (26 7, 5 72)
2022/23 28 February 2023 3,786,218 151 264,667 4,051,036 2 (264,818)
Of Neil Murphy’s revised holding:
1 As at this date, 6,556 ordinary shares were beneficially owned by his wife, Alison Murphy.
2 As at this date, 14,992 ordinary shares were beneficially owned by his wife, Alison Murphy.
Alison Vincent’s shareholdings
As also explained on pages 69 to 70, an undisclosed purchase of 608 BTG shares by a PCA of Alison Vincent means that the
directors’ shareholding information in the Annual Report and Accounts 2021/22 and 2022/23 was incorrect with respect to the
shareholdings of Alison Vincent and her PCAs.
There is a prior-year adjustment to the statement of directors’ shareholding and share interests table (see previous footnote 5) in
respect of this undisclosed shareholding.
Payments for loss of office and to past directors (audited)
There were no payments for loss of office to past directors during the year.
As announced on 21 February 2024, Neil Murphy resigned as CEO of BTG with immediate effect from that date.
In accordance with Neil’s service contract and the directors’ remuneration policy, each of the elements of remuneration has been
treated as follows and approved under the terms of a settlement agreement reached between the company and Neil on 9 May 2024:
Fixed pay • • Paid until date of resignation. Neil Murphy has not received, nor will receive, any further salary,
pension or benefits for the period after the date of his resignation.
Annual bonus • • Ineligible for any payment in respect of the 2023/24 financial year.
• • In addition, the committee exercised its powers to pursue clawback for the full amount of the cash
portion of all annual bonuses awarded to Neil Murphy since IPO (on a net-of-tax basis reflecting
the actual amounts received). The total agreed is £274,825, payable to the company within 28days
from the date of the agreement. To the extent that he obtains a refund from HMRC of income tax
previously paid on any or all of the bonus payments, Neil will immediately notify the Company of
such refund and shall pay any such refund to the Company within 14 days of receiving the refund.
Share-based awards • • On the date of his resignation, all Neil Murphy’s unvested deferred bonus plan awards and unvested
PSP awards were forfeited in full. There were no vested options at this date, exercised or unexercised.
Shareholding guidelines • • 200% of salary shareholding guideline applies for two years from resignation, being not less than
ordinary shares to the value of at least £819,000 for a minimum period of up to 21 February 2026,
provided always that he shall not be obliged to hold more than 136,673 shares.
• • Any sales in this period to be conducted via the company broker in the first instance.
• • Notwithstanding the statement made by Neil Murphy on 22 June 2023 at the time of the sale of 950,000
ordinary shares in the company to not sell any shares in the company in the 12 months following that
date, it is agreed between the parties that Neil is permitted as of the date of the Settlement Agreement
to sell ordinary shares up to a maximum value of £500,000 before 22 June 2024.
122 Bytes Technology Group plc
GOVERNANCE REPORT
Non-executive directors’ fees (audited)
As a consequence of the undisclosed share dealings by Neil Murphy and Alison Vincent’s PCA in 2023/24, it was necessary for the
Board to establish specifically constituted additional subcommittees of the Board to investigate these matters, and to oversee
anddirect the work of both internal teams and external professional advisors who were appointed to support these processes. In
recognition of the complexity of such additional responsibilities and the additional time commitment, which extended beyond the
normal responsibilities of non-executive directors, during 2023/24 additional remuneration was considered for those non-
executives serving on and leading these subcommittees.
It was agreed by the Board that it was appropriate and in shareholders’ best interests that BTG non-executive directors should
receive additional fees per additional day worked on these matters and that the levels of such fees should reflect an equivalent
dayrate set by reference to continuing normal BTG non-executive director fees for roles fulfilled (non-executive base fees and
additional fees for chairing Board subcommittees).
In 2023/24, such additional fees comprised £32,000 to Erika Schraner, £13,250 to Mike Phillips and £1,900 to Shruthi Chindalur.
All these amounts are reflected in the single total figure of remuneration for each director table on page 117. With this work
continuing into 2024/25, there will be further amounts for the work on these subcommittees included in the single total figure of
remuneration for each director table in the directors’ remuneration report for 2024/25, with the values calculated on the same
basis of equivalent day rates related to continuing non-executive director fees.
Total shareholder return performance
The graph below shows the value at 29 February 2024 of £100 invested in BTG on 11 December 2020, the date of commencement
of conditional trading on the London Stock Exchange, compared with £100 invested in the FTSE 250 Index (excluding real estate
and equity investment trusts) on the same date, on the assumption that dividends are reinvested for additional equity.
The FTSE 250 Index (excluding real estate and equity investment trusts) was selected as a comparator because BTG is a
constituent. This allows our performance to be compared against the index as a whole.
£ 11 December 2020 28 February 2021 28 February 2022 28 February 2023 29 February 2024
Bytes Technology Group
155
108
171
111
153
108
220
107
FTSE 250
(excluding real estate and
equity investment trusts)
Source: Datastream
(an LSEG product)
50
100
150
200
250
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
123
Directors’ remuneration report continued
CEO and Interim CEO remuneration
The total remuneration figure for the CEO in 2023/24 is shown in the table below, along with the value of bonuses paid, and PSP
vesting, as a percentage of the maximum opportunity. This table will build to show a rolling 10 years’ worth of data over time.
Year CEO or Interim CEO
CEO single
total figure of
remuneration
Annual bonus
payout %
of maximum
PSP
vesting %
of maximum
2023/24 Sam Mudd
1,2
£11,412 63% N/A
2023/24 Neil Murphy
1,2
£415,675 0% N/A
2022/23 Neil Murphy
1
£776,301 94% N/A
2021/22 Neil Murphy
1
£739,364 95% N/A
2020/21 Neil Murphy
1,3
£92,025 100% N/A
1 No PSP awards vested during the period.
2 Sam Mudd was appointed Interim CEO on 21 February 2024 and her total remuneration is the prorated figure for nine days from that date
to29 February2024. Neil Murphy’s total remuneration covers the period until his resignation on 21 February 2024.
3 Total remuneration is the prorated, post-IPO figure (for the period from admission to the London Stock Exchange to 28 February 2021).
Change in directors’ remuneration compared with other employees
The following table shows the percentage change in the remuneration of the executive directors and non-executive directors
compared with the average change for all employees of the parent company for the year ended 29 February 2024. 2022/23 was
the first year in which this table was included, because it represented the first time where two full years of data had been available
since IPO. This table will build up over time to ultimately cover a rolling five-year period.
Current directors
Salary and
fees
(% change)
Taxable
benefits
(% change)
Annual
bonus
(% change)
Sam Mudd 2023/24 N/A N/A N/A
Andrew Holden
1
2023/24 5% 20.9% (-38.3%)
2022/23 198.6% N/A 195.4%
Patrick De Smedt 2023/24 0% N/A N/A
2022/23 4% N/A N/A
Mike Phillips
2
2023/24 18.2% N/A N/A
2022/23 4% N/A N/A
Erika Schraner
3
2023/24 77. 2% N/A N/A
2022/23 108.0% N/A N/A
Shruthi Chindalur 2023/24 N/A N/A N/A
2022/23 N/A N/A N/A
Former directors
David Maw 2023/24 (-63.4%) N/A N/A
2022/23 14.6% N/A N/A
Alison Vincent 2023/24 (-33.3%) N/A N/A
2022/23 4% N/A N/A
Neil Murphy
4
2023/24 4 .1% (-63.9%) (-100 %)
2022/23 4% 282.8% 2.9%
All employees
5
2023/24 6.7% 24.2% (-6.3%)
2022/23 5.7% 6.2% 21.7%
1 Salary and annual bonus percentage increase in 2022/23 were in
relation to pro rata salary and bonus earned in 2021/22 since date
ofappointment to the Board on 21 October 2021. The reduction in
annual bonus in 2023/24 reflects the Group not achieving it’s adjusted
operating profit stretch target in the year.
2 Fee increase in 2023/24 relates to amounts received for additional
workon Board subcommittees established to investigate undisclosed
share dealings.
3 Fee increase in 2022/23 was in relation to pro rata fees earned in
2021/22 since date of appointment to the Board on 1 September 2021.
Fee increase in 2023/24 relates to amounts received for additional
workon Board subcommittees established to investigate undisclosed
sharedealings.
4 2023/24 figures for Neil Murphy reflect nil bonus for 2023/24 as a result
of his resignation and lower benefits given he received a long service
award in 2022/23 of £9,777.
5 Reflects the average percentage change in salary, benefits and bonus
for employees of the parent company (excluding the Board). To aid
comparison, the employees of the parent company are those full-time
employees who were employed over the complete two-year period.
124 Bytes Technology Group plc
GOVERNANCE REPORT
Relative importance of spend on pay
The following table shows the actual spend on pay for all BTG
employees relative to dividends:
Year Staff costs Dividends
2023/24 £88.4m £36.6m
2022/23 £76.8m £30.7m
% increase 15% 19%
CEO-to-employee pay ratio
The table below sets out the ratio between the total pay of the
CEO and that of employees at the 25th, 50th (median) and 75th
percentiles of BTG’s UK employees. This table will expand to
show a rolling 10 years’ worth of data over time.
Year Method 25th percentile 50th percentile 75th percentile
2023/24 A 12:1 8:1 5:1
2022/23 A 22:1 15:1 8:1
2021/22 A 24:1 15:1 8:1
2020/21 A 14:1 9:1 5:1
The 25th, 50th and 75th percentile-ranked individuals were
identified using ‘option A’ in the reporting regulations, selected
on the basis that this is the most robust and statistically accurate
means of identifying the relevant people. Given ratios could be
unduly affected by joiners and leavers who may not participate in
all remuneration arrangements in the year of joining and leaving,
the committee has modified the statutory basis slightly to
excludeanyone not employed throughout the entire financialyear.
The25th, 50th and 75th percentile employees were identified as
at 29 February 2024.
The CEO pay figure is derived from the total remuneration set
out in the single total figure of remuneration for each director
table on page 117. Given that more than one person has
undertaken the role of the CEO in the year ended 29 February
2024, the calculation of the ratio uses the total remuneration in
the table paid in relation to the period those persons were
undertaking the role of CEO during the year.
Pay in respect of the CEO and employees is shown in the
tablebelow (the employee pay includes the same pay elements
as for the CEO, and so excludes LTIPS).
CEO All employees
Year
See CEO and
Interim CEO
remuneration
table on
page 124
1
25th
percentile
50th
percentile
75th
percentile
2023/24
salary
£413,260 £31,800 £30,000 £65,000
2023/24
total pay
£4 2 7,0 87 £36,385 £55,647 £91,713
1 Total pay for the former CEO to date of resignation on 21 February 2024
plus prorated pay for the Interim CEO from 21 February 2024 to
29 February 2024.
The decrease in the ratio from 2022/23 to 2023/24 primarily
reflects the removal of any bonus to Neil Murphy for the
year ended 29 February 2024 as a result of his resignation on
21 February 2024. The pay for the Interim CEO was included
only from appointment on 21 February 2024, so there is only
asmall pro rata bonus included for the subsequent nine days.
This accounts for the relatively small difference between salary
for the CEO role and total pay for that role. Given this impact,
there is not yet any clear trend in the median pay ratio over the
period of financial years covered by the pay ratio table. After
taking this into account, the committee is satisfied that the
ratiois reasonable and consistent with our wider policies
onemployee pay, reward and progression.
External appointments
At the date of this report, no executive directors are currently
non-executive directors of any company outside BTG.
Executive directors’ service contracts
The table below summarises key details of the executive
directors’ contracts:
Date of joining
BTG
Date of service
contract
Notice period
(from either party)
Neil Murphy 1997
1
30 October 2020 12 months
Andrew Holden 2021
2
1 November 2021 6 months
Sam Mudd 2003
3
12 July 2023 6 months
1 Neil Murphy, appointed as CEO in 2020. Previously MD of Group subsidiary
Bytes Software Services Limited since 2000, before which he was sales
director for three years. Resigned from BTG on 21 February 2024.
2 Andrew Holden joined BTG as COO on 1 June 2021 and joined the
Board as CFO on 21 October 2021.
3 Sam Mudd, appointed to the BTG Board on 12 July 2023 and then as
Interim CEO on 21 February 2024 and CEO on 10 May 2024. Previously
MD ofGroup subsidiary Phoenix Software Limited since 2014, before
which she was a director for five years and associate director for six years.
Non-executive directors’ letters of appointment
The table below summarises key details of the non-executive
directors’ contracts:
Date of
joiningBTG
Date of letter
ofappointment
Date of last
re-election
Notice period
(from either party)
Patrick
De Smedt
27 July
2020
27 July
2020
12 July
2023
1 month
Mike
Phillips
1
6 November
2020
19 October
2020
12 July
2023
1 month
Erika
Schraner
1 September
2021
1 September
2021
12 July
2023
1 month
Shruthi
Chindalur
1 February
2024
30 January
2024
N/A 1 month
1 Resigned from the Board effective 24 March 2024.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
125
Directors’ remuneration report continued
Implementation of policy for the year ending 28 February 2025
Basic salary
The committee reviews the executive directors’ base salaries annually, with any increases taking effect from 1 March each year.
Base salaries effective from 1 March 2024 are:
Base salary
2023/24
Base salary
2024/25 Increase
Sam Mudd (MD Phoenix to 9 May 2024) £295,000 £308,275 4.5%
Sam Mudd (CEO from 10 May 2024) N/A £421,000 N/A
Andrew Holden £333,900 £348,926 4.5%
Up to 9 May 2024, the table above shows Sam Mudd’s salary for her substantive role as MD Phoenix. In addition, Sam, for this
period of acting as Interim CEO, was paid a salary supplement of £91,725 per annum (increasing her salary to £400,000 in total).
From 10 May 2024, Sam will be paid her CEO salary.
Benefits and pension
No changes are proposed to pension and benefits for 2024/25. Executive directors will continue to receive benefits that include private
medical and life insurance, and pension contributions of up to 4% for the CEO, CFO and Interim CEO, in line with the policy.
For the period Sam Mudd holds the role of Interim CEO during 2024/25, her pension contribution will be calculated from the total
of her continuing base salary as MD Phoenix and the Interim CEO salary supplement (£400,000 in total).
Annual bonus
Subject to approval of the new policy, the maximum opportunity under the annual bonus plan will be 125% of salary for the Interim
CEO, CEO and CFO. One-third of the total bonus payment will be deferred into shares for two years, and recovery and withholding
provisions will apply in line with our approved policy.
For the period Sam Mudd held the role of Interim CEO during 2024/25 up to 9 May 2024, her annual bonus will be calculated from the
total of her continuing base salary as MD Phoenix and the Interim CEO salary supplement (£400,000 in total) and, subject to approval of
the new policy, her maximum annual bonus for the period while Interim CEO will be 125% of this total amount. From 10 May 2024, Sam’s
bonus will be calculated as 125% against her new salary of £421,000 as CEO.
Bonuses will be based on targets relating to adjusted operating profit (80%) and a number of key strategic objectives (20%). The
strategic objectives will include metrics relating to maintenance of financial efficiency and ESG (including employee and customer
NPS and an external ESG quality assessment). The committee has not disclosed the detailed performance targets for the
forthcoming year in advance, because it considers that they include commercially sensitive matters. Retrospective disclosure of
the performance against targets will be made in next year’s annual report on remuneration, if the targets are no longer considered
commercially sensitive at that time.
Performance Share Plan
The executive directors will participate in the PSP in 2024/25. Andrew Holden will receive awards of 150% of salary, while Sam
Mudd as Interim CEO will receive awards of 100% of salary (with her salary for this purpose excluding her Interim CEO salary
supplement) and then as CEO will receive awards of 150% of salary. Vesting will be subject to the following performance conditions:
Measure Weighting Performance period Targets
Adjusted EPS 75% Three financial years
to28 February 2027
1
Adjusted EPS of 23.6 pence (20%vests)
rising on a straight-line basis to50%
vesting for 27.7 pence and ona
straight-line basis again to full
vestingforachievement of 30.6 pence
Relative TSR versus constituents of
the FTSE 250 (excluding real estate
and equity investment trusts)
25% Three financial years
to28 February 2027
Median (20% vests) rising on a
straight-line basis to full vesting
forupper-quartile performance
1 The adjusted EPS target is based on performance in the final year of the performance period.
In addition, the committee retains discretion to reduce the overall PSP vesting level (potentially to zero) if it considers that the
underlying business performance of the company does not justify it.
A two-year holding period will apply to any awards vesting, and recovery and withholding provisions will apply in line with our approved policy.
126 Bytes Technology Group plc
GOVERNANCE REPORT
Non-executive directors’ fees
For 2024/25, the regular non-executive directors’ fees are:
Fee 2023/24 Fee 2024/25 % increase
Chair £187,2 0 0 £205,000 9.5%
Base fee £52,000 £57,000 9.6%
Senior independent director fee £10,400 £11,000 5.7%
Audit Committee Chair fee £10,400 £11,000 5.7%
Remuneration Committee Chair fee £10,400 £11,000 5.7%
ESG Committee Chair fee N/A £11,000 N/A
Designated non-executive director for employee engagement £7,2 8 0 £8,000 9%
Additionally, as explained on page 104, in 2024/25 there are continuing actions being taken by the non-executive directors
inleading specially established Board subcommittees investigating undisclosed share dealings. BTG will pay additional non-
executive directors’ fees (calculated on an equivalent pro rata day rate for continuing non-executive director work) for
thisadditional work. The Board regards the payment of these fees as appropriate and fully in shareholders’ best interests.
Remuneration voting outcomes
At our 2023 AGM, our remuneration report was approved with 98.85% of votes cast in favour, 1.15% of votes against and
33,552votes withheld. At our 2021 AGM, our remuneration policy was approved with 94.29% of votes cast in favour,
5.71%ofvotesagainst and 18,603 votes withheld.
On behalf of the Board.
Erika Schraner
Remuneration Committee Chair
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
127
Directors’ report
This report summarises other useful information, from
our Companies Act disclosures and going concern
statement, to the details of our main shareholders
and our forthcoming Annual General Meeting.
BTG’s directors present this report together with the audited
consolidated financial statements for the year ended
29 February 2024.
The report has been prepared in accordance with the
requirements outlined in The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008, and forms part of the management report as required
under Disclosure Guidance and Transparency Rule (DTR) 4.
Certain information that fulfils the requirements of the directors’
report can be found elsewhere in this report and is referred to
below. The information is incorporated into this directors’ report
by reference.
The directors’ report is made up of the governance report and
this report. Other relevant information that is incorporated by
reference can be found in the strategic report, including:
• • An outline of the important events thatoccurred during the
year, on pages 4 to 8
• • An indication of likely future developments in the business
ofBTG and its subsidiaries, Bytes Software Services and
Phoenix Software, onpages 6 to 8
• • Financial performance, on pages 26 to 29
• • Business environment, on pages 12 to 13
• • Outlook and financial management strategies, including
particulars of any important events affecting the company
since the year end (with subsidiary undertakings included in
consolidated statements), on pages 6 to 13
• • Internal controls, principal risks and risk management
framework, onpages 53 to 62
• • Stakeholder engagement, includingemployee engagement,
on pages 78 to 82
• • Directors’ biographies, on pages 72 to 73
• • Section 172 statement, on page 65.
Requirements of Listing Rule9.8.4
Information to be included in the Annual Report and Accounts
under Listing Rule 9.8.4 may be found as follows:
Relevant Listing Rule Pages
LR 9.8.4R (4): details of any long-term
incentive schemes and directors’ interests
116 to 127
LR 9.8.4R (5): details of any arrangements
under which adirector has waived
emoluments, or agreed to waive any future
emoluments, from the company
116 to 127
The strategic report and the directors’ report together form
themanagement report for the purposes of the DTR 4.1.8R.
Information relating to financial instruments can be found on
page 172 and is incorporated by reference. For information
onour approach to social, environmental and ethical matters,
please refer to our strategic report, including our Task Force on
Climate-related Financial Disclosures (TCFD) statement on
pages 44 to 52.
Financial risk management instruments
The company’s exposure to financial risks and how these risks
affect the company’s future financial performance is disclosed
in notes 23 and 24 to the financial statements.
Research and development
The company did not carry out any research and development
activities during the year (2022/23: none).
128 Bytes Technology Group plc
GOVERNANCE REPORT
Directors
The directors who held office at 29 February 2024, and up to the
date of this report, are set out below and on pages 72 to 73 with
their biographies. Changes to the composition of the Board or
committees during the year ended 29 February 2024, and up
tothe date of approval of the financial statements, were:
• • David Maw, who retired as a non-executive director
on12 July 2023
• • Alison Vincent, who stepped down as an independent
non-executive director on 31 October 2023
• • Shruthi Chindalur, who was appointed as an independent
non-executive director on 1 February 2024
• • Neil Murphy, who resigned as CEO and as a member of
theBoard with immediate effect on 21 February 2024
• • Sam Mudd, who was appointed to the Board as an
executivedirector on 12 July 2023, as Interim CEO on
21 February 2024 and as CEO on 10 May 2024
• • Mike Phillips, who resigned with immediate effect as an
independent non-executive director on 24 March 2024.
Directors
as at 29 February 2024
Name
Effective date of joining
BTGBoard Position
Patrick De Smedt 15 October 2020 Independent
non-executive
Chair
Sam Mudd 12 July 2023 Interim CEO
(appointed
asCEO on
10 May2024)
Andrew Holden 21 October 2021 CFO
Erika Schraner 1 September 2021 Independent
non-executive
director
Shruthi Chindalur 1 February 2024 Independent
non-executive
director
The company’s Articles of Association govern the appointment,
removal and replacement of directors and explain the powers
given to them. Sam and Shruthi will stand for election as
directors at the AGM on 11 July 2024, while all remaining
directors will stand for re-election. The remuneration of
thedirectors, including their respective shareholdings
inthecompany, is set out in the directors’ remuneration
reportonpages 116 to 127.
Avoiding conflicts of interest
Since their respective dates of appointment, and up to the
dateof this report, no director held any beneficial interest in
anycontract significant to the company’s business, other than
acontract of employment.
The Board regularly reviews each director’s interests outside
BTG and considers how the Chair ensures they are applying
objective judgement in their role, as required by the UK
Corporate Governance Code. To help directors avoid conflicts,
orpossible conflicts, of interest, the Board must first give
clearance to any potential conflicts, including directorships
orother interests in outside companies and organisations.
Thisis recorded in the company’s statutory records.
Should a director become aware that they, or their connected
parties, have an interest in an existing or proposed transaction
with the Group, they are required to notify the Board or the
Group Company Secretary as soon as reasonably possible.
Insuch an instance, unless allowed by the company’s Articles
ofAssociation, the director cannot take part in any decisions
about the contract or arrangement.
Directors’ and officers’ liability insurance and
indemnification of directors
The company maintains directors’ and officers’ liability
insurance, which gives appropriate cover should legal action
bebrought against its directors. The company has also provided
anindemnity for its directors, which is a qualifying third-party
indemnity provision, for the purposes of Section 234 of the
Companies Act 2006. This was in place for the duration of the
financial year ended 29 February 2024 and up to the date of
approval of the financial statements.
Share capital
The issued share capital of the company at 29 February 2024
was 240,356,898 ordinary shares of £0.01 nominal value,
withno shares held in treasury. A total of 4,345 additional shares
were issued after the year ended 29 February 2024, relating
tothecompany’s long-term incentive plans. Note 20 to the
consolidated financial statements on page 174 contains full
details of the issued share capital. As far as the company is
aware, there are no restrictions on the voting rights attached
toits ordinary shares and there are no agreements that may
result in restrictions in the transfer of securities or voting rights.
Nosecurities carry any special rights.
An analysis of shareholdings is shown on page 130. Theclosing
mid-market price of a share of the company on 29 February 2024,
together with the range since admission tothe London Stock
Exchange, is also shown on page 123.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
129
Dividends and dividend policy
Our dividend policy remains a progressive one, which targets
anannual dividend of 40% of the company’s profits after tax
before any exceptional items in each financial year. Subject
toany cash requirements for ongoing investment, the Board
considers returning excess cash to shareholders, as and
whenappropriate.
We recommend a final dividend of 6.0 pence per ordinary share,
taking the total full year dividend to 8.7 pence per ordinary
share. In addition, we recommend a special dividend of
8.7 pence per ordinary share is paid at the same time as thefinal
dividend. Shareholders will be asked to approve the final and
special dividends at the AGM on 11 July 2024.
Substantial shareholdings
At 30 April 2024, the company had been notified under
theDTRs, or had ascertained from its own analysis, that the
following held notifiable interests in the voting rights in the
company’s issued share capital of 3% or more of its ordinary
share capital:
Shareholder
Number of
votingrights
% of
voting rights
JPMorgan Asset Management 21, 3 4 3 ,15 0 8.88%
Biltron 18,262,478 7.6 0%
Coronation Fund Managers 13,399,067 5.57%
BlackRock, Inc. 12,646,568 5.26%
abrdn 12,300,625 5.12 %
Capital Group 11,281,669 4.69%
Vanguard Group 9,744,760 4.05%
Committees of the Board
The Board has established Audit, Nomination and Remuneration
Committees. The Audit Committee has been mandated to also
oversee and monitor BTG’s enterprise risk management. For
more details of these committees, including membership and
key focus areas for 2023/24, see their respective reports in the
governance report. During the year, the Board set up two
subcommittees to investigate share dealing-related disclosure
aspects (see pages 69 to 70).
Remuneration voting outcomes
At our 2023 AGM our remuneration report was approved, with
98.85% of votes cast in favour, 1.15% of votes against and
33,552 votes withheld. Our current remuneration policy was
approved by shareholders at our 2021 AGM and will soon come
to the end of its initial three-year period. We will present a
revised policy to shareholders for approval at the AGM on
11July 2024. Subject to shareholders’ approval, the policy
willformally apply until the 2027 AGM, unless a new or
revisedpolicy is presented before then.
Companies Act 2006 disclosures
In accordance with Section 992 of the Companies Act 2006,
thedirectors disclose the following information:
• • The company’s capital structure and voting rights are
summarised in note 20, and there are no restrictions
onvoting rights nor any agreement between holders
ofsecurities that result in restrictions on the transfer
ofsecurities or on voting rights
• • The company does not hold any shares in treasury
• • No securities exist that carry special rights with regard
tothecontrol of the company
• • Details of the substantial shareholders and their
shareholdings in the company are listed in the previous table
• • The Deferred Bonus Plan has been implemented from
1 June 2022. The number of shares awarded under
thecompany’s Deferred Bonus Plan for the year ended
29 February 2024 is set out in note 27 and shown
onpage178
• • The appointment and replacement of directors, amendment
to the Articles of Association and powers to issue or buy
back the company’s shares are contained in the Articles of
Association of the company and the Companies Act 2006
• • There exist no agreements to which the company is party
that may affect its control following a takeover bid
• • No agreements exist between the company and its directors
providing for compensation for loss of office that may occur
because of a takeover bid.
Articles of Association
The company’s Articles of Association set out the rights of
shareholders, including voting rights, distribution rights,
attendance at general meetings, powers of directors,
proceedings of directors, borrowing limits and other
governance controls. A copy of the Articles of Association
canbe requested from the Group Company Secretary or
foundon our website.
Political donations
No donations were made for the year ended 29 February 2024
and up to the date of this report (2022/23: £nil). Generally,
thecompany’s policy remains to not make political donations,
either directly or through a subsidiary. However, authority will
again besought at the 2024 AGM to authorise the company to
make political donations provided that the aggregate amount
isnotmore than £50,000. This resolution has been proposed
toensure BTG and its subsidiaries do not, because of the
wide-reaching definition in the Companies Act 2006,
unintentionally breach the act.
Directors’ report continued
130 Bytes Technology Group plc
GOVERNANCE REPORT
Equality and diversity
The company has an equal opportunities philosophy that
endeavours to treat individuals fairly and not to discriminate
onthe basis of gender, disability, race, national or ethnic
origin,sexual orientation or marital status. Applications
foremployment are fully considered on their merits, and
employeesare given appropriate training and equal
opportunities for career development and promotion.
The company is committed to ensuring that adequate policies
and procedures are in place to give disabled applicants training
to perform safely and effectively, and to provide development
opportunities to ensure they reach their full potential. If
someone becomes disabled during their employment with the
company, the company will seek to provide, wherever possible,
continued employment on normal terms and conditions.
Adjustments will be made to the environment and duties or,
alternatively, suitable new roles within the company will be
secured with additional training where necessary.
The company values involving its people and continues to keep
them informed about what affects them as employees. This is
done using a variety of methods, including whole-company
meetings, team briefings, company days, emails and the
intranet. Dr Erika Schraner assumed the role of designated
non-executive director for employee engagement, after
DavidMaw retired from the Board at the AGM in July 2023,
withthis role now held by Shruthi Chindalur. At team meetings,
managers are responsible for ensuring that information sharing,
discussion and feedback take place on a regular basis. As a
result of these meetings, management can communicate the
financial and economic factors affecting the company and make
sure that the views of employees are considered in company
decisions that are likely to affect their interests.
Going concern
BTG’s business activities, financial position and cash flows,
together with the factors likely to affect its future performance
and position, are set out in the strategic report on pages 9 to 11
and 26 to 29. Details of its objectives and policies on financial
risk management are set out in note 23 to the financial
statements on pages 175 to 17 7.
The directors have made appropriate enquiries and consider
that BTG has adequate resources to continue to operate for
theforeseeable future, which comprises the period of at least
12months from the date of approval of the financial statements,
that is 22 May 2024. There are no material uncertainties that
would prevent the directors from being unable to make this
statement. Accordingly, the directors continue to adopt the
going concern basis in preparing BTG’s financial statements.
Events after the reporting period
On 9 May 2024, a settlement agreement was reached between
the company and Neil Murphy, its former CEO, following his
resignation on 21 February 2024, in accordance with the terms
of his service contract and the directors’ remuneration policy.
Full details can be found on page 122 of the directors’
remuneration report.
Auditor and disclosure of information
The directors who held office at the date of approval of this
directors’ report confirm that, as far as they are each aware:
• • There is no relevant audit information of which the
company’s auditor is unaware
• • Each director has taken all the steps they ought to have
taken as a director to make themselves aware of any
relevantaudit information, and to establish that the
company’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
CompaniesAct 2006. Separate resolutions will be proposed
atthe forthcoming AGM concerning its appointment and to
authorise the Board to agree its remuneration.
Annual General Meeting
The 2024 AGM will be held at 14:00 (BST) on Thursday,
11July2024, at Bytes House, Randalls Way, Leatherhead,
Surrey KT22 7TW, UK.
The company will make use of the electronic voting facility
provided by its registrars, Computershare Limited. The facility
includes CREST voting for members holding their shares in
uncertificated form. For more information, please refer to the
section on online services and electronic voting in the notes
tothe notice of meeting.
The notice of AGM and an explanation of the resolutions
beingput to the meeting are set out in the notice of meeting
accompanying this Annual Report. The directors fully support
allthe resolutions set out in the notice and encourage
shareholders to vote in favour of each of them, as they
intendtoin respect of their own shareholdings.
The directors’ report was approved by the Board of directors
on22 May 2024 and is signed on its behalf.
WK Groenewald FCG
Group Company Secretary
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
131
Statement of directors’
responsibilities
This report outlines our directors’ responsibilities
for ensuring that our Annual Report and financial
statements comply with regulation.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
and Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the company and
the Group, and enable them to ensure that the company and
theGroup financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Group and parent company and so for taking reasonable
steps to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors’ report,
directors’ remuneration report and corporate governance
statement that comply with that law and those regulations.
Thedirectors are responsible for the maintenance and
integrityof the corporate and financial information included
onthe company’s website.
Directors’ confirmations pursuant to FCA’s
Disclosure Guidance and Transparency Rule 4
The directors confirm, to the best of their knowledge, that the:
• • Consolidated financial statements, prepared in accordance
with international accounting standards in conformity with
the requirements of the Companies Act 2006, give a true
and fair view of the assets, liabilities, financial position and
profit of the parent company and undertakings included in
the consolidation, taken as a whole
• • Annual Report, including the strategic report, includes a fair
review of the development and performance of the business
and the position of the company and undertakings included in
the consolidation, taken as a whole, together with a description
of the principal risks and uncertainties that they face.
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the directors
have elected to prepare the Group financial statements in
accordance with UK-adopted International Accounting
Standards (IAS), and the parent company financial statements
in accordance with UK Generally Accepted Accounting Practice
(UK Accounting Standards and applicable law), including
Financial Reporting Standard 101 Reduced Disclosure
Framework (FRS 101). Under company law, the directors must
not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and the company and of the profit or loss of the Group
and the company for that period.
In preparing these financial statements the directors are
required to:
• • Select suitable accounting policies and then apply
themconsistently
• • Make judgements and accounting estimates that are
reasonable and prudent
• • Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information
• • Provide additional disclosures when compliance with the
specific requirements in IFRS (and in respect of the parent
company financial statements, FRS 101) is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the Group
andcompany financial position and financial performance
• • In respect of the Group financial statements, state whether
UK-adopted IAS have been followed, subject to any
materialdepartures disclosed and explained in the
financialstatements
• • In respect of the parent company financial statements,
statewhether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosedandexplained in the financial statements
• • Prepare the financial statements on the going concern
basisunless it is inappropriate to presume that the
companyand/or the Group will continue in business.
132 Bytes Technology Group plc
GOVERNANCE REPORT
Directors’ confirmations
The directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for shareholders to assess
the Group and parent company’s position and performance,
business model and strategy. In the case of each director in
office at the date on which the directors’ report is approved:
• • As far as the director is aware, there is no relevant audit
information of which the Group and parent company’s
auditor is unaware
• • They have taken all the steps that they ought to have taken
as a director to make themselves aware of any relevant audit
information and to establish that the Group and parent
company’s auditor is aware of that information.
This responsibility statement was approved by the Board
ofdirectors on 22 May 2024 and is signed on its behalf.
Sam Mudd
CEO
22 May 2024
Andrew Holden
CFO
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
133
Extending our record
of double-digit growth
FINANCIAL STATEMENTS
134 Bytes Technology Group plc
Finan ci al
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
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
135Annual Report and Accounts 2023/24
Independent auditor’s report to the members
ofBytesTechnology Group plc
Opinion
In our opinion:
• • Bytes Technology Group plc’s Group financial statements and parent company financial statements (the ‘financial statements’)
give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 29 February 2024 and of the
Group’s profit for the year then ended;
• • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• • the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Bytes Technology Group plc (the ‘parent company’) and its subsidiaries (the ‘Group’)
for the year ended 29 February 2024 which comprise:
Group Parent company
Consolidated statement of financial position as at 29 February 2024 Company balance sheet as at 29 February 2024
Consolidated statement of profit or loss for the year then ended Company statement of changes in equity for the year then ended
Consolidated statement of changes in equity for the year then ended Related notes 1 to 11 to the financial statements including
asummary of significant accounting policies
Consolidated statement of cash flows for the year then ended
Related notes 1 to 30 to the financial statements, including a summary
ofsignificant accounting policies
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the
parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced
Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and parent in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and
weremain independent of the Group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and parent
company’s ability to continue to adopt the going concern basis of accounting included:
• • Performing a walkthrough of the Group’s financial close process to confirm our understanding of management’s going
concern assessment process and engaging with management early to ensure all key risk factors identified were considered
intheir assessment.
• • Obtaining management’s going concern assessment, including the cashflow forecasts, covenant calculations and the impact
assessment of recent events arising from the resignation of the former CEO and forensic investigations, covering the period to
31 August 2025. We then performed procedures to confirm the clerical accuracy of the underlying model including validating
the credit facility assumptions.
• • Assessing the Group’s base scenario for consistency with cash flow forecasts used in the goodwill impairment assessment
over which we have performed detailed audit procedures to challenge the base case assumptions.
136 Bytes Technology Group plc
FINANCIAL STATEMENTS
• • The Group has modelled a base scenario and then two downside scenarios, being a severe but plausible downside scenario
and a stressed scenario in order to incorporate unexpected changes to the forecasted liquidity of the Group. We have performed
audit procedures to challenge the base case and the assumptions included in each modelled scenario for the cash forecast
and covenant calculation. We have considered the potential impact of the Group-led investigations as well as the potential
impact of geopolitical and macroeconomic risks such as increases in energy costs, wages inflation, supply chain inflation
andrising interest rates impacting customer spending and customer payments.
We noted that the key assumptions present were forecast gross invoiced income growth rates, gross profit growth rates,
headcount and base pay growth rates, overhead growth rates and debtor days. We agreed the forecasts to Board approved
budgets and performed enquiries with management to understand the basis of the key assumptions. We performed procedures
to assess their appropriateness, such as reviewing the growth rate assumptions within the context of historicperformance.
We critically assessed management’s ability to accurately forecast through lookback analysis on the last three years of historic
financial data. Additionally, where possible, we corroborated management’s assumptions to external data points such as
economic forecasts and competitor trading updates.
• • We reviewed management’s stress test of their cash forecasts and covenant calculations in order to quantify then assess the
likelihood of the downside scenarios required to exhaust the Group’s forecast liquidity and breach the Group’s covenant ratios.
• • Considering the impact and feasibility of potential mitigating activities that are within control of the Group, such as freezing
planned growth in headcount, pay rises, and reducing dividend payments.
• • Reviewing the Group’s going concern disclosures included in the Annual Report in order to assess their completeness and
conformity with the reporting standards, market practice and FRC guidance.
Our key observations
• • We observed that at 29 February 2024, the Group had cash and cash equivalents of £88.8 million in addition to the Group’s
RCF facility of £30 million which is undrawn. On 17 May 2023, the Group’s previous facility was replaced by a facility of the
same amount and runs for three years, until May 2026. The new facility includes an optional one-year extension to May 2027
and a non-committed £20 million accordion to increase the availability of funding should it be required for future activity.
• • The directors’ assessment is that Bytes Technology Group plc has sufficient liquidity and headroom in cash throughout the going
concern period to 31 August 2025. Management’s severe but plausible scenario demonstrated that a worsening of allkey
assumptions against the base case would not result in liquidity concerns. This is prior to further potential mitigations modelled by
management. The changes in assumptions modelled are considered to be highly unlikely based on historical financial performance.
• • We have not identified any material climate-related risks that should be incorporated into Bytes Technology Group plc’s
forecasts to 31 August 2025.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and parent company’s ability to continue as a going concern
fora period until 31 August 2025, being the going concern assessment period.
In relation to the Group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
ofthis report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
փ We performed an audit of the complete financial information of three components and
audit procedures on specific balances for a further six components.
փ The components where we performed full or specific audit procedures accounted for
99% of the Group’s Profit before tax, 100% of Revenue and 100% of Total assets.
Key audit matters
փ Risk of misstatement of revenue recognised at or near period end
փ Risk of misstatement of rebate receivable to overstate reported results at period end
փ Risk of incorrect IFRS 15 presentation and disclosure in respect of principal versus agent
փ Risk arising from the undisclosed share trading by directors
Materiality
փ Overall Group materiality of £3m which represents 5% of forecast profit before tax.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
137
An overview of the scope of the parent company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope
for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.
We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the
business environment, the potential impact of climate change and other factors such as recent Internal audit results when
assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, of the nine reporting components of the Group, we selected nine
components covering entities within the United Kingdom, which represent the principal business units within the Group.
Of the nine components selected, we performed an audit of the complete financial information of three components (‘full scope
components’) which were selected based on their size or risk characteristics. For the remaining six components (‘specific scope
components’), we performed audit procedures on specific accounts within that component that we considered had the potential for the
greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
Audit procedures performed on the three full scope components, located in two different locations in the UK, contributed 99%
(2023: 100%) of the Group’s Profit before tax, 100% (2023: 100%) of the Group’s Revenue and 100% (2023: 99%) of the Group’s
Total assets. The remaining six specific scope components contributed <1% (2023: <1%) of the Group’s Profit before tax, 0%
(2023: 0%) of the Group’s Revenue and <1% (2023: 1%) of the Group’s Total assets. To respond to any potential risks of material
misstatement to the Group financial statements, we performed other procedures on these components, including analytical
review, confirmation of bank balances, and verification that intercompany and intra-Group investment balances were eliminated
aspart of the consolidation.
Changes from the prior year
Our full scope locations and other procedures components are consistent with the prior year. We believe our overall coverage
iscomparable and appropriate for the risk of the business.
Involvement with component teams
In establishing our overall approach to the Group audit, the Senior Statutory Auditor, James Harris, determined the type of work
that needed to be undertaken at each of the components.
As Bytes Group management and trading components (Bytes Software Services and Phoenix Software) operate primarily in the
UK,we have performed the audit using a single integrated Group team. Therefore, of the three full scope components, audit
procedures were performed directly by the primary audit team. Overseen by the Senior Statutory Auditor, the Group audit
teamdesigns, executes, reviews and concludes on all work performed, operating as a single audit team across both locations.
This integrated team performed all audit procedures at all three full scope components as well as procedures at other scope
components. Procedures over all components were overseen by the Senior Statutory Auditor including the design, execution
andconclusion on all work performed.
Climate change
Stakeholders are increasingly interested in how climate change will impact Bytes Technology Group plc. The Group has
determined that the most significant future impacts from climate change on their operations will be regulatory changes. These are
explained on pages 44 to 52 in the Task Force on Climate-related Financial Disclosures and on page 62 in the principal risks and
uncertainties. They have also explained their climate commitments on page 52. All of these disclosures form part of the ‘Other
information’, rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, their climate commitments, the effects of material climate risks
disclosed on pages 44 to 52; and the adequacy of the Group’s disclosures in the financial statements and the conclusion that no
issues were identified that would impact on the accounting judgements and estimates in the current year and no material impact
onassets and liabilities as at 29 February 2024. We also challenged the directors’ considerations of climate change risks in their
assessment of going concern and viability and associated disclosures.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to
impact a key audit matter.
Independent auditor’s report to the members ofBytesTechnology Group plc continued
138 Bytes Technology Group plc
FINANCIAL STATEMENTS
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk
Key observations communicated
totheAudit Committee
Misstatement of revenue recognised
at or near period end
Refer to the Audit Committee report
(page85); accounting policies (page 157);
and note 3 of the consolidated financial
statements (page 164).
The Group has reported revenue of
£207.0 million (2023: £184.4 million).
Revenue reported in accordance with IFRS
15 Revenue from Contracts with Customers
is a key financial metric for the business.
Compensation incentives are also
basedon gross profit or adjusted
operating profit targets, creating a
riskofrevenue misstatement through
management override.
Management’s process for accounting for
certain revenue transactions, particularly
the review process at or near the year end
is mostly manual and therefore susceptible
to error (either deliberate or without intent).
There is therefore a risk that revenue is
recognised prematurely or fictitiously
around period end or revenue is held back
to distort earnings between periods.
The overall risk of revenue recognition
hasremained consistent compared to
theprior year.
We have performed the following key audit procedures on
revenue transactions (included in gross invoiced income):
Re-confirmed our understanding of management’s
process in determining the revenue recognition point
and understood the process of entering into a
contract and agreeing terms with customers, and
howcontracts are then assessed to ensure correct
revenue recognition terms are applied through
discussions held.
Assessed revenue cut-off by testing transactions
recorded before and after the year end on a sample
basis by vouching to proof of satisfaction of the
related evidence of whether or not performance
obligations had been satisfied.
Addressed the risk of management override by testing
a sample of manual journal entries recorded at or near
year end by verifying these to supporting documentation.
Tested a sample of credit notes issued subsequent to
the year end.
Tested a sample of sales transactions related to the
rendering of services which were deferred at the
year end and recalculated the deferred elements
toobtain assurance over the calculation of
deferredrevenue.
Utilised data analytics to analyse the full population of
sales-related journal entry data to track sales from
revenue though to accounts receivable through to
cash collection. We used this analysis to validate the
appropriateness of transaction flow and test a sample
of transactions to determine if the journals accurately
reflected the substance of the transaction recorded.
We performed full scope audit procedures over this
riskarea in two locations, which covered 100% of
therisk amount.
Through our procedures
performed we have not identified
any unsupported manual
adjustments to revenue.
We conclude that the revenue
recognised at or near year end
was properly accounted for
andthat revenue has been
appropriately recognised in
accordance with IFRS 15.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
139
Risk Our response to the risk
Key observations communicated
totheAudit Committee
IFRS 15 presentation and disclosure in
respect of principal versus agent
Refer to the Audit Committee report
(page89); accounting policies
(page s157 to 158); and note 3 of the
consolidatedfinancial statements
(page164).
The Group has recognised an
agencyadjustment of £1,616.0 million
(2023: £1,254.9 million) in respect of
income to be recognised net as agent
under IFRS 15.
The Group makes a judgement as to
whether the Group is a principal or agent
against each specified good or service.
There is a risk that the reported revenue
may be incorrectly presented as a result of
incorrectly assessing whether the Group
has control over the products or services
sold and consequently if the Group is
principal or agent in its arrangements
withcustomers. The overall process
tocategorise the population between
principal or agent is manual in nature
andthus susceptible to error.
We performed the following key audit procedures:
Re-confirmed our understanding of management’s
processes, methodologies and judgements in identifying
and categorising revenue transactions as principal (gross)
or agent (net) based on the new accounting policy.
Tested a sample of transactions across the year to
determine the Group’s key control over the product or
service including:
– Verifying the product type by obtaining evidence for
each transaction and agreeing back to underlying
data, such as customer purchase order, to determine
the Group’s categorisation of the product or service.
– Tested the related cost for the sample selected by
tracing through to supporting purchase invoices.
– Assessed whether principal (gross) or agent (net)
treatment should be applied and compared to
management’s conclusion.
Reperformed management’s agency adjustment
calculation to ensure this has been performed
correctly, i.e., the revenue, cost of sales and margin
agency adjustment is correct.
Tested that the methodology utilised to calculate
theadjusted performance measure (‘APM’) ‘gross
invoiced income’ is consistent with the FY 2023
Annualreport, assessing management’s rationale
forincluding the APM and ensuring that the amount
reported is reconciled to reported revenue.
We performed full scope audit procedures over this risk area
in two locations, which covered 100% of the risk amount.
We concluded that the
presentation of revenue
transactions is appropriate
andhave been prepared in
accordance with IFRS 15.
Misstatement of rebate receivable to
overstate reported results at period end
Refer to the Audit Committee report
(page85); and accounting policies
(page158).
The Group has reported a year-end rebate
receivable of £5.7 million (2023: £5.1 million).
Bytes Technology Group plc has rebate
arrangements with suppliers, which are
based on agreed percentages of sales
made to the customers during the current
rebate period.
While most rebates are agreed with the
supplier and received during the year, there
is a degree of estimation at or around the
year end when the rebate is accrued ahead
of the full information on the rebate being
available. The resulting estimation
uncertainty around the rebate receivable
balance therefore provides scope for the
use of management override to influence
reported amounts through the estimated
rebate adjustments posted to cost of sales.
The overall risk over rebate receivable
hasremained consistent compared to
theprior year.
We have performed the following key audit procedures:
Updated our understanding of the procedures and key
controls in place over the recognition and recording of
rebates including understanding the key assumptions
used within management’s determination of the estimate.
Independently tested a sample of the rebate
receivable balance at year end and vouched back to
third-party source documentation being subsequent
cash or credit notes received.
Analysed the rebate receivable balance by vendor
andcompared the largest vendor balances against
28 February 2023. Performed an analysis to
understand the drivers of increases or decreases
inthe underlying balances to identify higher levels
ofrisk where changes were not anticipated.
Made enquires of management to understand the
movements in rebate trends that are not in line with
our expectations or understanding of the business.
Assessed the accuracy of management’s previous
estimates as tested as at 28 February 2023 and
31 August 2023.
Tested a sample of rebate transactions recorded to
the statement of profit and loss throughout the year
tovendor issued credit notes or bank statements
forcash collections to determine whether the
transactions have been recorded appropriately.
We performed full scope audit procedures over this risk area
in two locations, which covered 100% of the risk amount.
We concluded that the rebate
receivable at the year end and
the corresponding rebates
income is appropriate in
accordance with IFRS.
Independent auditor’s report to the members ofBytesTechnology Group plc continued
140 Bytes Technology Group plc
FINANCIAL STATEMENTS
Risk Our response to the risk
Key observations communicated
totheAudit Committee
Risk arising from the undisclosed
sharetrading by directors
Refer to the Governance Report
(pages69to 70); and the Audit Committee
Report (page 86).
As announced on 21 February 2024, the
Group’s former Chief Executive Officer,
NeilMurphy, resigned with immediate
effect, on account of undisclosed trading
inthe Group’s shares. These trades were
undertaken between January 2021 to
November 2023 and were announced to
the market on 23 February 2024 and then
again on 13 March 2024 when further
undisclosed trades relating to persons
closely associated (PCA) with him were
identified.
In March 2024, the directors appointed a
subcommittee of the Board and engaged
external forensic experts and external legal
advisers to undertake an investigation into
the undisclosed share dealings of the
former CEO.
Previously, in October 2023, the directors
appointed a subcommittee of the Board,
and undertook an externally facilitated
review of circumstances relating to the
share purchase by a PCA of a former
non-executive director which was not
disclosed in the prior period Annual
Reportand Accounts.
These matters have resulted in the
disclosures included in the directors’
remuneration report in the prior year
beingrestated.
Our audit focused on ensuring the
completeness and accuracy of the
shareholding disclosures included in the
directors’ remuneration report, including
the impact of the restatement on the
Annual Report and Accounts.
We have performed the following key audit procedures:
With support from our internal forensic specialists,
weassessed the nature, scope and objectives of
theinternal investigation undertaken by the Board
toensure that this was appropriately designed to
address the potential risks identified.
We assessed the independence, objectivity and
competence of the external forensic investigators.
We reviewed the key documents supporting the
investigation, including share registers, interview
transcripts and document / data captures.
With the assistance of the EY forensics team, we
challenged the external investigators and the directors
regarding the findings of the investigation and
designed additional procedures where required.
In addition, we designed and performed incremental
audit procedures which included:
– Understanding the company’s process and
procedures around directors share dealings and the
process followed to ensure that the share register is
complete and accurate.
– Performing procedures over the completeness of
the share trading transactions undertaken by the
former CEO and his PCA. A completeness check
was also performed for all other directors.
– Ensuring the actions from the recommendations
arising from the investigations have been
implemented or that a timeline for implementation
has been established.
– Reviewing the completeness and accuracy of the
disclosures in the director’s remuneration report,
including the consequential disclosures for the prior
year restatement.
We communicated to
management and the Audit
Committee our findings and
observations following the
completion of the Board
ledinvestigation.
We are satisfied that the
disclosures included in the
shareholding and share interest
table within the directors’
remuneration report reflect the
revised shareholding position
following completion of the
investigation, and a prior year
adjustment is required to adjust
for the previously undisclosed
share trades.
In the current year, we have added a key audit matter relation to the risk arising from the undisclosed share trading by directors
which has been a key focus of the Board this year. There have been no other changes in our assessment of keyaudit matters
compared with prior year.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
141
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements
ontheaudit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined materiality for the Group to be £3 million (2023: £2.5 million), which is 5% (2023: 5%) of profit before tax.
Webelievethat profit before tax provides the most relevant measure of underlying performance to the stakeholders of the Group.
The increase in the current year is in line with the increase in profitability in the year.
We determined materiality for the Parent Company to be £9 million (2023: £6.8 million), which is 1% (2023: 1%) of total equity.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was 50% (2023: 50%) of our planning materiality, namely £1.5 million (2023: £1.2 million). We have set
performance materiality at this percentage due to our overall risk assessment and expectations on misstatements.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based
on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that
component. In the current year, the range of performance materiality allocated to components was £0.5 million to £1.3 million
(2023: £0.2 million to £1.1 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.1 million
(2023:£0.1 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
ofother relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 133, including the Strategic
report set out on pages 1 to 65, and the Governance report set out on pages 66 to 133, other than the financial statements and
ourauditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
inthis report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude
thatthere is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Independent auditor’s report to the members ofBytesTechnology Group plc continued
142 Bytes Technology Group plc
FINANCIAL STATEMENTS
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with
theCompanies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• • the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable
legal requirements;
• • the information about internal control and risk management systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules
sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has
beenprepared in accordance with applicable legal requirements; and
• • information about the company’s corporate governance statement and practices and about its administrative, management
and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in:
• • the strategic report or the directors’ report; or
• • the information about internal control and risk management systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
toyou if, in our opinion:
• • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• • the parent company financial statements and the part of the directors’ remuneration report to be audited are not in
agreementwith the accounting records and returns; or
• • certain disclosures of directors’ remuneration specified by law are not made; or
• • we have not received all the information and explanations we require for our audit; or
• • a Corporate Governance Statement has not been prepared by the company.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 131;
• • Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period
is appropriate set out on pages 64 to 65;
• • Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets
its liabilities set out on page 131;
• • Directors’ statement on fair, balanced and understandable set out on pages 132 to 133;
• • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 53 to 62;
• • The section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on page 88; and
• • The section describing the work of the audit committee set out on pages 83 to 93.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
143
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 132 to 133, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control asthe
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financialstatements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance
ofthecompany and management.
• • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
thatthe most significant are those related to the reporting framework (UK adopted international accounting standards, the
Companies Act 2006, the UK Corporate Governance Code 2018 and in regard to the parent company financial statements,
UK GAAP including FRS 101) and the relevant tax compliance regulations in the UK.
• • We understood how Bytes Technology Group plc is complying with those frameworks by making enquires of management and
those responsible for legal, compliance and governance matters. We corroborated our enquiries through our review of board
minutes, discussions with the Audit Committee, directors (including subcommittees of the investigations), the Company
Secretary, and any correspondence from regulatory bodies and those responsible for legal and compliance procedures.
• • We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur
by meeting with management from various parts of the business to understand where it considered there was susceptibility
tofraud and by assessing key assumptions over significant estimates made by management for evidence of bias. We also
considered the performance targets and their propensity to influence efforts made by management to manage revenue and
earnings. We considered the programmes and controls that the Group has established to address risks identified, or that
otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls.
• • We also considered the risk of management override of controls and any direct impact of the resignation of the former CEO.
The key audit matter section above addresses procedures performed in areas where we have concluded the incremental
riskarising from the undisclosed share trading of directors.
• • Where the risk was considered to be higher, including areas impacting Group key performance indicators or management
remuneration, we performed audit procedures to address each identified fraud risk or other risk of material misstatement.
These procedures included those on revenue recognition detailed above as well as testing manual journals; and were
designed to provide reasonable assurance that the financial statements were free from fraud and error. We performed
journalentry testing, focusing on the key audit matters, as described in the section above, the testing of manual consolidation
journals and journals that indicated large or unusual transactions based on our understanding of the business.
• • Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
We reviewed Board minutes, external legal advice and reports to the Board on the conclusion of the investigations and
inquiries with management and directors. Our procedures included a focus on compliance with the accounting, governance
and regulatory frameworks and other relevant legislations through obtaining sufficient audit evidence in line with the level of
risk identified, in conjunction with compliance with relevant legislation, including tax computations and returns and
corroborated that dividend payments complied with the relevant legal requirements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Independent auditor’s report to the members ofBytesTechnology Group plc continued
144 Bytes Technology Group plc
FINANCIAL STATEMENTS
Other matters we are required to address
• • Following the recommendation from the Audit Committee we were appointed by the company on 25 February 2021
toauditthefinancial statements for the year ending 28 February 2021 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is four years,
coveringtheyears ending 28 February 2021 to 29 February 2024.
• • The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
James Harris (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Southampton
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
145
Consolidated statement of profit or loss
For the year ended 29 February 2024
Note
Year ended Year ended
29 February28 February
20242023
£’000£’000
Revenue
3
2 0 7, 0 2 1
18 4 , 4 2 1
Cost of sales
(61 ,243)
(54,848)
Gross profit
14 5 ,7 7 8
12 9 , 5 7 3
Administrative expenses
4
(8 7, 8 3 9)
(77,753)
Impairment on trade receivables
17
(1 ,227)
(9 37)
Operating profit
5 6 ,7 12
5 0, 88 3
Finance income
7
5 ,111
–
Finance costs
7
(39 3)
(4 91)
Share of profit of associate
12
16 6
–
Profit before taxation
6 1, 5 9 6
50,3 9 2
Income tax expense
8
(14 , 74 5)
(9 , 9 7 1)
Profit after taxation
4 6 , 8 51
4 0 ,4 21
Profit for the period attributable to owners of the parent company
4 6 , 8 51
4 0, 4 21
Pence
Pence
Basic earnings per ordinary share
28
19. 5 5
16.88
Diluted earnings per ordinary share
28
18 . 8 5
16 . 2 8
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.
146 Bytes Technology Group plc
FINANCIAL STATEMENTS
Consolidated statement of financial position
As at 29 February 2024
Note
As at As at
29 February28 February
20242023
£’000£’000
Assets
Non-current assets
Property, plant and equipment
9
8,47 8
8,38 0
Right-of-use assets
10
1 , 4 11
783
Intangible assets
11
4 0,6 4 6
41, 52 6
Investment in associate
12
3,193
–
Contract assets
13
2 ,6 8 9
397
Deferred tax asset
8
834
–
Total non-current assets
5 7, 2 51
51, 0 8 6
Current assets
Inventories
15
60
58
Contract assets
13
11,7 5 6
10 ,6 8 4
Trade and other receivables
17
2 2 1, 8 1 5
185 ,920
Cash and cash equivalents
18
88,8 36
7 3 ,019
Total current assets
322,467
269,68 1
Total assets
3 7 9 ,7 1 8
3 2 0 ,7 6 7
Liabilities
Non-current liabilities
Lease liabilities
10
(1, 3 14)
(9 17)
Contract liabilities
14
(2 ,13 7)
(1, 9 7 6)
Deferred tax liabilities
8
–
(6 3 5)
Total non-current liabilities
(3 , 4 5 1)
(3,528)
Current liabilities
Trade and other payables
19
(277,917)
(2 3 1,71 7)
Contract liabilities
14
(19, 3 4 8)
(2 3 , 914)
Current tax liabilities
(24 3)
(3 6)
Lease liabilities
10
(4 2 3)
(75)
Total current liabilities
(29 7 ,93 1)
(2 5 5 ,74 2)
Total liabilities
(3 0 1, 3 8 2)
(2 5 9, 2 7 0)
Net assets
78,3 36
6 1, 4 9 7
Equity
Share capital
20
2 ,40 4
2, 39 5
Share premium
20
633,650
633, 636
Share-based payment reserve
11, 0 5 0
7, 2 3 5
Merger reserve
21
(644,3 75)
(6 4 4 , 37 5)
Retained earnings
75,6 0 7
6 2,6 0 6
Total equity
78,3 36
6 1, 4 9 7
The consolidated financial statements on pages 146 to 181 were authorised for issue by the Board on 22 May 2024 and were
signed on its behalf by:
Sam Mudd Andrew Holden
Chief Executive Officer Chief Financial Officer
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
147
Consolidated statement of changes in equity
For the year ended 29 February 2024
Note
Attributable to owners of the company
Share-based
Share Share paymentMerger RetainedTotal
capitalpremium reservereserveearningsequity
£’000£’000£’000£’000£’000£’000
Balance at 1 March 2022
2,39 5
633,636
3 ,07 2
(6 4 4, 3 7 5)
52,8 39
4 7, 5 6 7
Total comprehensive income for the year
–
–
–
–
4 0,4 21
4 0 ,4 21
Dividends paid
24(b)
–
–
–
–
(3 0 , 6 5 4)
(3 0, 6 5 4)
Share-based payment transactions
27
–
–
4 ,1 8 8
–
–
4,188
Tax adjustments
8
–
–
(2 5)
–
–
(25)
Balance at 28 February 2023
2,395
633,636
7, 2 3 5
(6 4 4 , 37 5)
62,6 0 6
61, 4 9 7
Total comprehensive income for the year
–
–
–
–
4 6 , 8 51
4 6, 8 51
Dividends paid
24(b)
–
–
–
–
(3 6 , 6 41)
(3 6 ,6 41)
Shares issued during the year
20
9
14
–
–
–
23
Transfer to retained earnings
27
–
–
(2 , 7 9 1)
–
2 ,7 9 1
–
Share-based payment transactions
27
–
–
5 ,7 0 8
–
–
5 ,7 0 8
Tax adjustments
8
–
–
898
–
–
898
Balance at 29 February 2024
2,4 04
633, 650
11, 0 5 0
(6 44 ,375)
75,6 0 7
78 ,33 6
148
Bytes Technology Group plc
FINANCIAL STATEMENTS
Consolidated statement of cash flows
For the year ended 29 February 2024
Note
Year ended Year ended
29 February28 February
20242023
£’000£’000
Cash flows from operating activities
Cash generated from operations
22
67,333
4 8,88 9
Interest received
7
5,111
–
Interest paid
7
(330)
(4 4 3)
Income taxes paid
(15,109)
(1 0,295)
Net cash inflow from operating activities
57,005
3 8 ,1 51
Cash flows from investing activities
Payments for property, plant and equipment
9
(1,334)
(1, 3 6 3)
Investment in associate
(3,027)
–
Net cash outflow from investing activities
(4,361)
(1, 3 6 3)
Cash flows from financing activities
Proceeds from issues of shares
23
–
Principal elements of lease payments
10
(209)
(2 3 3)
Dividends paid to shareholders
24(b)
(36,641)
(3 0 , 6 5 4)
Net cash outflow from financing activities
(36,827)
(3 0, 8 8 7)
Net increase in cash and cash equivalents
15,817
5, 9 01
Cash and cash equivalents at the beginning of the financial year
73,019
6 7,11 8
Cash and cash equivalents at end of year
18
88,836
7 3 ,0 19
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
149
Notes to the consolidated financial statements
1 Accounting policies
1.1 General information
Bytes Technology Group plc, together with its subsidiaries
(‘the Group’ or ‘the Bytes business’) is one of the UK’s
leading providers of IT software offerings and solutions,
with a focus on cloud and security products. The Group
enables effective and cost-efficient technology sourcing,
adoption and management across software services,
including in the areas of security and cloud. The Group
aims to deliver the latest technology to a diverse and
embedded non-consumer customer base and has a long
track record of delivering strong financial performance.
The Group has a primary listing on the Main Market of the
London Stock Exchange (LSE) and a secondary listing on
the Johannesburg Stock Exchange (JSE).
1.2 Basis of preparation
The Group’s consolidated financial statements have been
prepared in accordance with UK-adopted International
Accounting Standards (IAS) in conformity with the
requirements of the Companies Act 2006.
The Group’s material accounting policies and presentation
considerations on both the current and comparative periods
are detailed below.
In adopting the going concern basis for preparing the financial
statements, the directors have considered the business
activities and the Group’s principal risks and uncertainties
in the context of the current operating environment. This
includes the current geopolitical environment, the current
challenging economic conditions, and reviews of future
liquidity headroom against the Group’s revolving credit
facilities, during the period under assessment. The
approach and conclusion are set out fully in note 1.3.
The consolidated financial statements have been
prepared on a historical cost basis, as modified to include
derivative financial assets and liabilities at fair value
through the consolidated statement of profit or loss.
1.3 Going concern
The going concern of the Group is dependent on
maintaining adequate levels of resources to continue to
operate for the foreseeable future. The directors have
considered the principal risks, which are set out in the
Group’s risk report within the strategic report, in addition to
ever-present risks such as the Group’s exposure to credit
risk as described in note 17, and liquidity risk, currency risk
and foreign exchange risk as described in note 23.
When assessing the going concern of the Group, the
directors have reviewed the year-to-date financial actuals,
as well as detailed financial forecasts for the period up to
31 August 2025, 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 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
The Group is now reporting its fourth year of strong growth
since it listed in December 2020. In the current year of
reporting, the Group has achieved double-digit growth in
gross invoiced income (GII), revenue, gross profit (GP) and
operating profit, and finished the year with £88.8 million of
cash compared to the prior year £73.0 million.
During the year, customers have continued to move their
software products and data off-site and into the cloud,
requiring the Group’s advice and ongoing support around this,
as well as needing flexibility and added security, with hybrid
working continuing to be significant for many customers.
On top of these existing opportunities, we are seeing
growing requirements for artificial intelligence (AI)
functionality within IT applications and a demand for
guidance and support from our customers. While we also
recognise this as an emerging risk, due to the potential of
this technology to change the IT and working landscape
and the associated risks from security, moral, legal and
ethical standpoints, we primarily consider AI and machine
learning an opportunity for our business, as we expand
sales into areas such as Microsoft’s Copilot and support
our customers to capitalise on this emerging technology.
Resilience continues to be built into the Group’s operating
model from its wide customer base, high levels of repeat
business, strong vendor relationships, increased demand
driven by heightened IT security risks, and the back-to-back
nature of most of its sales. This is explained further below.
• • Wide ranging customer base – The Group’s income
includes a large volume of non-discretionary spend
from UK corporates because IT is vital to run their
day-to-day operations and to establish competitive
advantage in an increasingly digital age. Public sector
organisations have similarly sought efficiencies,
resilience, and security within their IT infrastructures.
This is evident from the 26.7% increase in GII during the
year, and our mix of private and public customers means
that a downturn in one area can be compensated by
upturns in others. This year, though, both sectors
have performed strongly, with public sector GII
growing by 32.8% and corporate GII by 17.6%.
Sales risk is further mitigated by the fact that none
of the Group’s wide range of customers contributes
more than 1% of GP. Indeed, during the year only two
customers generated GP in excess of £1 million out
of a total Group GP of £145.8 million. While we have
some significant contributions to our GII by individual
customers, most notably the NHS, these are primarily
long-term (three-year) contracts within the public
sector, which makes our income even more secure
and provides the opportunity to develop and monetise
those accounts further. Even then, the largest customer
has provided only 8% of our total GII of £1.8 billion
during the year.
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FINANCIAL STATEMENTS
• • High levels of repeat business – Due to the nature
of licensing schemes and service contracts, a high
proportion of business is repeatable in nature, with
subscriptions needing to be renewed for the customer
to continue to enjoy the benefit of the product or
service. Indeed, excluding sales of hardware and
services, the remaining dominant balance of our GII
– some £1.7 billion (94%) of software – falls into this
bracket. The largest software contracts, Microsoft
enterprise agreements (EAs), run for three years and
it is rare to lose a contract mid-term, which mitigates
the risk of income reducing rapidly. The Group has a
high success rate in securing renewals of existing EA
agreements and winning new ones.
Increasingly, customers transact their cloud software
requirements under usage-based cloud solution
provider (CSP) contracts, which provide flexibility but
also make the running of many of their key business
functions dependent on maintaining these agreements
and reliant on the Group’s support to manage them.
The high level of customer retention and growth is
illustrated by the renewal rate for the year of 109%,
a measure of the rate of growth in GP from existing
customers, who also contributed 97% of total GP in the
year. The Group will continue to focus on increasing its
customer base and spend per customer during the
going concern period.
• • Microsoft relationship strength – With 68% of the
Group’s GII and 50% of GP generated from sales of
Microsoft products and associated service solutions,
this continues to be a very important partnership for
both sides. These contributions from Microsoft remain
closely in line with previous years in percentage terms;
in absolute terms, as our largest vendor, we have
now seen their contribution to GII and GP exceed
£1.2 billion and £70 million respectively.
As with the customer side, the licensing of a large
proportion of EA software over three-year terms
reduces the risk of income falling away quickly.
Also, with the notable move towards more agile
‘pay-as-you-go’ CSP contracts around cloud-based
applications, this makes those agreements even
more ‘sticky’, by increasing the dependency of the
customer on the cloud infrastructure and products
which Microsoft provides.
Further, the Microsoft partnership has created the
opportunity for the Group to develop a host of skill
sets, so it is best placed to advise and support the
customers in whatever direction they choose to fulfil
their licensing requirements from a programmatic,
purchasing and consumption perspective. To this
end, the Group has attained high levels of Microsoft
expert status, specialisations and solution partner
designations in numerous Microsoft technology
areas. In turn, Microsoft rewards partners who have
these awards with additional levels of funding. The
Board is engaged directly with Microsoft executives
in developing the partnership further and Microsoft
business is currently growing at double-digit rates.
Within the Microsoft program offerings, and also
those of other vendors, including dedicated security
software providers, the Group has seen an increased
demand for security products and functionality to
protect customer IT systems. This has arisen from the
increased risk of cyber threats and attacks and has
generated additional requirements for the Group’s
support in this area.
Most recently we have seen Microsoft develop and
launch its AI product, Copilot. The Group enrolled in its
early access programme during the year in preparation
to support customers to improve productivity using
Copilot within their Microsoft 365 applications, and
we have developed associated services to support
customer readiness and adoption. We will continue to
carefully expand our internal skills in preparation for
this to gain increasing momentum in 2024/25 and
beyond and to complement the existing Microsoft
solutions we sell.
While vendor concentration, and over-reliance on any
one supplier, is identified as one of our principal risks,
the very close daily workings between the two sides,
the mutually beneficial growth in business, and the
increase in accreditations and awards, makes the
Group a key partner to Microsoft, as they are to us.
We therefore believe the risk of cessation of the
Microsoft relationship to be remote.
• • Back-to-back sales model – The Group’s business is
substantially derived from the sale of software that it
transacts on a ‘back-to-back’ basis, meaning all orders
placed with vendors follow the receipt of a customer
order, and the intangible nature of software products
means that the Group is not exposed to inventory risk.
Hardware sales are also made on a back-to-back basis,
and delivered direct from suppliers to customers, so
the Group is not required to invest in, or hold, stock.
As a result of these factors described above, the directors
believe that the Group operates in a resilient industry,
which will enable it to continue its profitable growth
trajectory – but it remains very aware of the risks that
exist in the wider economy.
Over the past year we have seen the continued risks
around energy, wage and commodities inflation; supply
problems and product shortages caused by the ongoing
conflicts in Ukraine and the Middle East; and climate
change. These risks align to those identified in our principal
risks statement, notably economic disruption, inflation, and
attraction and retention of staff. The Board monitors these
macroeconomic and geopolitical risks on an ongoing
basis. These risks are considered further below.
Macroeconomic risks
• • Energy cost inflation – Our businesses are not
naturally heavy consumers of energy, and hence this
element of our overall cost base is very small, at less
than 0.5% of the total Group administrative expenses.
Even a substantial percentage rise would not have a
significant impact on our operating profit. Indeed, we
are now starting to see a downward trend following
many months with high prices.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
151
Notes to the consolidated financial statements continued
1.3 Going concern continued
• • Cost of sales inflation and competition leading to
margin pressure – While pricing from our suppliers
may be at risk of increasing, as they too face the same
macroeconomic pressures as ourselves, our
commercial model is based on passing on supplier
price increases to our customers. We also see
pressure from our customers, notably in the public
sector space where new business must often be won
under highly competitive tendering processes. So,
while there has been a reduction in our gross profit/
gross invoiced income (GP/GII%) in the period, this is
almost entirely attributable to two exceptionally large
new public sector contracts which were secured at
reduced margins, for strategic reasons, in order to
monetise those accounts over the longer contract
terms. Excluding those deals, we have seen only a
minimal reduction in our GP/GII% compared to the
prior period and this remains one of the biggest focus
areas in our business.
• • Wage inflation – The business has been facing
pressure from wage inflation over the past two to
three years. Where strategically required, we have
increased salaries to retain key staff in the light of
approaches from competitors, especially where staff
have specialist or technical skills. We monitor our staff
attrition rate and have maintained a level around 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 adjusted operating profit/gross
profit (AOP/GP), we have achieved 43.4%, which is
in line with last year, demonstrating the control over
rising staff costs in response to the growth of the
business. While we have already aligned staff salaries
to market rates, further expected rises have been
factored into the financial forecasts in line with
those awarded in the past year.
• • Interest rates – The substantial rise in UK and
global interest rates since the pandemic has had a
negative financial impact on many organisations and
households. The Group, however, has no debt and so
currently no exposure, nor has it ever needed to call
on its revolving credit facility (RCF). We have taken
advantage of the recent higher interest rates to
generate a significant £5.1 million of interest income
in the reporting period, due to the timing difference
we see in our cash flow model between customer
receipts and supplier payments, and by placing 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.
• • Inflation and rising interest rates 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.
• • Inflation and rising interest rates impacting on
customer payments – Across the year we have seen a
reduction in our average debtor days from 39 to 37
and in our closing debtor days from 37 to 34
compared to prior year, and with minimal evidence
that customers ultimately do not pay. Indeed, we have
suffered only a small level of bad debt during the year:
£0.3 million against GII of £1.8 billion (see note 17).
While we have provided for a higher loss allowance
against trade receivables at the year end, this is due
to the increased volumes of business, and still only
represents 1% of the closing balances due.
As in previous years, the majority of our GII (62%),
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.
• • As noted above, increasing energy prices are not
having a noticeable impact on our profitability.
• • In terms of supply chain, we are not significantly or
materially dependent on the movement of goods,
so physical trade obstacles are not likely to affect us
directly, with hardware only making up 2% of our GII
during the year. Nevertheless, we have ensured that we
have a number of suppliers with substitute, or alternative,
technologies that we can rely on if one supplier cannot
meet our requirements or timescales. This indicates
that we have managed the supply chain well.
• • Software sales, though, continue to be the dominant
element of our overall GII and so are not inherently
affected by cross-border issues.
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FINANCIAL STATEMENTS
Climate change risks
The Group does not believe that the effects of climate
change will have a material impact on its operations and
performance over the going concern assessment period
considering:
• • The small number of UK locations it operates from
• • A customer base substantially located within the UK
• • A supply chain that is not reliant on international trade
and does not source products and services from
parts of the world that may be affected 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 affected 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.
Additional risk considerations in relation to resignation
of Group CEO
The Group’s former CEO, Neil Murphy, resigned on
21 February 2024, when it transpired he had engaged in
unauthorised and undisclosed trading in the company’s
shares between January 2021 to November 2023, which
the company was notified of and also announced to the
market on 23 February 2024 and then again on 13 March
2024 when further undisclosed trades were identified.
In the subsequent investigation conducted by the Group
regarding these breaches of market regulations, we have
considered whether this has, or may in the future, create
reputational damage, which could in turn affect the
Group’s relationships with key stakeholders and ultimately
affect the Group’s future financial performance, including
its profits and cash flows. We have considered potential
adverse impacts in the context of the going concern
assessment, notably whether we believe the maximum
extent of possible risks would be catered for within our
stress tests and downside models. We have taken into
account the effect, if any, on our major stakeholders,
being our customers, suppliers, staff, and other external
parties such as our bank, HSBC.
In summary, our customers and vendors deal with our
two operating companies, because that is where their
contractual arrangements sit, and not at Group level. Their
relationships are with the managing directors, leadership
teams and staff at the two operational entities, many
established over years or decades. In the case of
customers, they deal ostensibly with one operation or the
other and, as noted in the operating model section above,
resilience comes from our wide customer base and from
having no reliance on any one customer. Certain vendors
deal with both operations but not with the Group per se. For
some of the largest customer and vendor accounts there
may also be relationships at Group Board level, as would
be expected, most notably with Microsoft. These are
long-standing, deep and close relationships and, from our
observations and direct dialogue with key parties, we have
seen no impact on our operational performance to date.
For our staff too, its business as usual and we have not
seen any change to staff attrition rates or ability to attract
new staff. Our bank has not raised any concerns or
questions and the availability of our RCF is unaffected.
As time passes, we believe the possibility of impacts
materialising will diminish even further. Therefore, based
on the above considerations, any potential impacts from
this matter have not been specifically factored into the
modelling scenarios described below as we believe the
sensitivities modelled under our most stressed downside
(30% reductions in GII and GP) would be sufficient to cater
for any losses, should they arise.
Liquidity and financing position
At 29 February 2024, the Group held instantly accessible
cash and cash equivalents of £88.8 million.
The balance sheet shows net current assets of
£24.5 million at year end; this amount is after the Group
paid final and special dividends for the prior year totalling
£30.2 million and an interim dividend for the current year
of £6.5 million. Post year end the Group has remained
cash positive and this is expected to remain the case with
continued profitable operations in the future and customer
receipts collected ahead of making the associated
supplier payments.
The Group has access to a committed RCF of £30 million
with HSBC. The facility commenced on 17 May 2023,
replacing the Group’s previous facility for the same
amount, and runs for three years, until 17 May 2026.
The new facility includes an optional one-year extension to
17 May 2027 and a non-committed £20 million accordion
to increase the availability of funding should it be required
for future activity. To date, the Group has not been required
to use either its previous or new facilities, and we do not
forecast use of the new facility over the going concern
assessment period.
Approach to cash flow forecasts and downside testing
The going concern analysis reflects the actual trading
experience through the financial year to date, Board-
approved budgets to 28 February 2025 and detailed
financial forecasts for the period up to 31 August 2025,
being the going concern assessment period. The Group
has taken a measured approach to its forecasting and
has balanced the expected trading conditions with
available opportunities.
In its assessment of going concern, the Board has
considered the potential impact of the current economic
conditions and geopolitical environment as described
above. If any of these factors leads to a reduction in
spending by the Group’s customers, there may be
an adverse effect on the Group’s future GII, GP,
operating profit, and debtor collection periods. Under
such downsides, the Board has factored in the extent to
which they might be offset by reductions in headcount,
recruitment freezes and savings in pay costs (including
commissions and bonuses). As part of the stressed
scenario, where only partial mitigation of downsides is
possible, the Board confirmed that the RCF would not
need to be used during the going concern period up to
31 August 2025.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
153
Notes to the consolidated financial statements continued
1.3 Going concern continued
Details of downside testing
The Group assessed the going concern by comparing
a base case scenario to two downside scenarios and, in
each of the downside cases, taking into consideration two
levels of mitigation: full and partial. These scenarios are
set out below.
• • Base case was forecast using the Board-approved
budget for the year ending 28 February 2025 and
extended across the first six months of the following
year to 31 August 2025.
• • Downside case 1, Severe but plausible, modelled GII
reducing by 10% year on year, GP reducing by 15%
year on year and debtor collection periods extending
by five days, in each case effective from June 2024.
• • Downside case 2, Stressed, modelled both GII
and GP reducing by 30% year on year and debtor
collection periods extending by ten days, again in
each case effective from June 2024.
• • Partial mitigation measures modelled immediate
‘self-mitigating’ reduction of commission in line with
falling GP, freezing recruitment of new heads and not
replacing natural leavers from September 2024,
freezing future pay from March 2025 (as current year
rises are already committed) and freezing rises in
general overheads from March 2025.
• • Full mitigation measures modelled additional headcount
reductions from March 2025, in line with falling GP.
The pay and headcount mitigations applied in the
downside scenarios are within the Group’s control and,
depending on how severe the impacts of the modelled
downside scenarios are, the Group could activate further
levels of mitigation. For example:
• • Those relating to headcount freezes or reductions
could be implemented even more quickly than
indicated above to respond to downward trends as,
considering the sudden and significant falls in
profitability and cash collections modelled under both
downsides, we would not wait for a full three months
before taking any action.
• • We would also be able to take more action to lower
our operating cost base, given the flexibility of our
business model.
• • A natural reduction in the level of shareholder
dividends would follow, in line with the modelled
reductions in profit after tax.
Therefore, the Board believes that all mitigations have
been applied prudently and are within the Group’s control.
Under all scenarios assessed, the Group would remain
cash positive throughout the whole of the going concern
period, have no requirement to call on the RCF and remain
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.
The directors consider that the level of stress-testing is
appropriate to reflect the potential collective impact of all
the macroeconomic and geopolitical matters described
and considered above.
Going concern conclusion
Based on the analysis described above, the Group has
sufficient liquidity headroom through the forecast period.
The directors therefore have reasonable expectation that
the Group has the financial resources to enable it to
continue in operational existence for the period up to
31 August 2025, being the going concern assessment
period. Accordingly, the directors conclude it to be
appropriate that the consolidated financial statements
be prepared on a going concern basis.
1.4 Critical accounting estimates and judgements
The preparation of the consolidated financial statements
requires the use of accounting estimates which,
by definition, will seldom equal the actual results.
Management also needs to exercise judgement
in applying the Group’s accounting policies.
This note provides an overview of the areas that involved
significant judgement or complexity. Estimates and
judgements are continually evaluated and are based
on historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances. Detailed information
about each of these estimates and judgements is included
in other notes, together with information about the basis of
calculation for each affected line item in the consolidated
financial statements.
(i) Key accounting judgements
The areas involving key accounting judgements are:
• • Revenue recognition – Principal versus agent,
see note 1.10.
Under IFRS 15, Revenue from Contracts with
Customers, when recognising revenue, the Group
is required to assess whether its role in satisfying
its various performance obligations is to provide the
goods or services itself (in which case it is considered
to be acting as principal) or arrange for a third party
to provide the goods or services (in which case it is
considered to be acting as agent). Where it is
considered to be acting as principal, the Group
recognises revenue at the gross amount of
consideration to which it expects to be entitled.
Where it is considered to be acting as agent, the
Group recognises revenue at the amount of any fee or
commission to which it expects to be entitled or the
net amount of consideration that it retains after paying
the other party.
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FINANCIAL STATEMENTS
To determine the nature of its obligation, the standard
primarily requires that an entity shall:
(a) Identify the specified goods or services to be
provided to the customer
(b) Assess whether it controls each specified good
or service before that good or service is transferred
to the customer by considering if it:
a. is primarily responsible for fulfilling the promise
to provide the specified good or service
b. has inventory risk before the specified good
or service has been transferred to a customer
c. has discretion in establishing the price for the
specified good or service.
Judgement is therefore required as to whether the
Group is a principal or agent against each specified
good or service, noting that a balanced weighting of
the above indicators may be required when making
the assessment.
The specific judgements made for each revenue
category are discussed in the accounting policy for
revenue, note 1.10, as disclosed below.
(ii) Significant accounting estimates and uncertainties
There are no major sources of estimation uncertainty at the
end of the reporting period that have a significant risk of
resulting in a material adjustment to the carrying amounts
of assets and liabilities within the next financial year.
(iii) Other accounting estimates and uncertainties
The other areas involving accounting estimates are
included below. The effect of climate change has been
considered in determining any critical judgements or
adjustments required in the preparation of the Group’s
financial statements. During the current year, and within
the next financial year, the impact, if any, is not expected
to create any significant risks which result in a material
misstatement to the financial statements occurring.
However, the effects of climate change over the longer
term are more uncertain and may be more significant.
• • Property, plant and equipment (see notes 1.20 and 9)
and leases (see notes 1.14 and 10).
The Group’s assets under these categories primarily
comprise freehold land and buildings and leasehold
buildings with much smaller net book values reported
for computer equipment, furniture and fittings. IAS 16
Property, Plant and Equipment requires an item of
property, plant and equipment (PPE) to be recognised
if it is probable that future economic benefits
associated with the item will flow to the entity
and its cost can be measured reliably.
Consideration has been made as to whether climate-
related matters may affect the value of any items of
PPE, their economic life or residual value. As noted
in the Task Force on Climate-related Financial
Disclosures (TCFD) statement with the strategic report,
none of the Group’s items of PPE, the properties and
the assets included within them, are deemed to be at
risk or prone to damage from acute or chronic weather
events which could arise as part of climate change.
Also, none of the items of PPE is deemed susceptible to
being phased out, replaced or made redundant under
any climate-related legislative changes.
Hence it is judged that there is no material risk from
climate change to the carrying values of any items of
PPE on the balance sheet at 29 February 2024.
• • Estimation of recoverable amount of goodwill
(see notes 1.15 and 11).
The Group tests annually whether goodwill has
suffered any impairment, in accordance with the
accounting policy stated in note 1.15. The recoverable
amounts of cash generating units (CGUs) have been
determined based on value-in-use calculations which
require the use of assumptions. The calculations use
cash flow projections based on forecasts approved by
management covering a five-year period. The growth
rates used in the forecasts are based on historical
growth rates achieved by the Group. Cash flows
beyond the five-year period are extrapolated using the
estimated growth rates disclosed in note 11. The
forecast cash flows are discounted, at the rates
disclosed in note 11, to determine the CGUs value-in-
use. The sensitivity of changes in the estimated growth
rates and the discount rate are disclosed in note 11.
• • Impairment of intangible assets (see notes 1.15,
1.21 and 11).
The Group’s assets under this category comprise
goodwill, customer relationships and brands, arising
on acquisition of subsidiaries. Customer relationships
and brands are recognised at fair value after deduction
of accumulated amortisation over their useful lives.
IAS 36 Impairment of Assets requires an entity to
assess, at the end of each reporting period, whether
there are any impairment indicators for an entity’s
assets. Impairment indicators include significant
changes in the technological, market, economic
or legal environment in which the entity operates.
Consideration has been made as to whether climate-
related matters may affect any of these conditions
which in turn may affect the economic performance
of an asset or CGU, or its long-term growth rates. For
example, customer buying behaviours, requirement to
make significant investments in new technologies, or
an increase in costs generally charged by suppliers.
Further, climate change indirectly resulting in an
increase in market interest rates is likely to affect the
discount rate used in calculating an asset’s or CGU’s
value in use. This, in turn, could decrease the asset’s
or CGU’s recoverable amount by reducing the present
value of the future cash flows and result in a lower
value in use.
However, as noted in the TCFD statement with the
strategic report, the Group continually monitors the
regulatory and legal environment and takes external
advice as required. It expects the impact from changing
customer behaviours to be small given the Group’s
primary business is the supply of critical cloud, security
and software products and IT services. Further, the
Group does not rely on overseas operations, or
require colleagues to work on-site at all times. Nor
does it need to have physical products transported
to maintain the economic performance of its CGUs.
Hence it is judged that there is no material risk from
climate change to the carrying values of any intangible
assets on the balance sheet at 29 February 2024.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
155
Notes to the consolidated financial statements continued
1.4 Critical accounting estimates and judgements continued
• • Provisions (see note 1.24)
IAS 37 Provisions, Contingent Liabilities and Contingent
Assets requires a provision to be recognised when an
entity has a present obligation (legal or constructive)
because of a past event, it is probable that an outflow
of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate
can be made of the obligation. If any of the conditions
for recognition are not met, no provision is recognised,
and an entity may instead have a contingent liability.
Contingent liabilities are not recognised, but
explanatory disclosures are required, unless the
possibility of an outflow in settlement is remote. In the
case of an onerous contract, the provision reflects the
lower of the costs of fulfilling the contract and any
compensation or penalties from a failure to fulfil it.
Consideration has been made as to whether climate-
related matters may result in the recognition of new
liabilities or, where the criteria for recognition are not
met, new contingent liabilities may have to be disclosed.
Further consideration has been made as to whether
climate change, and any resulting associated legislation,
may require past judgements to be reconsidered.
The Group has judged that there is no material risk
from climate change which requires new provisions to
be made or existing provisions to be reconsidered at
29 February 2024.
The Group will continue to review and assess potential
climate change impacts when making judgements in
relation to its accounting for assets and liabilities or
for its future earnings and cash flows. However, for the
financial statements for the year ended 29 February
2024, the Group believes there is no material impact
or risk of misstatement.
1.5 New standards, interpretations and amendments
adopted by the Group
(a) New and amended standards adopted by the Group
The Group has applied the following standard or
amendments for the first time in the annual reporting
period commencing 1 March 2023:
• • Definition of Accounting Estimates – Amendments
to IAS 8
• • Disclosure of Accounting Policies – Amendments
to IAS 1 and IFRS Practice Statement 2
• • Deferred Tax related to Assets and Liabilities arising
from a Single Transaction – Amendments to IAS 12
• • International Tax Reform – Pillar Two Model Rules –
Amendments to IAS 12
The amendments listed above did not have any impact on
the amounts recognised in current or prior periods and
are not expected to affect future periods.
(b) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations
have been published that are not mandatory for
29 February 2024 reporting periods and have not been
adopted early by the Group. These standards are not
expected to have a material impact on the Group in the
current or future reporting periods and on foreseeable
future transactions.
1.6 Principles of consolidation
1.6.1 Subsidiaries
Subsidiaries are all entities over which the Group has
control. The Group controls an entity where the Group is
exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealised
gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the Group.
1.6.2 Associate
An associate is an entity over which the Group has
significant influence. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee but is not control or joint control over those
policies. The Group’s investment in its associate is
accounted for using the equity method.
Under the equity method, the investment in an associate is
initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s
share of net assets of the associate since the acquisition
date. The statement of profit or loss reflects the Group’s
share of profit of the associate. Where there is objective
evidence that the investment in associate is impaired, the
amount of the impairment is recognised within ‘Share of
profit of associate’ in the statement of profit or loss.
1.7 Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker who views the Group’s operations on
a combined level, given they sell similar products and
services, and substantially purchase from the same
suppliers and under common customer frameworks.
The Group has therefore determined that it has only
one reportable segment under IFRS 8, which is that of
‘IT solutions provider’.
1.8 Finance income and costs
Finance income comprises interest income on funds
invested. Interest income is recognised as it accrues in
profit or loss, using the effective interest method.
Finance costs comprises interest expense on borrowings
and the unwinding of the discount on lease liabilities, that
are recognised in profit or loss as it accrues using the
effective interest method.
1.9 Foreign currency translation
(i) Functional and presentation currency
Items included in the consolidated financial statements
of each of the Group’s entities are measured using the
currency of the primary economic environment in which
the entity operates (‘the functional currency’).
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FINANCIAL STATEMENTS
(ii) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions, and
from the translation of monetary assets and liabilities
denominated in foreign currencies at year-end exchange
rates, are generally recognised in profit or loss. They are
deferred in equity if they relate to qualifying cash flow
hedges and qualifying net investment hedges or are
attributable to part of the net investment in a
foreign operation.
All foreign exchange gains and losses are presented
in the statement of profit or loss on a net basis,
within ‘other gains/(losses)’.
1.10 Revenue recognition
Revenue recognition principles across all
revenue streams
The Group recognises revenue on completion of its
performance obligations at the fixed transaction prices
specified in the underlying contracts or orders. There are
no variable price elements arising from discounts, targets,
loyalty points or returns. Where the contract or order
includes more than one performance obligation, the
transaction price is allocated to each obligation based
on their stand-alone selling prices. These are separately
listed as individual items within the contract or order.
In the case of sales of third-party products and services,
the Group’s performance obligations are satisfied by
fulfilling its contractual requirements with both the
customer and the supplier (which may be direct with the
product vendor), ensuring that orders are processed
within any contractual timescales stipulated. In the case of
sales of the Group’s own in-house products and internal
services, this includes the Group fulfilling its contractual
responsibilities with the customer.
That primary areas of judgement for revenue recognition
as principal versus agent are set out above under our key
accounting judgements policy and described further
below for each revenue category.
Software
The Group acts as an advisor, analysing customer
requirements and designing an appropriate mix of
software products under different licensing programs.
This may include a combination of cloud and on-premise
products, typically used to enhance users’ productivity,
strengthen IT security or assist in collaboration. The way in
which the Group satisfies its performance obligations
depends on the licensing programs selected.
Direct software sales – the Group’s performance
obligation is to facilitate software sales between vendors and
customers, but the Group is not party to those sales contracts.
Supply and activation of the software licences, invoicing
and payment all take place directly between the vendor
and the customer. The transaction price for the customer
is set by the vendor with no involvement from the Group.
Therefore, the Group does not control the licences prior
to their delivery to the customer and hence acts as agent.
The Group is compensated by the vendor with a fee based
on fixed rates set by the vendor applied to the customer
transaction price and determined according to the
quantity and type of products sold. Revenue is recognised
as the fee received from the vendor on a point in time basis
when the vendor’s invoicing to the customer takes place.
Indirect software sales – the Group’s performance
obligation is to fulfil customers’ requirements through
the procurement of appropriate on-premise software
products, or cloud-based software, from relevant
vendors. Operating as a reseller, the Group invoices,
and receives payment from, the customer itself. Whilst
the transaction price is set by the Group at the amount
specified in its contract with the customer, the software
licensing agreement is between the vendor and the
customer. The vendor is responsible for issuing the
licences and activation keys, for the software’s
functionality, and for fulfilling the promise to provide the
licences to the customer. Therefore, the Group acts as
agent and revenue is recognised as the amount retained
after paying the software vendor. As a reseller, the Group
recognises indirect software sales revenue on a point-in-
time basis once it has satisfied its performance
obligations. This takes two main forms as follows:
In the case of cloud-based software sales, the Group
arranges for third-party vendors to provide customers
with access to software in the cloud. As the sales
value varies according to monthly usage, revenue is
recognised once the amount is confirmed by the
vendor and the Group has analysed the data and
advised the customer. This is because the
responsibilities of the Group to undertake such
activities mean that these performance obligations
are satisfied at each point usage occurs and the
Group has a right to receive payment.
In the case of licence sales (non cloud-based
software) arising from fixed-price subscriptions where
the customer makes an up-front payment, the Group
recognises revenue when the contract execution or
order is fulfilled by the Group because its
performance obligation is fully satisfied at that point.
Typically, these take the form of annual instalments
where the Group is required to undertake various
contract review activities at each anniversary date.
Hardware – resale of hardware products
The Group’s activities under this revenue stream comprise
the sale of hardware items such as servers, laptops and
devices. For hardware sales, the Group acts as principal,
as it assumes primary responsibility for fulfilling the
promise to provide the goods and for their acceptability,
is exposed to inventory risk during the delivery period
and has discretion in establishing the selling price.
Revenue is recognised at the gross amount receivable
from the customer for the hardware provided and on a
point-in-time basis when delivered to the customer.
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157
Notes to the consolidated financial statements continued
1.10 Revenue recognition continued
Services internal – provision of services to customers
using the Group’s own internal resources
The Group’s activities under this revenue stream comprise
the provision of consulting services using its own internal
resources. The services provided include, but are not
limited to, helpdesk support, cloud migration,
implementation of security solutions, infrastructure, and
software asset management services. The services may
be one-off projects where completion is determined on
delivery of contractually agreed tasks, or they may
constitute an ongoing set of deliverables over a contract
term which may be multi-year.
When selling internally provided services, the Group acts
as principal as there are no other parties involved in the
process. Revenue is recognised at the gross amount
receivable from the customer for the services provided.
The Group recognises revenue from internally provided
consulting services on an over-time basis. This is because
the customer benefits from the Group’s activities as the
Group performs them. For service projects extending over
more than one month the Group applies an inputs basis by
reference to the hours expended to the measurement
date, and the day rates specified in the contract. For
managed services and support contracts the revenue is
recognised evenly over the contract term.
Services external – provision of services to customers
using third-party contractors
The Group’s activities under this revenue stream comprise
the sale of a variety of IT services which are provided by
third-party contractors. These may be similar to the
internally provided consulting services, where the Group
does not have the internal capacity at the time required by
the customer or may be services around different IT
technologies and solutions where the Group does not
have the relevant skills in-house.
Whilst the transaction price is set by the Group at the
amount specified in its contract with the customer, when
selling externally provided services, the Group acts as
agent because responsibility for delivering the service
relies on the performance of the third-party contractor. If
the customer is not satisfied with their performance, the
third party will assume responsibility for making good the
service and obtaining customer sign-off. The Group will
not pay the third party until customer sign-off has been
received. Revenue is recognised at the amount retained
after paying the service provider for the services delivered
to the customer on a point-in-time basis. The Group does
not control the services prior to their delivery and its
performance obligations are satisfied at the point the
service has been delivered by the third party and
confirmed with the customer.
1.11 Contract costs, assets and liabilities
Contract costs
Incremental costs of obtaining a contract
The Group recognises the incremental costs of obtaining
a contract when those costs are incurred. For revenue
recognised on a point-in-time basis, this is consistent with the
transfer of the goods or services to which those costs relate.
For revenue recognised on an over-time basis, the Group
applies the practical expedient available in IFRS 15 and
recognises the costs as an expense when incurred
because the amortisation period of the asset that would
otherwise be recognised is less than one year.
Costs to fulfil a contract
The Group recognises the costs of fulfilling a contract
when those costs are incurred. This is because the
nature of those costs does not generate or enhance the
Group’s resources in a way that enables it to satisfy its
performance obligations in the future and those costs
do not otherwise qualify for recognition as an asset.
Contract assets
The Group recognises a contract asset for accrued
revenue. Accrued revenue is revenue recognised from
performance obligations satisfied in the period that has
not yet been invoiced to the customer.
Contract assets also include costs to fulfil services
contracts (deferred costs) when the Group is invoiced by
suppliers before the related performance obligations of
the contract are satisfied by the third party. Deferred costs
are measured at the purchase price of the associated
services received. Deferred costs are released from the
consolidated statement of financial position in line with
the recognition of revenue on the specific transaction.
Contract liabilities
The Group recognises a contract liability for deferred
revenue when the customer is invoiced before the related
performance obligations of the contract are satisfied.
A contract liability is also recognised for payments
received in advance from customers. Contract liabilities
are recognised as revenue when the Group performs its
obligations under the contract to which they relate.
1.12 Rebates
Rebates from suppliers are accounted for in the period in
which they are earned and are based on commercial
agreements with suppliers. Rebates earned are mainly
determined by the type and quantity of products within
each sale but may also be volume-purchase related. They
are generally short term in nature, with rebates earned but
not yet received typically relating to the preceding month’s
or quarter’s trading. Rebate income is recognised in cost
of sales in the consolidated statement of profit or loss and
rebates earned but not yet received are included within
trade and other receivables in the consolidated statement
of financial position.
1.13 Income tax
The income tax expense or credit for the period is the tax
payable on the current period’s taxable income, based on
the applicable income tax rate for each jurisdiction, adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated based on the
tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company and
its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax
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FINANCIAL STATEMENTS
regulation is subject to interpretation. It establishes
provisions, where appropriate, based on amounts
expected to be paid to the tax authorities.
Deferred income tax is provided for in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts
in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from
the initial recognition of goodwill. Deferred income tax is
also not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business
combination that, at the time of the transaction, affects
neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the end of
the reporting period and are expected to apply when the
related deferred income tax asset is realised, or the
deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable
that future taxable amounts will be available to utilise
those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and
tax bases of investments in foreign operations where the
Group is able to control the timing of the reversal of the
temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there
is a legally enforceable right to offset current tax assets
and liabilities and where the deferred tax balances relate
to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability
simultaneously .
Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
1.14 L eas es
Lessee
The Group leases a property and various motor vehicles.
Lease agreements are typically made for fixed periods but
may have extension options included. Lease terms are
negotiated on an individual basis and contain different
terms and conditions. The lease agreements do not
impose any covenants, but leased assets may not be
used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease
payment is allocated between the liability and finance
cost. The finance cost is charged to profit or loss over
the lease period to produce a constant periodic rate of
interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a
straight-line basis. The Group is depreciating the right-of-
use assets over the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured at the net present value of the minimum lease
payments. The net present value of the minimum lease
payments is calculated as follows:
• • Fixed payments, less any lease incentives receivable
• • Variable lease payments that are based on an index
or a rate
• • Amounts expected to be payable by the lessee under
residual value guarantees
• • The exercise price of a purchase option if the lessee
is reasonably certain to exercise that option
• • Payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease; where this rate cannot be determined,
the Group’s incremental borrowing rate is used.
Right-of-use assets are measured at cost comprising
the following:
• • The net present value of the minimum lease payments
• • Any lease payments made at, or before, the
commencement date less any lease incentives received
• • Any initial direct costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as
an expense in profit or loss. Short-term leases are leases
with a lease term of 12 months or less. Low-value assets
comprise IT equipment and small items of office furniture.
Depreciation
Depreciation is recognised in profit or loss for each category
of assets on a straight-line basis over the lease term.
The estimated useful lives for the current and comparative
periods are as follows:
• • Buildings, 8 years
• • Motor vehicles, 2 to 3 years.
The depreciation methods, useful lives and residual values
are reassessed annually and adjusted if appropriate.
Gains and losses arising on the disposal of leased assets
are included as capital items in profit or loss.
1.15 Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever
events or changes in circumstances indicate that the
carrying amount might not be recoverable. An impairment
loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash generating
units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal
of the impairment at the end of each reporting period.
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FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
159
Notes to the consolidated financial statements continued
1.16 Cash and cash equivalents
Cash is represented by cash in hand and deposits with
financial institutions repayable without penalty on notice
of not more than 24 hours. Cash equivalents are highly
liquid investments that mature in no more than three
months from the date of acquisition and that are readily
convertible to known amounts of cash with insignificant
risk of change in value.
For purposes of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short-term
deposits as defined above.
1.17 Trade receivables
Trade receivables are amounts due from customers for
merchandise sold or services rendered in the ordinary course
of business. Trade receivables are recognised initially at the
amount of consideration that is unconditional, i.e. fair value
and subsequently measured at amortised cost using the
effective interest method, less loss allowance. Prepayments
and other receivables are stated at their nominal values.
1.18 Inventories
Inventories are measured at the lower of cost and net
realisable value considering market conditions and
technological changes. Cost is determined on the first-in
first-out and weighted average cost methods. Work and
contracts in progress and finished goods include direct
costs and an appropriate portion of attributable overhead
expenditure based on normal production capacity.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs
of completion and selling expenses.
1.19 Financial instruments
Financial instruments comprise investments in equity,
loans receivable, trade and other receivables (excluding
prepayments), investments, cash and cash equivalents,
restricted cash, non-current loans, current loans, bank
overdrafts, derivatives and trade and other payables.
Recognition
Financial assets and liabilities are recognised in the
Group’s statement of financial position when the Group
becomes a party to the contractual provisions of the
instruments. Financial assets are recognised on the date
the Group commits to purchase the instruments (trade
date accounting).
Financial assets are classified as current if expected to
be realised or settled within 12 months from the reporting
date; if not, they are classified as non-current. Financial
liabilities are classified as non-current if the Group has
an unconditional right to defer payment for more than
12 months from the reporting date.
Classification
The Group classifies financial assets on initial recognition
as measured at amortised cost, fair value through other
comprehensive income (FVOCI), or fair value through
profit or loss (FVTPL) based on the Group’s business
model for managing the financial asset and the cash
flow characteristics of the financial asset.
Financial assets are classified as follows:
• • Financial assets to be measured subsequently at fair
value (either through other comprehensive income
(OCI) or through profit or loss)
• • Financial assets to be measured at amortised cost.
Financial assets are not reclassified unless the Group
changes its business model. In rare circumstances
where the Group does change its business model,
reclassifications are done prospectively from the date
that the Group changes its business model.
Financial liabilities are classified and measured at
amortised cost except for those derivative liabilities and
contingent considerations that are measured at FVTPL.
Measurement on initial recognition
All financial assets and financial liabilities are initially
measured at fair value, including transaction costs, except
for those classified as FVTPL which are initially measured
at fair value excluding transaction costs. Transaction costs
directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in
profit or loss.
Subsequent measurement: financial assets
Subsequent to initial recognition, financial assets are
measured as described below:
• • FVTPL – these financial assets are subsequently
measured at fair value and changes therein (including
any interest or dividend income) are recognised in
profit or loss
• • Amortised cost – these financial assets are
subsequently measured at amortised cost using the
effective interest method, less impairment losses.
Interest income, foreign exchange gains and losses and
impairments are recognised in profit or loss. Any gain
or loss on derecognition is recognised in profit or loss
• • Equity instruments at FVOCI – these financial assets
are subsequently measured at fair value. Dividends
are recognised in profit or loss when the right to
receive payment is established. Other net gains and
losses are recognised in OCI. On derecognition,
gains and losses accumulated in OCI are not
reclassified to profit or loss.
Subsequent measurement: financial liabilities
All financial liabilities, excluding derivative liabilities and
contingent consideration, are subsequently measured
at amortised cost using the effective interest method.
Derivative liabilities are subsequently measured at fair
value with changes therein recognised in profit or loss.
Derecognition
Financial assets are derecognised when the rights to
receive cash flows from the assets have expired or have
been transferred and the Group has transferred
substantially all risks and rewards of ownership. Financial
liabilities are derecognised when the obligations specified
in the contracts are discharged, cancelled or expire.
On derecognition of a financial asset or liability, any
difference between the carrying amount extinguished
and the consideration paid is recognised in profit or loss.
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FINANCIAL STATEMENTS
Offsetting financial instruments
Offsetting of financial assets and liabilities is applied when
there is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously.
The net amount is reported in the statement of
financial position.
Impairment
The Group applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables
have been grouped based on credit risk characteristics
and the days past due.
The expected credit loss (ECL) rates are based on the
payment profiles of sales over a 12-month period before
29 February 2024, 28 February 2023 and 1 March 2022
respectively and the corresponding historical credit
losses experienced within this period. The historical loss
rates are reviewed and adjusted to reflect current and
forward-looking information on macroeconomic
factors affecting the ability of the customers to settle
the receivables.
Trade receivables are written off where there is no
reasonable expectation of recovery. Indicators that there
is no reasonable expectation of recovery include, among
others, the failure of a debtor to engage in a repayment
plan with the Group, and a failure to make contractual
payments for a period of greater than 120 days past due.
Impairment losses on trade receivables are presented as
net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited
against the same line item.
Derivatives
Derivatives are initially recognised at fair value on the
date that a derivative contract is entered into as either a
financial asset or financial liability if they are considered
material. Derivatives are subsequently remeasured to
their fair value at the end of each reporting period, with
the change in fair value being recognised in profit or loss.
1.20 Property, plant and equipment
Owned assets
Property, plant and equipment is measured at cost less
accumulated depreciation and impairment losses. When
components of an item of property, plant and equipment
have different useful lives, those components are
accounted for as separate items of property, plant
and equipment.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. Purchased software that is
integral to the functionality of the related equipment is
capitalised as part of that equipment.
Subsequent costs
The Group recognises in the carrying amount of an item of
property, plant and equipment the cost of replacing part of
such an item when the cost is incurred, if it is probable that
future economic benefits embodied within the item will flow
to the Group and the cost of such item can be measured
reliably. The carrying amount of the replaced item of property,
plant and equipment is derecognised. All other costs are
recognised in profit or loss as an expense when incurred.
Depreciation
Depreciation is recognised in profit or loss for each
category of assets on a straight-line basis over their
expected useful lives up to their respective estimated
residual values. Land is not depreciated.
The estimated useful lives for the current and comparative
periods are as follows:
• • Buildings, 20 to 50 years
• • Leasehold improvements (included in land and
buildings), shorter of lease period or useful life
of asset
• • Plant and machinery, 3 to 20 years
• • Motor vehicles, 4 to 8 years
• • Furniture and equipment, 5 to 20 years
• • IT equipment and software, 2 to 8 years.
The depreciation methods, useful lives and residual values
are reassessed annually and adjusted if appropriate. Gains
and losses arising on the disposal of property, plant and
equipment are included as capital items in profit or loss.
1.21 Intangible assets
Goodwill
Goodwill is measured as described in note 1.15. Goodwill
on acquisitions of subsidiaries is included in intangible
assets. Goodwill is not amortised, but it is tested for
impairment annually, or more frequently if events or
changes in circumstances indicate that it might be
impaired and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to
the entity sold.
Goodwill is allocated to cash generating units for the
purpose of impairment testing. The allocation is made to
those cash generating units or groups of cash generating
units that are expected to benefit from the business
combination in which the goodwill arose. The units or
groups of units are identified at the lowest level at which
goodwill is monitored for internal management purposes.
Brands and customer relationships
Brands and customer relationships acquired in a business
combination are recognised at fair value at the acquisition
date. They have a finite useful life and are subsequently
carried at cost less accumulated amortisation and
impairment losses.
The useful lives for the brands and customer
relationships are as follows:
• • Customer relationships, 10 years
• • Brands, 5 years.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
161
Notes to the consolidated financial statements continued
1.21 Intangible assets continued
Software
Costs associated with maintaining software programs
are recognised as an expense as incurred. Development
costs that are directly attributable to the design and
testing of identifiable and unique software products
controlled by the Group are recognised as intangible
assets where the following criteria are met:
• • It is technically feasible to complete the software
so that it will be available for use
• • Management intends to complete the software
and use or sell it
• • There is an ability to use or sell the software
• • It can be demonstrated how the software will
generate probable future economic benefits
• • Adequate technical, financial and other resources
to complete the development and to use or sell
the software are available
• • The expenditure attributable to the software during
its development can be reliably measured.
The useful lives for software is 2 to 8 years.
Research and development
Research expenditure and development expenditure
that do not meet the criteria above are recognised as
an expense as incurred. Development costs previously
recognised as an expense are not recognised as an
asset in a subsequent period.
1.22 Trade and other payables
Trade payables, sundry creditors and accrued expenses
are obligations to pay for goods or services that have
been acquired in the ordinary course of business from
suppliers. They are accounted for in accordance with
the accounting policy for financial liabilities as included
above. Amounts received from customers in advance,
prior to confirming the goods or services required, are
recorded as other payables. Upon delivery of the goods
and services, these amounts are recognised in revenue.
Other payables are stated at their nominal values.
1.23 Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of
the borrowings using the effective-interest method. Fees
paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down.
In this case, the fee is deferred until the drawdown occurs.
To the extent that there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
1.24 Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation because of past events, for
which it is probable that an outflow of economic benefits
will be required to settle the obligation, and where a reliable
estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected
future cash flows at a pre-tax discount rate that reflects
current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
1.25 Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave, that
are expected to be settled wholly within 12 months after
the end of the period in which the employees render the
related service are recognised in respect of employees’
services up to the end of the reporting period and are
measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as
current employee benefit obligations in the balance sheet.
Post-employment obligations
The Group operates various defined contribution plans
for its employees. Once the contributions have been paid,
the Group has no further payment obligations. The
contributions are recognised as employee benefit
expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund
or a reduction in the future payments is available.
Termination benefits
Termination benefits are payable when employment is
terminated by the Group before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange
for these benefits. The Group recognises termination benefits
at the earlier of the following dates: (a) when the Group can no
longer withdraw the offer of those benefits; and (b) when the
Group recognises costs for a restructuring that is within the
scope of IAS 37 and involves the payment of termination
benefits. In the case of an offer made to encourage voluntary
redundancy, the termination benefits are measured based
on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after the end of
the reporting period are discounted to present value.
Share-based payments
Equity settled share-based payment incentive scheme
Share-based compensation benefits are provided to
particular employees of the Group through the Bytes
Technology Group plc share option plans. Information
relating to all schemes is provided in note 27.
162 Bytes Technology Group plc
FINANCIAL STATEMENTS
Employee options
The fair values of options granted under the Bytes Technology Group plc share option plans are recognised as an employee
benefit expense, with a corresponding increase in equity. The total amount to be expensed is determined by reference to the
fair value of the options granted. The share-based payment reserve comprises the fair value of share awards granted which
are not yet exercised. The amount will be reversed to retained earnings as and when the related awards vest and are exercised
by employees.
The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions
are to be satisfied. At the end of each period, the Group revises its estimates of the number of options issued that are
expected to vest based on the service conditions. It recognises the impact of the revision to original estimates, if any,
in profit or loss, with a corresponding adjustment to equity.
1.26 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
1.27 Dividends
Dividends paid on ordinary shares are classified as equity and are recognised as distributions in equity.
1.28 Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• • The profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares
• • By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to consider:
• • The after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares
• • The weighted average number of additional ordinary shares that would have been outstanding, assuming the conversion
of all dilutive potential ordinary shares.
1.29 Rounding of amounts
All amounts disclosed in the consolidated financial statements and notes have been rounded off to the nearest thousand,
unless otherwise stated.
2 Segmental information
2(a) Description of segment
The information reported to the Group’s Chief Executive Officer, who is considered to be the chief operating decision maker
for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the
Group. The Group has therefore determined that it has only one reportable segment under IFRS 8, which is that of ‘IT
solutions provider’. The Group’s revenue, results, assets and liabilities for this one reportable segment can be determined by
reference to the consolidated statement of profit or loss and the consolidated statement of financial position. An analysis of
revenues by product lines and geographical regions, which form one reportable segment, is set out in note 3.
2(b) Adjusted operating profit
Adjusted operating profit is an alternative performance measure which excludes the effects of intangible assets amortisation
and share-based payment charges.
Adjusted operating profit reconciles to operating profit as follows:
Note
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Adjusted operating profit
63,300
56,377
Share-based payment charges
27
(5,708)
(4,18
8)
Amortisation of acquired intangible assets
4
(880)
(1,306)
Operating profit
56,712
50,883
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
163
Notes to the consolidated financial statements continued
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:
Revenue by product
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Software
130,365
114,108
Hardware
41,389
38,355
Services internal
31,517
28,454
Services external
3,750
3,504
Total revenue from contracts with customers
207,0 21
184,421
Software
The Group’s software revenue comprises the sale of various types of software licences (including both cloud-based and
non-cloud-based licences), subscriptions and software assurance products.
Hardware
The Group’s hardware revenue comprises the sale of items such as servers, laptops and other devices.
Services internal
The Group’s internal services revenue comprises internally provided consulting services through its own internal resources.
Services external
The Group’s external services revenue comprises the sale of externally provided training and consulting services through
third-party contractors.
Revenue by geographical regions
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
United Kingdom
199,912
17 7, 8 8 2
Europe
4,326
4,358
Rest of world
2,783
2,181
207,0 21
184,421
3(b) Gross invoiced income by type
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Software
1,721,993
1,3
4 6,110
Hardware
41,389
38,355
Services internal
31,517
28,454
Services external
28,10
3
26,395
1,823,002
1,439,314
Gross invoiced income
1,823,002
1,439,314
Adjustment to gross invoiced income for income recognised as agent
(1,615,981)
(1,254,893)
Revenue
207,0 21
184,421
Gross invoiced income reflects gross income billed to customers adjusted for deferred and accrued revenue items
amounting to £8.5 million (2023: £5.5 million). The Group reports gross invoiced income as an alternative financial KPI
as management believes this measure allows further understanding of business performance and position particularly
in respect of working capital and cash flow.
164 Bytes Technology Group plc
FINANCIAL STATEMENTS
4 Material profit or loss items
The Group has identified several items included within administrative expenses which are material due to the significance of
their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance
of the Group:
Note
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Depreciation of property, plant and equipment
9
1,236
1,029
Depreciation of right-of-use assets
10
263
145
Loss on disposal of property, plant and equipment
–
3
Amortisation of acquired intangible assets
11
880
1,306
System support and maintenance
3,872
2,991
Share-based payment expenses
27
5,708
4,188
Expense relating to short-term leases
10
250
25
Foreign exchange losses/(gains)
137
(32)
5 Employees
Employee benefit expense: Note
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Employee remuneration (including directors’ remuneration
1
)
49,791
40,725
Commissions and bonuses
21,623
22,299
Social security costs
9,479
8 ,158
Pension costs
1,794
1,413
Share-based payments expense
27
5,708
4,18
8
88,395
76,783
Classified as follows:
Cost of sales
17,211
13,527
Administrative expenses
71,184
63,256
88,395
76,783
1 Directors’ remuneration is included in the directors’ remuneration report on pages 102 to 127.
The average monthly number of employees during the year was:
Year ended Year ended
29 February 28 February
2024 2023
Number Number
Sales – account management
335
285
Sales – support and specialists
228
199
Service delivery
263
204
Administration
202
173
1,028
861
The employee benefit expenses in relation to the service delivery employees are included within cost of sales.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
165
Notes to the consolidated financial statements continued
6 Auditors’ remuneration
During the year, the Group obtained the following services from the company’s auditors and its associates:
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Fees payable to the company’s auditors and its associates for the audit of the parent
company and consolidated financial statements
268
281
Fees payable to the company’s auditors and its associates for other services:
Audit of the financial statements of the company’s subsidiaries
398
372
Other fees
420
14
Non-audit services
101
95
1,187
762
1
1 Non-audit services in the current and prior year relate to the auditors’ review of our interim report issued in October 2023 (28 February 2023: October 2022).
7 Finance income and costs
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Finance income
Bank interest received
5,111
–
Finance income
5,111
–
Finance costs
Interest expense on financial liabilities measured at amortised cost
(330)
(443)
Interest expense on lease liability
(63)
(48)
Finance costs
(393)
(491)
1
1 I nterest received on cash deposited on money market .
8 Income tax expense
The major components of the Group’s income tax expense for all periods are:
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Current income tax charge in the year
15,892
10,483
Adjustment in respect of current income tax of previous years
(85)
66
Total current income tax charge
15,807
10,549
Current year
(1,109)
(402)
Adjustments in respect of prior year
70
(75)
Effect of changes in tax rates
(23)
(101)
Deferred tax credit
(1,062)
(578)
Total tax charge
14,745
9,971
166 Bytes Technology Group plc
FINANCIAL STATEMENTS
Reconciliation of total tax charge
The tax assessed for the year differs from the standard rate of corporation tax in the UK applied to profit before tax:
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Profit before income tax
61,596
50,392
Income tax charge at the standard rate of corporation tax in the UK of 24.49% (2023: 19%)
15,085
9,574
Effects of:
Non-deductible expenses
(261)
507
Adjustment to previous periods
(15)
(9)
Effect of changes in tax rate
(23)
(101)
Effect of share of profit of associate
(41)
–
Income tax charge reported in profit or loss
14,745
9,971
1
1 Prorated rate for change in the tax rate from 19% to 25% on 1 April 2023.
Amounts recognised directly in equity
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
credited/(charged) to equity:
Deferred tax: share-based payments
407
(24)
Current tax: share-based payments
491
–
898
(24)
Deferred tax asset/(liabilities)
As at As at
29 February 28 February
2024 2023
£’000 £’000
The balance comprises temporary differences attributable to:
Intangible assets
(788)
(1,008)
Property, plant and equipment
(1,059)
(884)
Employee benefits
1
3
Provisions
73
65
Share-based payments
2,607
1,18
9
834
(635)
Deferred tax asset/(liabilities)
As at As at
29 February 28 February
2024 2023
£’000 £’000
At 1 March
(635)
(1,18
9)
Credited to profit or loss
1,062
578
Credit/(charge) to equity
407
(24)
Carrying amount at end of year
834
(635)
The deferred tax asset and deferred tax liabilities carrying amounts at the end of the year are set off as they arise in the same
jurisdiction and as such there is a legally enforceable right to offset.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
167
Notes to the consolidated financial statements continued
9 Property, plant and equipment
Freehold land Computer Furniture, fittings Computer Motor
and buildings equipment and equipment software vehicles Total
£’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 March 2022
8,921
3,875
1,305
74 6
101
14,948
Additions
484
590
8
271
10
1,363
Disposals
–
(126)
–
–
(7)
(133)
At 28 February 2023
9,405
4,339
1,313
1,017
104
16,178
Additions
373
692
11
249
9
1,334
Disposals
–
(25)
–
–
(27)
(52)
At 29 February 2024
9,778
5,006
1,324
1,266
86
17,460
Depreciation
At 1 March 2022
2 ,14 3
3,083
989
626
58
6,899
On disposals
–
(122)
–
–
(8)
(130)
Charge for the year
373
508
54
72
22
1,029
At 28 February 2023
2,516
3,469
1,043
698
72
7,7
9 8
On disposals
–
(25)
–
–
(27)
(52)
Charge for the year
421
584
51
163
17
1,236
At 29 February 2024
2,937
4,028
1,094
861
62
8,982
Net book value
At 28 February 2023
6,889
870
270
319
32
8,380
At 29 February 2024
6,841
978
230
405
24
8,478
10 Leases
(i) Amounts recognised in the balance sheet
Right-of-use assets
Buildings Motor vehicles Total
£’000 £’000 £’000
Cost
At 1 March 2022 and 28 February 2023
1,377
245
1,622
Additions
–
891
891
Disposals
–
(245)
(245)
At 29 February 2024
1,377
891
2,268
Depreciation
At 1 March 2022
449
245
694
Charge for the year
145
–
145
At 28 February 2023
594
245
839
Disposals
–
(245)
(245)
Charge for the period
144
119
263
At 29 February 2024
738
119
857
Net book value
At 1 March 2022
928
–
928
At 28 February 2023
783
–
783
At 29 February 2024
639
772
1,411
168 Bytes Technology Group plc
FINANCIAL STATEMENTS
Lease liabilities
As at As at As at
29 February 28 February 1 March
2024 2023 2022
£’000 £’000 £’000
Current
423
75
185
Non-current
1,314
917
992
1,737
992
1,17
7
There were additions of £0.9 million to the right-of-use assets in the financial year ended 29 February 2024 (financial
year ended 28 February 2023: £Nil).
(ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to leases:
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Depreciation charge of right-of-use assets
263
145
Interest expense (included in finance cost)
63
48
Expense relating to short-term leases (included in administrative expenses)
250
25
(iii) Changes in liabilities arising from financing activities
As at As at
1 March 29 February
2023 Additions Cash flows Interest 2024
£’000 £’000 £’000 £’000 £’000
Lease liabilities
992
891
(209)
63
1,737
Total liabilities from financing activities
992
891
(209)
63
1,737
As at As at
1 March 28 February
2022 Additions Cash flows Interest 2023
£’000 £’000 £’000 £’000 £’000
Lease liabilities
1,17
7
–
(233)
48
992
Total liabilities from financing activities
1,17
7
–
(233)
48
992
11 Intangible assets
Customer
Goodwill relationships Brand Total
£’000 £’000 £’000 £’000
Cost
At 1 March 2022, 28 February 2023 and
29 February 2024
37,4 93
8,798
3,653
49,944
Amortisation
At 1 March 2022
–
3,887
3,225
7,112
Charge for the year
–
878
428
1,306
At 28 February 2023
–
4,765
3,653
8,418
Charge for the year
–
880
–
880
At 29 February 2024
–
5,645
3,653
9,298
Net book value
At 28 February 2023
37, 4 93
4,033
–
41,526
At 29 February 2024
37,4 93
3,153
–
40,646
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
169
Notes to the consolidated financial statements continued
11 Intangible assets continued
Determination of recoverable amount
The carrying value of indefinite useful life intangible assets and goodwill are tested annually for impairment. For each CGU
and for all periods presented, the Group has assessed that the value in use represents the recoverable amount. The future
expected cash flows used in the value-in-use models are based on management forecasts, over a five-year period, and
thereafter a reasonable rate of growth is applied based on current market conditions. The recoverable amount of Bytes
Software Services and Phoenix Software is £737.3 million and £306.8 million respectively. For the purpose of impairment
assessments of goodwill, the goodwill balance is allocated to the operating units which represent the lowest level within the
Group at which the goodwill is monitored for internal management purposes.
A summary of the goodwill per CGU, as well as assumptions applied for impairment assessment purposes, is presented below:
29 February 2024
Long-term Goodwill
growth rate Discount rate carrying amount
% % £’000
Bytes Software Services
2
9.15
14,775
Phoenix Software
2
9.15
22,718
37,4 93
28 February 2023
Long-term Goodwill
growth rate Discount rate carrying amount
% % £’000
Bytes Software Services
2
9.10
14,775
Phoenix Software
2
9.10
22,718
37,4 9 3
Growth rates
The Group used what it considers to be a conservative growth rate of 2% which was applied beyond the approved budget
periods. The growth rate was consistent with publicly available information relating to long-term average growth rates for the
market in which the respective CGU operated.
Discount rates
Discount rates used reflect both time value of money and other specific risks relating to the relevant CGU. Pre-tax discount
rates have been applied.
Sensitivities
The impacts of variations in the calculation of value-in-use of assumed growth rate and pre-tax discount rates applied to the
estimated future cash flows of the CGUs have been estimated as follows:
29 February 2024
Bytes Software Phoenix
Services Software
£’000 £’000
Headroom
688,344
273,935
1% increase in the pre-tax discount rate applied to the estimated future cash flows
(97,592)
(38,628)
1% decrease in the pre-tax discount rate applied to the estimated future cash flows
129,792
51,351
0.5% increase in the terminal growth rate
46,379
18,323
0.5% decrease in the terminal growth rate
(40,316)
(15,928)
28 February 2023
Bytes Software Phoenix
Services Software
£’000 £’000
Headroom
675,427
229,245
1% increase in the pre-tax discount rate applied to the estimated future cash flows
(94,815)
(32,956)
1% decrease in the pre-tax discount rate applied to the estimated future cash flows
126,339
43,885
0.5% increase in the terminal growth rate
4 5 ,17 9
15,660
0.5% decrease in the terminal growth rate
(39,234)
(13,599)
None of the above sensitivities, taken either in isolation or aggregated, indicates a potential impairment. The directors
consider that there is no reasonable possible change in the assumptions used in the sensitivities that would result in an
impairment of goodwill.
170 Bytes Technology Group plc
FINANCIAL STATEMENTS
12 Investment in an associate
With effect from 18 April 2023 the Group acquired 25.1% interest in Cloud Bridge Technologies Limited for £3.0 million,
settled in cash. The Group’s interest in Cloud Bridge Technologies Limited is accounted for using the equity method.
As at
29 February
2024
£’000
Current assets
8,302
Non-current assets
123
Current liabilities
(6,078)
Non-current liabilities
(11)
Equity
2,336
Group’s share in equity – 25.1%
586
Goodwill
2,607
Group’s carrying amount of the investment
3,193
Acquisition to
29 February
2024
£’000
Revenue
13,857
Cost of sales
(11,789)
Administrative expenses
(1,171)
Finance costs
(6)
Profit before tax
885
Income tax expense
(222)
Profit for the period
663
Group’s share of profit for the period
166
The associate requires the Group’s consent to distribute its profits. The Group does not foresee giving such consent
at the reporting date.
The associate had no contingent liabilities or capital commitments as at 29 February 2024.
13 Contract assets
As at As at
29 February 28 February
2024 2023
£’000 £’000
Contract assets
14,445
11,0 81
Contract assets is further broken down as:
As at As at
29 February 28 February
2024 2023
£’000 £’000
Short-term contract assets
11,756
10,684
Long-term contract assets
2,689
397
14,445
11,0 81
Contract assets include £2.4 million (2023: £3.8 million) of deferred costs relating to internal services contracts, and the
recognition of accrued revenue of £12.0 million (2023: £7.3 million) for certain large software orders where performance
obligations were satisfied in the period but not yet invoiced to the customer at the period end.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
171
Notes to the consolidated financial statements continued
14 Contract liabilities
As at As at
29 February 28 February
2024 2023
£’000 £’000
Contract liabilities
21,485
25,890
Contract liabilities is further broken down as:
As at As at
29 February 28 February
2024 2023
£’000 £’000
Short-term contract liabilities
19,348
23,914
Long-term contract liabilities
2,137
1,976
21,485
25,890
During the year, the Group recognised £23.9 million (2023: £14.5 million) of revenue that was included in the contract liability
balance at the beginning of the period. This liability arises where revenue has been deferred when the customer is invoiced
before the related performance obligations of the contract are satisfied, and the deferral of certain large payments received
in advance from customers.
15 Inventories
As at As at
29 February 28 February
2024 2023
£’000 £’000
Inventories
60
58
60
58
Inventories include asset management subscription licences purchased in advance for a specific customer that as yet
haven’t been consumed.
Inventories recognised as an expense in cost of sales during the year amounted to £nil (28 February 2023: £38,000).
16 Financial assets and financial liabilities
This note provides information about the Group’s financial instruments, including:
• • An overview of all financial instruments held by the Group
• • Specific information about each type of financial instrument
• • Accounting policies
• • Information about determining the fair value of the instruments, including judgements and estimation
uncertainty involved.
The Group holds the following financial instruments:
Financial assets Note
As at As at
29 February 28 February
2024 2023
£’000 £’000
Financial assets at amortised cost:
Trade receivables
17
212,432
178,386
Other receivables
17
7,415
5,896
219,847
184,282
Financial liabilities Note
As at As at
29 February 28 February
2024 2023
£’000 £’000
Financial liabilities at amortised cost:
Trade and other payables – current, excluding payroll tax and
other statutory tax liabilities
19
259,661
217,
25 3
Lease liabilities
10
1,737
992
261,398
218,245
The Group’s exposure to various risks associated with the financial instruments is discussed in note 23. The maximum exposure
to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
172 Bytes Technology Group plc
FINANCIAL STATEMENTS
17 Trade and other receivables
As at As at
29 February 28 February
2024 2023
£’000 £’000
Financial assets
Gross trade receivables
214,922
179,928
Less: impairment allowance
(2,490)
(1,542)
Net trade receivables
212,432
178,386
Other receivables
7,415
5,896
219,847
184,282
Non-financial assets
Prepayments
1,968
1,638
1,968
1,638
Trade and other receivables
221,815
185,920
(i) Classification of trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are
recognised initially at the amount of consideration that is unconditional, unless they contain significant financing
components, in which case they are recognised at fair value. The Group holds the trade receivables with the objective of
collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest
method. Details about the Group’s impairment policies are provided in note 1.19.
(ii) Fair values of trade receivables
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
(iii) Credit risk
Ageing and impairment analysis (excluding finance lease assets)
29 February 2024
Past due Past due Past due Past due
Current 0 to 30 days 31 to 60 days 61 to 120 days 121 to 365 days Total
£’000 £’000 £’000 £’000 £’000 £’000
Expected loss rate
0.07%
0.41%
4.16%
7.62%
80.02%
Gross carrying amount
– trade receivables
180,289
23,688
4,994
3,744
2,207
214,922
Loss allowance
134
97
208
285
1,766
2,490
28 February 2023
Past due Past due Past due Past due
Current 0 to 30 days 31 to 60 days 61 to 120 days 121 to 365 days Tot al
£’000 £’000 £’000 £’000 £’000 £’000
Expected loss rate
0.09%
0.55%
6.39%
16.34%
92.68%
Gross carrying amount
– trade receivables
145,832
25,343
6,760
1,310
683
179,928
Loss allowance
124
139
432
214
633
1,542
The closing loss allowances for trade receivables reconcile to the opening loss allowances as follows:
Trade receivables
As at As at
29 February 28 February
2024 2023
£’000 £’000
Opening loss allowance at 1 March
1,542
750
Increase in loss allowance recognised in profit or loss during the period
1,227
937
Receivables written off during the year as uncollectable
(279)
(145)
Closing loss allowance
2,490
1,542
Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, among others, the failure of a debtor to engage in a repayment plan with the Group, and a
failure to make contractual payments for a period of greater than 120 days past due.
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.
(iv) Other receivables
Other receivables include accrued rebate income.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
173
Notes to the consolidated financial statements continued
18 Cash and cash equivalents
As at As at
29 February 28 February
2024 2023
£’000 £’000
Cash at bank and in hand
88,836
73,019
88,836
73,019
19 Trade and other payables
As at As at
29 February 28 February
2024 2023
£’000 £’000
Trade and other payables
168,777
138,307
Accrued expenses
90,884
78,946
Payroll tax and other statutory liabilities
18,256
14,464
27 7,917
231,717
Trade payables are unsecured and are usually paid within 45 days of recognition. Accrued expenses includes accruals for
purchase invoices not received and other accrued costs such as bonuses and commissions payable at year end, and costs
in relation to the investigation around undisclosed share dealings as set out on pages 69 and 70.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.
20 Share capital and share premium
Allotted, called up and fully paid
Number of Nominal value Share premium Total
shares £’000 £’000 £’000
At 1 March 2022 and 28 February 2023
1
239,482,333
2,395
633,636
636,031
Shares issued during the year
874,565
9
14
23
At 29 February 2024
240,356,898
2,404
633,650
636,054
2, 3
1 Shares issued during the prior year
During the prior year no new ordinary shares were issued by the company.
2 Ordinary shares
Ordinary shares have a nominal value of £0.01. All ordinary shares in issue rank pari passu and carry the same voting rights and entitlement to receive dividends and other
distributions declared or paid by the Group. The company does not have a limited amount of authorised share capital.
3 Share options
Information related to the company’s share option schemes, including options issued during the financial year and options outstanding at the end of the reporting period
is set out in note 27.
21 Merger reserve
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Balance at 1 March 2022, 28 February 2023 and 29 February 2024
(644,375)
(644,375)
(644,375)
(644,375)
The merger reserve of £644.4 million arose in December 2019, on the date that the Group demerged from its previous parent
company. This is an accounting reserve in equity representing the difference between the total nominal value of the issued
share capital acquired in Bytes Technology Limited of £1.10 and the total consideration given of £644.4 million.
174 Bytes Technology Group plc
FINANCIAL STATEMENTS
22 Cash generated from operations
Note
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Profit before taxation
61,596
50,392
Adjustments for:
Depreciation and amortisation
4
2,379
2,480
Loss on disposal of property, plant and equipment
4
–
3
Non-cash employee benefits expense – share-based payments
4
5,708
4 ,188
Share of profit of associate
(166)
–
Finance income
7
(5,111)
–
Finance costs
7
393
491
Increase in contract assets
(3,364)
(4,365)
Increase in trade and other receivables
(35,895)
(28,310)
(Increase)/decrease in inventories
(2)
38
Increase in trade and other payables
46,200
14,105
(Decrease)/increase in contract liabilities
(4,405)
9,867
Cash generated from operations
67,333
48,889
2 3 Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial
performance. Current year consolidated profit or loss and statement of financial position information has been included
where relevant to add further context.
Management monitors the liquidity and cash flow risk of the Group carefully. Cash flow is monitored by management on a
regular basis and any working capital requirement is funded by cash resources or access to the revolving credit facility.
The main financial risks arising from the Group’s activities are credit, liquidity and currency risks. The Group’s policy in
respect of credit risk is to require appropriate credit checks on potential customers before sales are made. The Group’s
approach to credit risk is disclosed in note 17.
The Group’s policy in respect of liquidity risk is to maintain readily accessible bank deposit accounts to ensure that the
company has sufficient funds for its operations. The cash deposits are held in a mixture of short-term deposits and current
accounts which earn interest at a floating rate.
The Group’s policy in respect of currency risk, which primarily exists as a result of foreign currency purchases, is to either sell
in the currency of purchase, maintain sufficient cash reserves in the appropriate foreign currencies which can be used to
meet foreign currency liabilities, or take out forward currency contracts to cover the exposure.
23(a) Derivatives
Derivatives are only used for economic hedging purposes and not speculative investments.
The Group has taken out forward currency contracts during the periods presented but has not recognised either a forward
currency asset or liability at each period end as the fair value of the foreign currency forwards is considered to be immaterial
to the consolidated financial statements due to the low volume and short-term nature of the contracts. Similarly, the amounts
recognised in profit or loss in relation to derivatives were considered immaterial to disclose separately.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
175
Notes to the consolidated financial statements continued
23 Financial risk management continued
23(b) Foreign exchange risk
The Group’s exposure to foreign currency risk at the end of the reporting period, was as follows:
As at 29 February 2024
As at 28 February 2023
USD EUR NOK USD EUR NOK
£’000 £’000 £’000 £’000 £’000 £’000
Trade receivables
10,247
2,661
–
13,529
1,900
–
Cash and cash
equivalents
176
1,647
–
250
214
–
Trade payables
(16,640)
(4,253)
(580)
(15,286)
(1,9 81)
(221)
(6,217)
55
(580)
(1,507)
133
(221)
The following table demonstrates the profit before tax sensitivity to a possible change in the currency exchange rates with
GBP, all other variables held constant.
As at 29 February 2024
As at 28 February 2023
GBP:USD GBP:EUR GBP:NOK GBP:USD GBP:EUR GBP:NOK
£’000 £’000 £’000 £’000 £’000 £’000
5% increase in rate
296
(3)
28
72
(6)
11
5% decrease in rate
(327)
3
(31)
(79)
7
(12)
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Total net foreign exchange losses/(gains) in profit or loss
137
(32)
23(c) Liquidity risk
(1) Cash management
Prudent liquidity risk management implies maintaining sufficient cash to meet obligations when due. The Group generates
positive cash flows from operating activities and these fund short-term working capital requirements. The Group aims to
maintain significant cash reserves and none of its cash reserves is subject to restrictions. Access to cash is not restricted and
all cash balances could be drawn on immediately if required. Management monitors the levels of cash deposits carefully and
is comfortable that for normal operating requirements, no further external borrowings are currently required.
At 29 February 2024, the Group had cash and cash equivalents of £88.8 million, see note 18. Management monitors rolling
forecasts of the Group’s liquidity position (which comprises its cash and cash equivalents) on the basis of expected cash flows
generated from the Group’s operations. These forecasts are generally carried out at a local level in the operating companies
of the Group in accordance with practice and limits set by the Group and take into account certain down-case scenarios.
(2) Revolving Credit Facility
On 17 May 2023 the Group entered into a new three-year committed Revolving Credit Facility (RCF) for £30 million including
an optional one-year extension to 17 May 2027, and a non-committed £20 million accordion to increase the availability of
funding should it be required for future activity. The new facility replaced the previous RCF which was entered into in
December 2020 and was set to expire in December 2023 but was cancelled, without penalty, on 17 May 2023, on
commencement of the new RCF. The new facility has incurred an arrangement fee of £0.1 million, being 0.4% of the new
funds available. The Group has so far not drawn down any amount on either the previous or new facility and to the extent that
there is no evidence that it is probable that some or all of the facility will be drawn down, the fees are capitalised as a
prepayment and amortised over the initial three-year period of the facility. The facility also incurs a commitment fee and
utilisation fee, both of which are payable quarterly in arrears. Under the terms of both the previous and new facilities, the
Group is required to comply with the following financial covenants:
• • Interest cover: EBITDA (earnings before interest, tax, depreciation and amortisation) to net finance charges for the past
12 months shall be greater than 4.0 times
• • Leverage: net debt to EBITDA for the past 12 months must not exceed 2.5 times.
The Group has complied with these covenants throughout the reporting period. As at 29 February 2024, the Group had net
finance income and has therefore complied with the interest cover covenant. The EBITDA to net finance charges in the prior
year was approximately 109 times. The Group has been in a net cash position as at 29 February 2024 and 28 February 2023
and has therefore complied with the Net debt to EBITDA covenant.
176 Bytes Technology Group plc
FINANCIAL STATEMENTS
(3) Contractual maturity of financial liabilities
The following table details the Group’s remaining contractual maturity for its financial liabilities based on undiscounted
contractual payments:
Total
contractual Carrying
Within 1 year 1 to 2 years 2 to 5 years Over 5 years cash flows amount
29 February 2024
Note
£’000 £’000 £’000 £’000 £’000 £’000
Trade and other payables
19
259,660
–
–
–
259,660
259,660
Lease liabilities
10
495
495
869
–
1,859
1,737
260,155
495
869
–
261,519
261,397
Tot al
contractual Carrying
Within 1 year 1 to 2 years 2 to 5 years Over 5 years cash flows amount
28 February 2023
Note
£’000 £’000 £’000 £’000 £’000 £’000
Trade and other payables
19
217, 25 3
–
–
–
217, 2 5 3
217,
25 3
Lease liabilities
10
116
463
545
–
1,124
992
217,369
463
545
–
218,377
218,245
24 Capital management
24(a) Risk management
For the purpose of the Group’s capital management, capital includes issued capital, ordinary shares, share premium and all
other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital
management is to maximise shareholder value.
The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the
requirements of shareholders. To maintain or adjust the capital structure, the Group may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares. To ensure an appropriate return for shareholders’ capital
invested in the Group, management thoroughly evaluates all material revenue streams, relationships with key vendors and
potential acquisitions and approves them by the Board, where applicable. The Group’s dividend policy is based on the
profitability of the business and underlying growth in earnings of the Group, as well as its capital requirements and cash
flows. The Group’s dividend policy is to distribute 40% of the Group’s post-tax pre-exceptional earnings to shareholders in
respect of each financial year. Subject to any cash requirements for ongoing investment, the Board will consider returning
excess cash to shareholders over time.
24(b) Dividends
2024
2023
Pence per share
£’000
Pence per share
£’000
Interim dividend paid
2 .7 0
6,466
2.40
5,748
Special dividend paid
7.50
17,9 61
6.20
14,848
Final dividend paid
5 .1 0
12,214
4.20
10,058
Total dividends attributable
to ordinary shareholders
15.30
36,641
12.80
30,654
Dividends per share is calculated by dividing the dividend paid by the number of ordinary shares in issue. Dividends are paid
out of available distributable reserves of the company.
The Board has proposed a final ordinary dividend of 6.0 pence and a special dividend of 8.7 pence per share for the
year ended 29 February 2024 to be paid to shareholders on the register as at 19 July 2024. The aggregate of the proposed
dividends expected to be paid on 2 August 2024 is £35.3 million. The proposed dividends per ordinary shares are subject
to approval at the Annual General Meeting and are not recognised as a liability in the consolidated financial statements.
25 Capital commitments
At 29 February 2024, the Group had £Nil capital commitments (28 February 2023: £Nil) .
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
177
Notes to the consolidated financial statements continued
26 Related-party transactions
In the ordinary course of business, the Group carries out transactions with related parties, as defined by IAS 24 Related Party
Disclosures. Apart from those disclosed elsewhere in the consolidated financial statements, material transactions for the
year are set out below:
26(a) Transactions with key management personnel
Key management personnel are defined as the directors (both executive and non-executive) of Bytes Technology Group plc,
Bytes Software Services Limited and Phoenix Software Limited. Details of the compensation paid to the directors of Bytes
Technology Group plc as well as their shareholdings in the Group are disclosed in the remuneration report.
Compensation of key management personnel of the Group
The remuneration of key management personnel, which consists of persons who have been deemed to be discharging
managerial responsibilities, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Short-term employee benefits
3,653
4,15
8
Post-employment pension benefits
97
92
Total compensation paid to key management
3,750
4,250
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel including executive directors.
Key management personnel received a total of 170,360 share option awards (2023: 565,782) at a weighted average exercise
price of £0.04 (2023: £1.33).
Share-based payment charges include £1,257,326 (2023: £1,006,423) in respect of key management personnel, refer to
note 27 for details on the Group’s share-based payment incentive schemes.
26(b) Subsidiaries and associates
Interests in subsidiaries are set out in note 29 and the investment in associate is set out in note 12.
26(c) Outstanding balances arising from sales/purchases of services
Group companies made purchases from the associate of £3.1 million during the year with a trade payable balance of
£0.5 million at year end.
27 Share-based payments
The Group accounts for its share option awards as equity-settled share-based payments. The fair value of the awards granted is
recognised as an expense over the vesting period. The amount recognised in the share-based payment reserve will be reversed to
retained earnings as and when the related awards vest and are exercised by employees. As noted in the prior year Annual Report
one-third of the annual bonus for the financial year ended 29 February 2024 awarded to each of the Company’s executive directors is
deferred in shares for two years. This deferral has resulted in the granting of the awards under the Deferred Bonus Plan during the year.
Performance Incentive Share Plan
Options granted under the Performance Incentive Share Plan (PISP) are for shares in Bytes Technology Group plc. The exercise price
of the options is a nominal amount of £0.01. Performance conditions attached to the awards granted in the current year are employee
specific, in addition to which, options will only vest if certain employment conditions are met. The fair value of the share options is
estimated at the grant date using a Monte Carlo option pricing model for the element with market conditions and Black-Scholes
option-pricing model for non-market conditions. The normal vesting date shall be no earlier than the third anniversary of the grant
date and not later than the day before the tenth anniversary of the grant date. There is no cash settlement of the options available
under the scheme. During the year the Group granted 1,195,700 (2023: 552,480) options. For the year ended 29 February 2024,
298,561 (2023: 30,589) options were forfeited, 819,416 options were exercised (2023: nil) and no options expired.
Company Share Option Plan
Options granted under the Company Share Option Plan (CSOP) are for shares in Bytes Technology Group plc. The exercise price of
the options granted in the current year was determined by the average of the last three dealing days prior to the date of grant. There
are no performance conditions attached to the awards, but options will only vest if certain employment conditions are met. The fair
value at grant date is estimated at the grant date using a Black-Scholes option-pricing model. The normal vesting date shall be no
earlier than the third anniversary of the grant date and not later than the day before the tenth anniversary of the grant date. There is
no cash settlement of the options available under the scheme. During the year the Group granted no (2023: 2,904,100) options.
For the year ended 29 February 2024, 176,600 (2023: 127,400) options were forfeited, and no options were exercised or expired.
Save as You Earn Scheme
Share options were granted to eligible employees under the Save As You Earn Scheme (SAYE) during the year. Under the SAYE
scheme, employees enter a three-year savings contract in which they save a fixed amount each month in return for their SAYE
options. At the end of the three-year period, employees can either exercise their options in exchange for shares in Bytes Technology
Group plc or have their savings returned to them in full. The exercise price of the options represents a 20% discount to the exercise
price of the CSOP awards. The fair value at grant date is estimated using a Black-Scholes option-pricing model. There is no cash
settlement of the options. During the year the Group granted 337,890 (2023: 722,863) options. For the year ended 29 February
2024, 213,832 (2023: 523,974) options were forfeited, 3,625 (2023: nil) options were exercised and no options expired.
178 Bytes Technology Group plc
FINANCIAL STATEMENTS
Deferred Bonus Plan
Options granted under the Deferred Bonus Plan (DBP) are for shares in Bytes Technology Group plc. The exercise price of
the options is a nominal amount of £0.01. There are no performance conditions attached to the awards, but options will only
vest if certain employment conditions are met. The fair value at grant date is estimated at the grant date using a Black-
Scholes option-pricing model. The normal vesting date shall be no earlier than the second anniversary of the grant date.
During the year the Group granted 45,365 (2023: 35,842) options. For the year ended 29 February 2024, 50,526 (2023: nil)
options were forfeited and no options were exercised or expired.
Share-based payment employee expenses
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Equity settled share-based payment expenses
5,708
4,18
8
There were no cancellations or modifications to the awards in 2024 or 2023.
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options
during the year:
29 February 29 February 28 February 28 February
2024 2024 2023 2023
Number WAEP Number WAEP
Outstanding at 1 March
8,760,684
£3.59
5 , 2 2 7,3 62
£3.43
Granted during the year
1,666,660
£0.80
4,215,285
£3.84
Forfeited during the year
(739,519)
£2.28
(681,963)
£3.98
Exercised during the year
(874,565)
£0.03
–
–
Outstanding at 29 February
8,813,260
£3.52
8,760,684
£3.59
Exercisable at 29 February
609,272
£0.01
–
–
1
1 The weighted average share price at date of exercise was £5.85.
The weighted average expected remaining contractual life for the share options outstanding at 29 February 2024 was 2.2
years (2023: 2.9 years).
The weighted average fair value of options granted during the year was £4.21 (2023: £1.63).
The range of exercise prices for options outstanding at the end of the year was £0.01 to £5.00 (2023: £0.01 to £5.00).
The tables below list the inputs to the models used for the awards granted under the below plans for the years ended
29 February 2024 and 28 February 2023:
Assumptions
29 February 29 February 29 February
2024 2024 2024
PISP SAYE DBP
Weighted average fair value at measurement date
£4.86
£1.79
£5.15
Expected dividend yield
1.53%
1.53%
0.00%
Expected volatility
31%
30%
30%
Risk-free interest rate
4.29%
4.79%
4.44%
Expected life of options
3 years
3 years
2 years
Weighted average share price
£5.16
£5.11
£5.16
Model used
Black-Scholes
Black-Scholes
Black-Scholes
and Monte Carlo
Assumptions
28 February 28 February 28 February 28 February
2023 2023 2023 2023
PISP CSOP SAYE DBP
Weighted average fair value at measurement date
£4.06
£1.20
£1.38
£4.52
Expected dividend yield
1.52%
1.52%
1.54%
0.00%
Expected volatility
37%
34%
37%
35%
Risk-free interest rate
1.59%
1.72%
1.59%
1.53%
Expected life of options
3 years
5 years
3 years
2 years
Weighted average share price
£4.53
£4.53
£4.48
£4.53
Model used
Black-Scholes
Black-Scholes
Black-Scholes
Black-Scholes
and Monte Carlo
The expected life of the options is based on current expectations and is not necessarily indicative of exercise patterns that
may occur. The expected volatility reflects the assumption that the historical volatility of the company and publicly quoted
companies in a similar sector to the company over a period similar to the life of the options is indicative of future trends, which
may not necessarily be the actual outcome.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
179
Notes to the consolidated financial statements continued
28 Earnings per share
The Group calculates earnings per share (EPS) on several different bases in accordance with IFRS and prevailing South
Africa requirements.
Year ended Year ended
29 February 28 February
2024 2023
pence pence
Basic earnings per share
19.55
16.88
Diluted earnings per share
18.85
16.28
Headline earnings per share
19.55
16.88
Diluted headline earnings per share
18.85
16.28
Adjusted earnings per share
21.78
18.83
Diluted adjusted earnings per share
21.01
18.16
28(a) Weighted average number of shares used as the denominator
Year ended Year ended
29 February 28 February
2024 2023
Number Number
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share and headline earnings per share
239,693,670
239,482,333
Adjustments for calculation of diluted earnings per share and diluted
headline earnings per share:
փ
share options
1
8,813,260
8,760,684
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share and
diluted headline earnings per share
248,506,930
248,243,017
1 Share options
Share options granted to employees under the Save As You Earn Scheme, Company Share Option Plan and Bytes Technology Group plc performance incentive share
plan are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share on the basis that all employees are
employed at the reporting date, and to the extent that they are dilutive. The options have not been included in the determination of basic earnings per share. Details
relating to the share options are disclosed in note 27.
28(b) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Listing Requirements. The
table below reconciles the profits attributable to ordinary shareholders to headline earnings and summarises the calculation
of basic and diluted HEPS:
Note
Year ended Year ended
29 February 28 February
2024 2023
pence pence
Profit for the period attributable to owners of the company
46,851
40,421
Adjusted for:
Loss on disposal of property, plant and equipment
4
–
3
Tax effect thereon
–
(1)
Headline profits attributable to owners of the company
46,851
40,423
180 Bytes Technology Group plc
FINANCIAL STATEMENTS
28(c) Adjusted earnings per share
Adjusted earnings per share is a Group key alternative performance measure which is consistent with the way that financial
performance is measured by senior management of the Group. It is calculated by dividing the adjusted operating profit
attributable to ordinary shareholders by the total number of ordinary shares in issue at the end of the year. Adjusted operating
profit is calculated to reflect the underlying long-term performance of the Group by excluding the impact of the following items:
• • Share-based payment charges
• • Acquired intangible assets amortisation.
The table below reconciles the profit for the financial year to adjusted earnings and summarises the calculation of adjusted EPS:
Note
Year ended Year ended
29 February 28 February
2024 2023
£’000 £’000
Profits attributable to owners of the company
46,851
40,421
Adjusted for:
փ
Amortisation of acquired intangible assets
4
880
1,306
փ
Deferred tax effect on above
(220)
(301)
փ
Share-based payment charges
27
5,708
4,188
փ
Deferred tax effect on above
(1,011)
(522)
Adjusted profits attributable to owners of the company
52,208
45,092
29 Subsidiaries
The Group’s subsidiaries included in the consolidated financial statements are set out below. The country of incorporation is
also their principal place of business.
Country of Ownership
Name of entity incorporation
interest
Principal activities
Bytes Technology Holdco Limited
UK
100%
Holding company
Bytes Technology Limited
UK
100%
Holding company
Bytes Software Services Limited
UK
100%
Providing cloud-based licensing and infrastructure and security
sales within both the corporate and public sectors
Phoenix Software limited
UK
100%
Providing cloud-based licensing and infrastructure and security
sales within both the corporate and public sectors
Blenheim Group Limited
UK
100%
Dormant for all periods
License Dashboard Limited
UK
100%
Dormant for all periods
Bytes Security Partnerships Limited
UK
100%
Dormant for all periods
Bytes Technology Group Holdings Limited
2
UK
100%
Dormant for all periods
Bytes Technology Training Limited
UK
100%
Dormant for all periods
Elastabytes Limited
UK
50%
Deregistered. Dormant in prior periods
1
2
2
2
2
1 Bytes Technology Holdco Limited is held directly by the company. All other subsidiary undertakings are held indirectly by the company.
2 Taken advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the year ended 29 February 2024.
The registered address of all of the Group subsidiaries included above is Bytes House, Randalls Way, Leatherhead,
Surrey, KT22 7TW.
30 Events after the reporting period
On 9 May 2024 a settlement agreement was reached between the company and Neil Murphy, it’s former CEO, following his
resignation on 21 February 2024 in accordance with the terms of his service contract and the directors’ remuneration policy.
Full details can be found on page 122 of the directors’ remuneration report.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
181
Note
As at
29 February
2024
£’000
As at
28 February
2023
£’000
Assets
Non-current assets
Investments 5 641,998 6 41,998
Property, plant and equipment 6 121 187
Deferred tax assets 4 141 25
Total non-current assets 642,260 642,210
Current assets
Trade and other receivables 7 12,884 20,000
Cash and cash equivalents 40,421 2 7, 913
Total current assets 53,305 47,913
Total assets 695,565 6 9 0,12 3
Current liabilities
Trade and other payables 8 (7,86 0) (11,4 4 6)
Current tax liability (157) –
Total current liabilities (8,017) (11,4 4 6)
Total liabilities (8,017) (11,4 4 6)
Net assets 687,548 678,677
Equity
Share capital 10 2,404 2,395
Share premium 10 633,650 633,636
Share-based payment reserves 9,969 7,0 5 2
Retained earnings
1
41,525 35,594
Total equity 687,548 678,677
1 The profit for the company for the period was £39,781,000 (2023: £32,477,000).
The financial statements on pages 182 to 191 were approved by the Board on 22 May 2024 and signed on its behalf by:
Sam Mudd Andrew Holden
Chief Executive Officer Chief Financial Officer
Parent company financial statements of
BytesTechnology Group plc
Company balance sheet
As at 29 February 2024
182 Bytes Technology Group plc
PARENT COMPANY FINANCIAL STATEMENTS
Note
Attributable to owners of the company
Share
capital
£’000
Share
premium
£’000
Share-based
payment
reserve
£’000
Retained
earnings
£’000
Total
£’000
At 1 March 2022 2,395 633,636 2,864 33,771 672,666
Total comprehensive income for the year – – 32,477 32,477
Dividends paid – – – (30,654) (30,654)
Share-based payment transactions – – 4 ,18 8 – 4,18 8
Balance at 28 February 2023 2,395 633,636 7,0 5 2 35,594 678,677
Total comprehensive income for the year – – 39,781 39,781
Dividends paid – – – (3 6,641) (36,641)
Shares issued during the year 10 9 14 – – 23
Transfer to retained earnings – – (2,791) 2,791 –
Share-based payment transactions – – 5,708 – 5,708
Balance at 29 February 2024 2,404 633,650 9,969 41,525 687,548
Company statement of changes in equity
For the year ended 29 February 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
183
Notes to the financial statements
1 Accounting policies
The principal accounting policies applied are
summarisedbelow.
1.1 Authorisation of financial statements and statement
of compliance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101)
The financial statements of Bytes Technology Group plc
for the period ended 29 February 2024 were approved
and signed by the Chief Executive Officer on 22 May 2024
having been duly authorised to do so by the Board. The
company meets the definition of a qualifying entity under
Financial Reporting Standard 100 Application of Financial
Reporting Requirements (FRS 100) issued by the
Financial Reporting Council. Accordingly, these financial
statements have been prepared in accordance with FRS
101 and in accordance with the provisions of theUK
Companies Act 2006.
1.2 Basis of preparation
The financial statements have been prepared in
accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101) and the
Companies Act 2006. The financial statements have been
prepared under the historical cost convention.
Bytes Technology Group plc is a company incorporated in
the UK under the Companies Act. The address of the
registered office is provided on page 196. The company is
the ultimate parent company and provides management
services to subsidiary undertakings in respect of certain
head office functions and requirements, which are
recharged as the costs are incurred by the company.
The company’s financial statements are included in the
Bytes Technology Group plc consolidated financial
statements for the period ended 29 February 2024.
These financial statements are separate
financialstatements.
The company has taken advantage of the following
disclosure exemptions in preparing these financial
statements, as permitted by FRS 101:
• • The requirements of IFRS 7 Financial
InstrumentsDisclosures
• • The requirements of paragraphs 91 to 99 of IFRS 13
Fair Value Measurement
• • The requirement in paragraph 38 of IAS 1
Presentation of Financial Statements to present
comparative information in respect of paragraph
79(a)(iv) of IAS 1
• • The requirement of paragraphs 10(d), 10(f), 16, 38A,
38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to
136 of IAS 1 Presentation of Financial Statements
• • The requirements of IAS 7 Statement of Cash Flows
• • The requirements of paragraphs 30 and 31 of IAS 8
Accounting Policies, Changes in Accounting
Estimates and Errors
• • The requirements of paragraphs 17 and 18A of IAS 24
Related Party Disclosures
• • The requirements in IAS 24 Related Party Disclosures
to disclose related party transactions entered into
between two or more members of a group, provided
that any subsidiary which is a party to the transaction
is wholly owned by such a member
• • The requirements of paragraphs 130(f)(ii), 130(f)(iii),
134(d) to 134(f) and 135(c) to 135(e) of IAS 36
Impairment of Assets, provided that equivalent
disclosures are included in the consolidated
financialstatements of the group in which the entity
isconsolidated
• • The requirements of the second sentence of
paragraph 110 and paragraphs 113(a), 114, 115, 118,
119(a) to (c), 120 to 127 and 129 of IFRS 15 Revenue
from Contracts with Customers.
Where required, equivalent disclosures are given in the
consolidated financial statements of Bytes Technology
Group plc. As permitted by Section 408 of the Companies
Act 2006, the income statement of the company is not
presented as part of these financial statements.
1.3 Going concern
The ability of the company to continue as a going concern
is contingent on the ongoing viability of the Group and its
ability to continue as a going concern. The Group has
prepared its going concern assessment and this is
provided in note 1.3 in the notes to the financial
statements included in the Bytes Technology Group plc
consolidated financial statements. Having assessed the
Group’s overall assessment of going concern in relation to
the company, the directors considered it appropriate to
adopt the going concern basis of accounting in preparing
the company’s financial statements.
1.4 Critical accounting estimates and judgements
The preparation of the 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 company’s
accounting policies.
There are no major sources of estimation uncertainty at
the end of the reporting period that have a significant risk
of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial
year. In order to ensure no new sources are missed,
estimates and judgements are continually evaluated
andare based on historical experience and other factors,
including expectations of future events that are believed
tobe reasonable under the circumstances.
184 Bytes Technology Group plc
PARENT COMPANY FINANCIAL STATEMENTS
The other areas involving accounting estimates are:
Impairment of investments
The investment in subsidiary’s are assessed annually to
determine if there is any indication that the investment
might be impaired. The recoverable amounts are
determined based on a value-in-use calculation and
compared to the carrying value of the investment. The
value-in-use calculation is based on forecasts approved
by management. The cash flows beyond the forecast
period are extrapolated using estimated long-term growth
rates. The forecast cash flows are discounted at the
company’s discount rate. The assumptions used are
consistent with those disclosed in note 11 to the notes
tothe consolidated financial statements of the Group.
1.5 Changes in accounting policy and disclosures
(a) New and amended standards adopted by
thecompany
The Group has applied the following standard or
amendments for the first time in the annual reporting
period commencing 1 March 2023:
• • Definition of Accounting Estimates – Amendments
toIAS 8
• • Disclosure of Accounting Policies – Amendments
toIAS 1 and IFRS Practice Statement 2
• • Deferred Tax related to Assets and Liabilities arising
from a Single Transaction – Amendments to IAS 12
• • International Tax Reform – Pillar Two Model Rules –
Amendments to IAS 12
The amendments listed above did not have any impact on
the amounts recognised in current or prior periods and
are not expected to affect future periods.
(b) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations
have been published that are not mandatory for
29 February 2024 reporting periods and have not been
adopted early by the company. These standards are not
expected to have a material impact on the company in the
current or future reporting periods and on foreseeable
future transactions.
1.6 Investments
Investments in subsidiary undertakings are included in the
balance sheet at cost less any provision for impairment in
value. The company assesses investments for impairment
whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If any
such indication of impairment exists, the company makes
an estimate of its recoverable amount. Where the carrying
amount of an investment exceeds its recoverable amount,
the investment is considered impaired and is written down
to its recoverable amount. Where these circumstances
have reversed, the impairment previously made is
reversed to the extent of the original cost of the
investment.
1.7 Functional and presentation currency
The financial statements are presented in pounds sterling
(£), which is the company’s functional and presentation
currency. All transactions undertaken by the company
aredenominated in pounds sterling.
1.8 Revenue recognition
The company provides management services to
subsidiary undertakings which are invoiced quarterly
inarrears. Revenue from providing such services is
recognised in the accounting period in which the
servicesare rendered on an over time basis. In
measuringits performance and the amount of revenue
tobe recognised, the company applies an inputs basis
byreference to the costs incurred by the company and
thehours expended by management for providing
services to the measurement date.
1.9 Income tax
The income tax expense or credit for the period is the tax
payable on the current period’s taxable income based on
the applicable income tax rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the end
of the reporting period in the UK. Management
periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions, where
appropriate, on the basis of amounts expected to be paid
to the tax authorities.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts
in the financial statements. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business
combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the end of
the reporting period and are expected to apply when the
related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable
that future taxable amounts will be available to utilise
those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to
thesame taxation authority. Current tax assets and
taxliabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on
anet basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
185
Notes to the financial statements continued
1.10 Property, plant and equipment
Owned assets
Property, plant and equipment is measured at cost less
accumulated depreciation and impairment losses. When
components of an item of property, plant and equipment
have different useful lives, those components are
accounted for as separate items of property, plant and
equipment. Cost includes expenditure that is directly
attributable to the acquisition of the asset.
Depreciation
Depreciation is recognised in profit or loss for each
category of assets on a straight-line basis over their
expected useful lives up to their respective estimated
residual values.
The estimated useful lives for the current and comparative
periods are as follows:
• • IT software, three years.
The depreciation methods, useful lives and residual values
are reassessed annually and adjusted if appropriate.
1.11 Trade and other receivables
Trade receivables are recognised initially at the amount of
consideration that is unconditional, i.e. fair value and
subsequently measured at amortised cost using the
effective interest method, less loss allowance.
Prepayments and other receivables are stated at their
nominal values.
1.12 Cash and cash equivalents
Cash is represented by cash in hand and deposits with
financial institutions repayable without penalty on notice
of not more than 24 hours. Cash equivalents are highly
liquid investments that mature in no more than three
months from the date of acquisition and that are readily
convertible to known amounts of cash with insignificant
risk of change in value.
1.13 Financial instruments
Financial instruments comprise investments in equity,
loans receivable, trade and other receivables (excluding
prepayments), investments, cash and cash equivalents,
current loans, and trade and other payables.
Recognition
Financial assets and liabilities are recognised in the
company’s balance sheet when the company becomes
aparty to the contractual provisions of the instruments.
Financial assets are classified as current if expected to be
realised or settled within 12 months from the reporting
date; if not, they are classified as non-current. Financial
liabilities are classified as non-current if the company has
an unconditional right to defer payment for more than 12
months from the reporting date.
Classification
The company classifies financial assets on initial
recognition as measured at amortised cost, fair value
through other comprehensive income (FVOCI) or fair value
through profit or loss (FVTPL) based on the company’s
business model for managing the financial asset and the
cash flow characteristics of the financial asset.
Financial assets are classified as follows:
• • Financial assets to be measured subsequently at fair
value (either through other comprehensive income
(OCI) or through profit or loss)
• • Financial assets to be measured at amortised cost.
Financial assets are not reclassified unless the company
changes its business model. In rare circumstances where
the company does change its business model,
reclassifications are done prospectively from the date that
the company changes its business model.
Financial liabilities are classified and measured at
amortised cost except for those derivative liabilities and
contingent consideration that are measured at FVTPL.
Measurement on initial recognition
All financial assets and financial liabilities are initially
measured at fair value, including transaction costs, except
for those classified as FVTPL which are initially measured
at fair value excluding transaction costs. Transaction costs
directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in
profit or loss.
Subsequent measurement: financial assets
Subsequent to initial recognition, financial assets are
measured as described below:
• • FVTPL – these financial assets are subsequently
measured at fair value and changes therein (including
any interest or dividend income) are recognised in
profit or loss
• • Amortised cost – these financial assets are
subsequently measured at amortised cost using the
effective interest method, less impairment losses.
Interest income, foreign exchange gains and losses
and impairments are recognised in profit or loss. Any
gain or loss on derecognition is recognised in profit or
loss
• • Equity instruments at FVOCI – these financial assets
are subsequently measured at fair value. Dividends
are recognised in profit or loss when the right to
receive payment is established. Other net gains and
losses are recognised in OCI. On derecognition,
gains and losses accumulated in OCI are not
reclassified to profit or loss.
Subsequent measurement: Financial liabilities
All financial liabilities are subsequently measured at
amortised cost using the effective interest method.
186 Bytes Technology Group plc
PARENT COMPANY FINANCIAL STATEMENTS
Derecognition
Financial assets are derecognised when the rights to
receive cash flows from the assets have expired or have
been transferred and the company has transferred
substantially all risks and rewards of ownership. Financial
liabilities are derecognised when the obligations specified
in the contracts are discharged, cancelled or expire. On
derecognition of a financial asset or liability, any
difference between the carrying amount extinguished and
the consideration paid is recognised in profit or loss.
Impairment
The company assesses on a forward-looking basis the
expected credit losses associated with its debt
instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been
a significant increase in credit risk.
1.14 Trade and other payables
Trade payables, sundry creditors and accrued expenses
are obligations to pay for goods or services that have been
acquired in the ordinary course of business from
suppliers. They are accounted for in accordance with the
accounting policy for financial liabilities as included
above. Other payables are stated at their nominal values.
1.15 Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of
the borrowings using the effective interest method. Fees
paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down.
In this case, the fee is deferred until the drawdown occurs.
To the extent that there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
1.16 Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave, that
are expected to be settled wholly within 12 months after
the end of the period in which the employees render the
related service are recognised in respect of employees’
services up to the end of the reporting period and are
measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as
current employee benefit obligations in the balance sheet.
Post-employment obligations
The company operates various defined contribution plans
for its employees. Once the contributions have been paid,
the company has no further payment obligations. The
contributions are recognised as employee benefit
expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or
a reduction in the future payments is available.
Share-based payments
Equity-settled share-based payment schemes
Share-based compensation benefits are provided to
particular employees of the Group through the Bytes
Technology Group plc share option plans.
Employee options
The fair values of options granted under the Bytes
Technology Group plc share option plans are recognised
as employee benefit expenses in the entities of the Group
in which the employees are contracted and providing their
services. The total amount to be expensed is determined
by reference to the fair value of the options granted. The
total expense is recognised over the vesting period, which
is the period over which all the specified vesting
conditions are to be satisfied. At the end of each period,
the Group revises its estimates of the number of options
issued that are expected to vest based on the service
conditions. It recognises the impact of the revision to
original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
The company has a recharge arrangement with its
subsidiaries whereby the company recharges the
amountequal to the share-based payment charge
toitssubsidiaries according to the vesting schedule.
The share-based payment reserve comprises the fair value
of share awards granted which are not yet exercised. The
amount will be reversed to retained earnings as and when
the related awards vest and are exercised by employees.
1.17 Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary shares
are recognised as a deduction from equity, net of any
taxeffects.
1.18 Dividends
Dividends paid on ordinary shares are classified as equity
and are recognised as distributions in equity.
1.19 Rounding of amounts
All amounts disclosed in the consolidated financial
statements and notes have been rounded off to the
nearest thousand, unless otherwise stated.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
187
Notes to the financial statements continued
2 Directors’ remuneration
Remuneration of directors:
Year ended
29 February
2024
£’000
Year ended
28 February
2023
£’000
Directors’ remuneration
1
1,387 1,823
Social security costs 168 242
Pension costs 17 17
1,572 2,082
1 Directors’ remuneration
The amounts comprise fees paid to the non-executive directors and, for executive directors, salary and benefits earned for the period. Further information on directors’
remuneration is provided in the directors’ remuneration report on pages 102 t o 12 7.
3 Employee costs and numbers
Employee benefit expense:
Year ended
29 February
2024
£’000
Year ended
28 February
2023
£’000
Employee remuneration 774 629
Social security costs 96 109
Pension costs 25 21
895 759
The average monthly number of employees during the period was:
Year ended
29 February
2024
Number
Year ended
28 February
2023
Number
Administration 6 5
6 5
188 Bytes Technology Group plc
PARENT COMPANY FINANCIAL STATEMENTS
4 Income tax expense
The major components of the company’s income tax expense are:
Year ended
29 February
2024
£’000
Year ended
28 February
2023
£’000
Current income tax charge in the year 157 –
Total current income tax charge 157 –
Current year (113) (19)
Adjustments in respect of prior year (1) –
Effect of changes in tax rates (2) (6)
Deferred tax credit (116) (25)
Total tax charge/(credit) 41 (25)
Reconciliation of total tax charge
The tax assessed for the period differs from the standard rate of corporation tax in the UK applied to profit before tax:
Year ended
29 February
2024
£’000
Year ended
28 February
2023
£’000
Profit before income tax 39,822 32,477
Income tax charge at the standard rate of corporation tax in the UK of 24.49% (2023: 19%)
1
9,752 6,171
Effects of:
Non-deductible expenses (35) 38
Non-taxable income (9,674) (6,317)
Adjustments to previous periods (1) –
Effect of change in rate (2) –
Group relief surrendered – 83
Income tax charge/(credit) reported in profit or loss 41 (25)
1 Prorated rate for change in the tax rate from 19% to 25% on 1 April 2023
Deferred tax assets
As at
29 February
2024
£’000
As at
28 February
2023
£’000
The balance comprises temporary differences attributable to:
Property, plant and equipment (30) (47)
Provisions 8 –
Share-based payments 163 72
141 25
Deferred tax assets
As at
29 February
2024
£’000
As at
28 February
2023
£’000
At 1 March 25 –
Credited to profit or loss 116 25
Carrying amount at end of year 141 25
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
189
Notes to the financial statements continued
5 Investment in subsidiary
As at
29 February
2024
£’000
As at
28 February
2023
£’000
Balance at 1 March 2022, 28 February 2023 and 29 February 2024 641,998 6 41,998
Subsidiary undertakings
A detailed listing of the company’s direct and indirect subsidiaries is set out in note 29 in the notes to the financial information
in the consolidated financial statements of theGroup.
6 Property, plant and equipment
Computer
software
£’000
Total
£’000
Cost
At 1 March 2022 – –
Additions 198 198
At 28 February 2023 and 29 February 2024 198 198
Depreciation
At 1 March 2022 – –
Charge for the year 11 11
At 28 February 2023 11 11
Charge for the year 66 66
At 29 February 2024 77 77
Net book value
At 28 February 2023 187 187
At 29 February 2024 121 121
7 Trade and other receivables
As at
29 February
2024
£’000
As at
28 February
2023
£’000
Amounts due from other Group companies 12,612 19,748
Prepayments 272 252
12,884 20,000
8 Trade and other payables
As at
29 February
2024
£’000
As at
28 February
2023
£’000
Trade and other payables
1
2,040 2,006
Amounts due to other Group companies
2
5,820 9,440
7,860 11, 4 4 6
1 Trade and other payables include an accrual for costs in relation to the investigation around undisclosed share dealings as set out on pages 69 and 70.
2 Amounts due to other Group companies are unsecured, interest free and repayable on demand.
190 Bytes Technology Group plc
PARENT COMPANY FINANCIAL STATEMENTS
9 Borrowings
On 17 May 2023 the Group entered into a new three-year committed Revolving Credit Facility (RCF) for £30 million, including
an optional one-year extension to 17 May 2027, and a non-committed £20 million accordion to increase the availability of
funding should it be required for future activity. The new facility replaced the previous RCF which was entered into in
December 2020 and was set to expire in December 2023 but was cancelled, without penalty, on 17 May 2023, on
commencement of the new RCF. The new facility has incurred an arrangement fee of £0.1 million, being 0.4% of the new
funds available. Neither the company, nor any of its subsidiaries, has drawn down any amount on either the previous or the
new facility and to the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the
fee has been capitalised as a prepayment and amortised over the three-year period of the facility. The facility also incurs a
commitment fee and utilisation fee, both of which are payable quarterly in arrears. For further details on the RCF, see note
23(c) in the notes to the consolidated financial statements of the Group.
10 Share capital and share premium
Ordinary shares
Allotted, called up and fully paid
Number of
shares
Nominal
value
£’000
Share
premium
£’000
Total
£’000
At 1 March 2022 and 28 February 2023
1
239,482,333 2,395 633,636 636,031
Shares issued during the period 874,565 9 14 23
At 29 February 2024
2
240,356,898 2,404 633,650 636,054
1 Shares issued during the prior period
No shares were issued during the prior period.
2 Ordinary shares
Ordinary shares have a nominal value of £0.01. All ordinary shares in issue rank pari passu and carry the same voting rights and entitlement to receive dividends and other
distributions declared or paid by the company. The company does not have a limited amount of authorised share capital.
11 Information included in the notes to the consolidated financial statements
Some of the information included in the notes to the consolidated financial statements is directly relevant to the financial
statements of the company. Please refer to the following:
Note 6 – Auditors’ remuneration
Note 26(a) – Transactions with key management personnel
Note 27 – Share-based payments
Note 30 – Events after the reporting period
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
191
Other
information
194 Glossary
195 Appendix
196 Company information
196 Financial calendar
OTHER INFORMATION
192 Bytes Technology Group plc
193Annual Report and Accounts 2023/24
Glossary
Admission: the admission of BTG’s shares to the premium
listing segment of the Official List and to trading on the London
Stock Exchange’s Main Market and on the Main Board of the
Johannesburg Stock Exchange via secondary inward listing
AI: artificial intelligence
Altron Limited: a public company incorporated and registered
in accordance with South African law, with registration number
1947/024583/06
Articles: the articles of association of the company
Bytes: Bytes Software Services Limited, a private limited
company incorporated under English and Welsh law, with
registered number 01616977
Carbon neutral: offsetting carbon emissions resulting in
nonetrelease of carbon through offsetting by investing
inclimate action and mitigation projects
Carbon removal credits: Higher-quality carbon credit
forinvestments in projects that permanently remove carbon
from the atmosphere
CDP: formerly the Carbon Disclosure Project, a not-for-profit charity
that runs the global disclosure system for investors, companies,
cities, states and regions to manage their environmental impacts
Cloud or cloud computing: shared, remotely accessible
ITsolutions
Company or BTG: Bytes Technology Group plc, a public
limited company incorporated under English and Welsh law,
with registration number 12935776
CSP: the Microsoft Cloud Solutions Provider programme
Executive directors: the executive directors of the company,
being Sam Mudd and Andrew Holden
Existing customers: customers with which the Group has
previously transacted
FCA: Financial Conduct Authority
FRC: Financial Reporting Council
GDPR: the General Data Protection Regulation 2016/679
GenAI: generative artificial intelligence
Group: Bytes Technology Group plc, Bytes Software Services
Limited, Phoenix Software Limited and any other subsidiary of
the company from time to time
HMRC: His Majesty’s Revenue and Customs
IT channel: the method by which Group products are made
available to its resellers
JSE: as the context requires, either JSE Limited (registration
number 2005/022939/06), a limited liability public company
incorporated in accordance with South African law and licensed
as an exchange under the South African Financial Markets Act,
No. 19 of 2012 (and amendments thereto), or the securities
exchange operated by the aforementioned company
License Dashboard: License Dashboard Limited, a private
limited company incorporated under English and Welsh law,
with registration number 06599902
Listing Rules: the listing rules of the FCA made under
section74(4) of the Financial Services and Markets Act 2000,
asamended
London Stock Exchange: London Stock Exchange plc
Main Market: the London Stock Exchange’s main market
forlisted securities
Microsoft certified professional: a sales team member
whohas passed Microsoft’s certified professional exam
Net zero: Our working definition of net zero aligns with the
SBTi’s science-based Net-Zero Standard, which is to reduce
ouremissions by 90–95% and use carbon removal credits to
neutralise emissions that we cannot remove
Non-executive directors: the non-executive directors
ofthecompany, being Patrick De Smedt, Erika Schraner,
ShruthiChindalur, Ross Paterson and Anna Vikström Persson
Deutsche Numis: Numis Securities Limited
Official List: the Official List of the FCA
PCAs: persons closely associated
PDMR: person discharging managerial responsibilities
Phoenix: Phoenix Software Limited, a private limited company
incorporated under English and Welsh law, with registration
number 02548628
SAYE: Save As You Earn (employee share scheme)
SBTi: Science Based Targets initiative
SDGs: Sustainable Development Goals
Shareholders: the holders of shares in the capital
ofthecompany
UK Corporate Governance Code or code: the UK
CorporateGovernance Code published by the FRC in July 2018,
as amended in 2024
UN Sustainable Development Goals: the 2030 Agenda
forSustainable Development, adopted by all United Nations
Member States in 2015, consists of 17 SDGs. It recognises that
ending poverty and other deprivations must go hand in hand
with strategies that improve health and education, reduce
inequality and spur economic growth – all while addressing
climate change and working to preserve oceans and forests
United Kingdom or UK: the United Kingdom of Great Britain
and Northern Ireland
VAR: value-added reseller
VAT: value-added tax
194 Bytes Technology Group plc
OTHER INFORMATION
Appendix
Methodology
Greenhouse gas (GHG) emissions disclosure
We have reported on the emission sources required under the
Companies Act 2006 Strategic Report and Directors’ Report
Regulations 2013 and have followed the requirements of the
SECR framework. We have used the GHG Protocol Corporate
Accounting and Reporting Standard to calculate our GHG
emissions and applied the emission factors from the UK
Government’s GHG Conversion Factors for Company Reporting
for the most recent year published when analysis is conducted.
We report on all emission sources required by SECR, under
theCompanies (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018.
These sources fall within our consolidated financial statements.
We followed the methodology of ISO 14064-1, which provides
guidance at the organisational level for the quantification and
reporting of greenhouse gas emissions and removals.
Our approach to reporting carbon emissions
We have reported on our carbon emissions reduction since
welisted in December 2020. Before this, carbon emission
reporting was an established part of our operating companies’
reporting process, as a required regulatory disclosure for our
former listed group. In 2023/24, we worked with CBN Expert
consultancy to map our energy and carbon data (Scope 1, 2
and3), using our 2020/21 baseline for Scope 1 and 2 and
ourupdated 2022/23 baseline for Scope 3, which we report
under the Streamlined Energy and Carbon Reporting
(SECR)regulations. For more details, see page 40.
We follow the methodology of ISO 14064-1 (Specification
withguidance at the organisation level for quantification and
reporting of greenhouse gas emissions and removals), and
emission factors from UK Government GHG Conversion Factors
for Company Reporting. We calculate our emissions using
factors published each year by the UK Government. In our
greenhouse gas/carbon emissions reporting, as well as
recording carbon dioxide (CO
2
), we include all other GHGs
covered under good practice reporting, that is: methane
(CH
4
),nitrous oxide (N
2
O), hydrofluorocarbons (HFC),
perfluorocarbons (PFC) and sulphur hexafluoride (SF
6
).
Wecalculate and report GHG emissions in tonnes of carbon
dioxide equivalent (tCO
2
e), following recommended best
practice. Procured renewable electricity and gas is calculated
inaccordance with the WBCSD – WSI Scope 2 Guidance on
procured renewable energy (2015). Conversion Factors have
been applied based on activity data wherever possible,
using2023 factors as published by DEFRA (Department for
Environment, Food and Rural Affairs) and DES&NZ (Department
for Energy Security and Net Zero). Where activity data is not
available, conversion factors have been applied based on
DEFRA-published 2020 EEIO spend based conversion factors.
Scope 1 Category 1 – Purchased Goods and Services emissions
constitute the majority of declared emissions, and were
calculated based on supplier stated emissions, where available.
A proportion of supplier stated emissions were then allocated
toCategory 1, based on spend with supplier, as a percentage
oftotal reported revenue. This approach calculated emissions
based on 78% of BSS spend, and 90% of Phoenix spend.
In line with ISO 14064-1, in reporting our carbon footprint
weuse the principle of operational and financial control. This
involves us accounting for GHG emissions from operations over
which BTG has control; both financial control – where we direct
the financial and working policies of our businesses to gain
economic benefits from our activities – and operational control,
where we have full authority to introduce and implement our
working policies.
To calculate our emissions, we use Greenhouse Gas Protocol
standards, which categorise emissions into three scopes. More
information about our carbon reduction targets, workstreams
and performance data is set out on pages 38 to 43, and under
sustainability at bytesplc.com.
We will continue to improve the quality and coverage of our
carbon emissions and associated reporting. As this process
matures, we will continue to work with external experts to assure
our carbon data disclosures. In 2023/24, we worked to improve
data and methodological accuracy for calculating our emissions.
We will continue to try and improve the data quality and
accuracy, and remove assumptions where possible.
Waste management and water are included within our carbon
calculations, but we are also aiming to have a separate waste
and water policy based on usage. We consider that impacts
relating to biodiversity and land use are not material to our
business and therefore outside our measurement scope.
However, we will continue to undertake initiatives to improve
thebiodiversity in our local areas, through volunteering with
charities and to educate on the importance of our natural
world,and also through our offsetting initiatives, which
haveabiodiversity benefit.
Annual Report and Accounts 2023/24 195
Financial calendar
Company information
Bytes Technology Group plc
A public limited company
incorporatedin England & Wales
underthe Companies Act 2006
withregistered number 12935776
Registered Office
Bytes House
Randalls Way
Leatherhead
Surrey
KT22 7TW
Group Company Secretary
WK Groenewald
+44 (0)1372 418992
wk.groenewald@bytes.co.uk
Bytes House
Randalls Way
Leatherhead
Surrey
KT22 7TW
Investor relations
Investor relations
+44 (0)1372 418500
IR@bytes.co.uk
Bytes House
Randalls Way
Leatherhead
Surrey
KT22 7TW
Financial calendar
23 May 2024
Release of results for the financial year ended 29 February 2024
11 July 2024 14:00 (BST)
Annual General Meeting
October 2024
Interim results
Public relations
Headland Consultancy
Stephen Malthouse
Henry Wallers
Jack Gault
+44 (0)20 3805 4822
bytes@headlandconsultancy.com
Cannon Green
1 Suffolk Lane
London
EC4R 0AX
Corporate brokers and
financialadvisors
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
JSE sponsor
Investec Bank Limited
100 Grayston Drive
Sandton
Johannesburg
2196
South Africa
Legal advisors
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Independent auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Registrar (UK)
Computershare Investor Services
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Transfer secretaries (SA)
Computershare Investor Services
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
South Africa
196 Bytes Technology Group plc
OTHER INFORMATION
Printed sustainably in the UK by
Pureprint, aCarbon Neutral company
with FSC
®
Chainofcustody and an
ISO14001-certified environmental
management system recycling over
100% of all dry waste.
Edited, designed and produced
byFalconWindsor.
falconwindsor.com
Bytes Technology Group plc | Annual Report and Accounts 2023/24