Bytes Technology Holds Guidance as Profit Lags Growth and CyberOne Deal Lands

Bytes Technology Group (LON: BYIT) reported a 17.8% rise in first-half gross profit to £97.1m, but operating profit grew just 6.6%, and it kept the full-year guidance it raised in September. The software and cloud reseller also agreed to buy CyberOne, a managed cyber security provider, for an initial £19.4m in cash.

The shares opened at 480.4p this morning, 3.9% above yesterday’s 462.2p close, and touched 494.2p before fading to 466.0p at 8.07am, up 0.8%. They had already jumped from 401.8p to 450.0p on the 17th of September, when the guidance was raised.

Operating profit rose to £35.3m from £33.1m, but slipped to 36.4% of gross profit from 40.2% a year earlier. The company points to cost normalisation, bonuses and share-based pay returning to usual levels, with about half of the c.£4.5m full-year cost falling in the half.

The board still expects full-year gross profit growth in the low to mid-teens and operating profit growth in the low to mid single digits, excluding CyberOne. The second half faces a stronger comparative, with costs slightly weighted to it.

Profit growth trailed gross profit, and cash fell after £41.3m was returned to shareholders, including completion of a £25m buyback.

Chief executive Sam Mudd tied the deal to where customers are spending.

Security is where our customers’ budgets are increasing fastest, and we are adding further sales capacity in November to support continued growth into FY28 and beyond.

Sam Mudd, Chief Executive Officer, Bytes Technology Group

CyberOne, founded in 2005, has over 80 staff and gives Bytes its own accredited 24×7 security operations centre, with about 90% of income recurring. Up to £18.0m more is payable over 16 months on performance. Contracts were exchanged on Friday, and completion needs clearance under the National Security and Investment Act, expected by the end of October.

The deal is outside guidance. Bytes expects FY27 operating profit from it to be offset by amortisation of acquired intangibles, with a positive EPS contribution in FY28. The 3.3p interim dividend, up from 3.2p, is payable on the 20th of November to holders on the register on the 6th of November.