23 May 2024
BYTES TECHNOLOGY GROUP
plc
('BTG', 'the
Group')
Audited preliminary results
for the year ended 29 February 2024
Strong strategic progress;
extending track record of double-digit growth
Bytes Technology Group plc (LSE:
BYIT, JSE: BYI), one of the UK's leading software, security, and
cloud services specialists, today announces its financial results
for the year ended 29 February 2024 (2023/24).
Sam
Mudd, Chief Executive Officer, said:
"I am very pleased to report another
set of positive results for BTG, with a 12.2% increase in adjusted
operating profit, driven by contributions from all areas of our
business. Despite the challenging economic climate over the past
year, our customers have continued to invest in their IT needs. Our
gross invoiced income has grown by 26.7%, and our gross profit has
risen by 12.5%, as we have expanded our client base in both the
public and corporate sectors and increased our share of wallet
among existing customers.
"The Group has made strategic
investments in personnel, internal systems, and new vendor
accreditations to drive future growth and assist our customers in
navigating the complexities of secure IT environments. Our strong
relationship with Microsoft enables us to capitalise on exciting
opportunities such as Copilot, Azure Virtual Solutions, and
Business Apps. With continued demand for cloud adoption, backup,
storage, and security solutions, these will be our key focus areas
in 2024/25.
"Moving forward, through our
passionate, talented, and experienced staff, we are well-positioned
to continue providing high-quality licensing advice, technical
support, and service delivery to meet our customers' needs. This
will remain our defining USP."
Financial
performance
|
£'million
|
Year ended 29 February
2024
|
Year ended 28 February
2023
|
% change year on
year
|
|
|
|
|
|
|
Gross invoiced income (GII)1
|
£1,823.0m
|
£1,439.3m
|
26.7%
|
|
Revenue2
|
£207.0m
|
£184.4m
|
12.3%
|
|
|
|
|
|
|
Gross profit (GP)
Gross margin % (GP/Revenue)
GP/GII %
|
£145.8m
70.4%
8.0%
|
£129.6m
70.3%
9.0%
|
12.5%
|
|
Operating profit
|
£56.7m
|
£50.9m
|
11.4%
|
|
|
|
|
|
|
Adjusted operating profit (AOP)3
AOP/GP %
Profit after tax
Cash
|
£63.3m
43.4%
£46.9m
£88.8m
|
£56.4m
43.5%
£40.4m
£73.0m
|
12.2%
16.1%
21.6%
|
|
|
|
|
|
|
Cash conversion (current
period)4
|
104.3%
|
84.3%
|
|
|
|
|
|
|
|
Earnings per share (pence)
|
19.55
|
16.88
|
15.8%
|
|
|
|
|
|
|
Final dividend per share (pence)
Special dividend per share (pence)
|
6.0
8.7
|
5.1
7.5
|
17.6%
16.0%
|
Financial
highlights
- GII increased
26.7% to £1,823.0 million (2022/23: £1,439.3 million).
The exceptional level of growth was underpinned
by strategically important contract wins in the public sector (most
notably with the NHS and HMRC) and by continued demand from
corporate customers.
- Revenue
increased 12.3% to £207.0 million (2022/23: £184.4
million).
- Growth in GP of
12.5% to £145.8 million (2022/23: £129.6 million) supported by
higher GP per customer of £24,400 (2022/23:
£21,800).
- Operating profit
increased by 11.4% to £56.7 million (2022/23: £50.9
million).
- AOP increased by
12.2% to £63.3 million (2022/23: £56.4 million); AOP as a
percentage of GP has remained in line with the previous year at
43.4% as we continue to invest in the business.
- Growth in profit
after tax of 16.1% to £46.9 million (2022/23: £40.4 million), with
high levels of interest income offsetting the impact of the rise in
the corporation tax rate from April 2023.
- Earnings per
share increased 15.8% to 19.55 pence (2022/23: 16.88
pence).
- Full-year cash
conversion of 104.3% reflects strong cash collection from customers
and in line with our annual target of 100%, an increase over the
84.3% achieved in 2022/23 and resulting in closing cash of £88.8
million (2022/23: £73.0 million).
Final and special
dividend
- The Board
proposes a final dividend of 6.0 pence per share and a special
dividend of 8.7 pence per share.
- The final
dividend represents a 17.6% increase over last year's payment,
reflecting the strong growth in adjusted profit after tax, and
takes the full-year dividend to 8.7 pence per share, an increase of
16.0%.
- The special
dividend has been increased by 16.0%, therefore matching the
increase in the full year dividend.
Operational
highlights
- Customers that
traded with BTG last year contributed 97% of our GP this year
(2022/23: 96%), at a renewal rate of 109%.
- BTG committed to
allocate Copilot licenses across 63% of internal staff (100% of
sales and marketing teams) following the successful trials held in
H2 2023/24.
- Increased
headcount in the year by 13.7% to 1,057 (2022/23: 930) in order to
meet high levels of customer demand; particular focus on bolstering
sales and service delivery teams, including net new 72 sales
heads.
- Continued
expansion of our physical footprint with the opening of a London
office in March 2023.
- Bytes Software
Services awards in 2023 included Mimecast VAR Customer Excellence
Partner of the Year, Forcepoint Partner Excellence Award, Rubrik
Top Growth Partner of the Year, Checkpoint Cloud Partner of the
Year, CyberArk Commercial Partner of the Year, and Tenable Growth
Partner of the Year.
- Phoenix Software
awards in 2023 included Microsoft Global Modern Endpoint Management
Partner of the Year, VMware Winner of the Industry Award, Veeam
Public Sector Partner of the Year, Druva International Partner of
the Year, Sophos Public Sector Partner of the Year (EMEA North),
and Adobe Best Retention Program Award.
- Both Bytes
Software Services and Phoenix Software named among the UK's top 50
Best Workplaces 2024 in the Large Company category. This is in
addition to both being listed by Great Places in the Tech, Women
and Wellbeing categories for 2023.
Current trading and
outlook
In 2023/24, we performed strongly,
continuing our trend of double-digit growth across all key
financial metrics. Whilst we operate in highly competitive markets
amidst challenging macroeconomic conditions, by nurturing our
customer relationships, extending our strong vendor partnerships,
and leveraging the technical and commercial skills of our teams, we
remain confident in our ability to succeed and make further
progress in 2024/25.
Analyst and investor
presentation
A presentation for sell-side
analysts and investors will be held today at 9:30am (BST) via a
live video webcast that can be accessed using the link:
https://stream.brrmedia.co.uk/broadcast/66321bc93d21e42c1c32c267
A recording of the webcast will be
available after the event at www.bytesplc.com.
The announcement and presentation will be available at
www.bytesplc.com
from 7.00am and 9.00am (BST),
respectively.
Enquiries
|
Bytes Technology Group plc
|
Tel: +44
(0)1372 418 500
|
|
Sam Mudd, Chief Executive
Officer
Andrew Holden, Chief Financial
Officer
|
|
|
|
|
|
Headland Consultancy Ltd
|
Tel: +44
(0)20 3805 4822
|
|
Stephen Malthouse
|
|
|
Henry Wallers
|
|
|
Jack Gault
|
|
Forward-looking
statements
This announcement includes
statements that are, or may be deemed to be, 'forward-looking
statements'. By their nature, forward-looking statements involve
risk and uncertainty since they relate to future events and
circumstances. Actual results may, and often do, differ materially
from forward-looking statements.
Any forward-looking statements in
this announcement reflect the Group's view with respect to future
events as at the date of this announcement. Save as required by law
or by the Listing Rules of the UK Listing Authority, the Group
undertakes no obligation to publicly revise any forward-looking
statements in this announcement following any change in its
expectations or to reflect events or circumstances after the date
of this announcement.
About Bytes Technology Group
plc
BTG is one of the UK's leading
providers of IT software offerings and solutions, with a focus on
cloud, security, and AI products. The Group enables effective and
cost-efficient technology sourcing, adoption and management across
software services, including in the areas of security and the
cloud. It aims to deliver the latest technology to a diverse range
of customers across corporate and public sectors and has a long
track record of delivering strong financial performance.
The Group has a primary listing on
the Main Market of the London Stock Exchange and a secondary
listing on the Johannesburg Stock Exchange.
1 'Gross invoiced income' (GII) is a
non-International Financial Reporting Standard (IFRS) alternative
performance measure that reflects gross income billed to customers
adjusted for deferred and accrued revenue items. GII has a direct
influence on our movements in working capital, reflects our risks
and shows the performance of our sales teams.
2 'Revenue' is reported in accordance with IFRS 15 Revenue from
Contracts with Customers. Under this standard, the Group is
required to exercise judgement to determine whether the Group is
acting as principal or agent in performing its contractual
obligations. Revenue in respect of contracts for which the Group is
determined to be acting as an agent is recognised on a 'net' basis
(the gross profit achieved on the contract and not the gross income
billed to the customer). Our key financial
metrics of gross invoiced income, gross profit, adjusted operating
profit and cash conversion are unaffected by this
judgement.
3 'Adjusted operating profit' is a non-IFRS alternative
performance measure that excludes from operating profit the effects
of significant items of expenditure that do not reflect our
underlying operations. Amortisation of acquired intangible assets
and share-based payment charges are both excluded on this basis.
The reconciliation of adjusted operating profit to operating profit
is set out in the Chief Financial Officer's review
below.
4 '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.
_______________________________________________________________________________
Chief Executive Officer's
review
A
strong performance delivering on our strategy
2023/24 was another year of strong
performance with the Group growing adjusted operating profit (AOP)
by 12.2% and gross profit (GP) by 12.5%, driven by a 26.7% increase
in gross invoiced income (GII). Our revenue, stated after the
netting adjustment for software and external services sales, under
IFRS 15, was up 12.3%.
Despite the ongoing economic
uncertainty, we have continued to achieve double-digit growth year
on year, underpinned by our diverse range of product offerings,
including software, IT services, and hardware solutions from
leading vendors and software publishers and reflecting the robust
nature of IT spending across the UK and Ireland.
The scale of the increase in GII is
in part due to our success in securing large public sector
contracts, illustrating our credibility and strength in bidding for
significant government software opportunities under the Crown
Commercial Services framework agreement. While these sales are
initially won at reduced margins, due to the competitive tendering
process, we have a strategy and track record of growing the
profitability of these contracts over time to secure additional
opportunities within those accounts. Additionally, our GII has
grown well across our corporate sector customers, increasing by
17.6%, reflecting our continued success in this area.
Our growth in 2023/24 continued to
be driven by customers' demand for resilient and efficient IT
environments around security, cloud adoption, digital
transformation, hybrid data centers, and storage. These are areas
where we will continue to invest in pre-sales and specialist
technical skills to expand our opportunities with existing and new
customers. Examples of our services delivery capabilities include
our Security Operation Centre (SOC), Governance, Risk and
Compliance (GRC), and Software Asset Management (SAM) including
licensing spend optimisation supported by our own IP in the form of
Quantum and Licence Dashboard. The expansion of our IT services
capability is further enhanced by the renewal of our Microsoft
Azure Expert status for the provision of managed services, along
with many other key vendor accreditations.
Customer investments increasingly
take the form of annuity contracts, providing confidence in our
future growth prospects and the potential for up-selling and
cross-selling opportunities with existing clients. Most recently
this is seen in the strong customer
response to Microsoft's AI products, as we have commenced sales of
Copilot and associated in-house services to support customer
readiness and adoption. We continue to expand our internal skills
through AI-dedicated teams in preparation for this to gain
increasing momentum in 2024/25 and beyond. Alongside this, other
vendors also have a pipeline of AI-supported software solutions
that we look forward to rolling out to our customers.
We are proud of the energy,
enthusiasm and professionalism demonstrated by our people,
now with over 1,000 staff who do a tremendous job
supporting our customers and providing outstanding service levels.
We continue to focus on targeted recruitment and training and
attracting talent, in front-end sales,
delivery teams and across all supporting areas, to help with our ambitious growth plans. A number of recently
announced appointments demonstrate our desire to grow the careers
of our staff internally, such as Phoenix Software's Managing
Director appointment of Clare Metcalfe, and on attracting external
talent, such as Bytes Software Services new Chief Commercial
Officer, Hayley Mooney.
As a management team, we are
extremely pleased with the way our people continue to embrace our
collaborative, team-based culture. Our flexible working regime
continues to deliver positive results for our business, while also
meeting our people's aspirations for a healthy work/life balance.
In June 2023, we launched our third Share Save Plan, which has
again been well received by our employees, with over 50%
participating in one or more of these plans.
To support the growth in sales and
people, we continue to invest in, and evolve, our internal systems
both to improve user experiences and to drive efficiencies.
Notwithstanding this investment, our AOP as a
percentage of GP has remained in line with the previous year at
just over 43% and meeting our sustainable target of more than
40%.
We have continued to deepen our
relationships with key partners and are especially pleased to have
been recognised by leading industry vendors. Phoenix has been named
2023 Microsoft Modern Endpoint Management Global Partner of the
Year, along with receiving awards from VMware, Sophos and Adobe,
while Bytes received awards from Mimecast, Forcepoint and Rubrik,
to name just a few, reflecting the status and high esteem that the
Group has with global technology leaders, and is testament to the
expertise of our staff and the customer success stories that we
deliver.
We are committed to executing our
strategy in a responsible manner, with sustainability rooted in
everything we do. Our sustainability framework aims to deliver
positive impacts for our stakeholders across the key themes we have
identified as most relevant for the environment in which we
operate. Within each theme - financial sustainability, corporate
responsibility, stakeholder engagement and good governance - we set
ourselves focus areas that drive our activities. Through our
staff-led working groups, we allocate time and resources to various
environmental initiatives and to corporate social responsibility
activities. We remain committed to supporting diversity throughout
our business and are proud of the balance represented across our
people. We continue our efforts to align with broader diversity
targets to reflect the society in which we, and our stakeholders,
operate. More details in respect of our sustainability initiatives
are set out below.
Our dividend policy is to distribute
40% of the Group's post-tax pre-exceptional earnings to
shareholders by way of normal dividends. Accordingly, we are
pleased to confirm that the Board has proposed a final dividend of
6.0 pence per share and an additional special dividend of 8.7 pence
per share that, subject to shareholder approval, will both be paid
on 2 August 2024 to shareholders on the register at 19 July
2024.
My appointment as CEO was confirmed
in May 2024 following what had been a challenging couple of months
for the Group. Throughout the period since Neil Murphy's
resignation, I have been hugely impressed by the commitment and
professionalism of all of our staff as they remained focused on
delivering our strategic priorities as we have entered 2024/25. I
am excited to have the opportunity to lead BTG on the next stage of
its journey and I wish to extend my gratitude to all my colleagues
for their hard work and dedication to the business. Finally, I
would like to thank our clients for their support and entrusting
their business to us; together, our staff and customers are our
lifeblood and will always be our top priority.
Continued focus on
environment, social and governance (ESG)
Our approach to responsible business
and ESG is aimed at helping to build a sustainable future and
create long-term value for the Group and its stakeholders. Our
strategy is underpinned by our purpose and values, which fosters an
aligned culture across the organisation. During the period, we
further progressed our ESG initiatives in the following
ways.
Increasing our carbon
reporting
In 2023/24, two major milestones
were achieved: our calculation and baselining of Scope 3 emissions
and the submission of our carbon reduction targets to the Science
Based Targets initiative (SBTi). For the first time, we have
calculated all our Scope 1 and 2 and relevant Scope 3 emissions,
which has given us a broad view of our key sources of emissions. In
July 2023, we made a Group commitment to submit our targets to the
SBTi for validation against the Paris Agreement's aim for less than
a 1.5-degree global temperature increase. These were submitted in
December 2023, and we expect to have our targets validated during
2024. 2023/24 also saw enhanced disclosures through CDP, which was
scored for the first time and is in line with our
industry.
We continue to monitor the progress
of the IFRS S1 and S2 standards being adopted by the UK Government
and will review our Annual Report and Accounts following adoption.
The standards will incorporate the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD), so we expect
to be in a good position to transition. Within our businesses,
we are supporting the evolution to greener transport to reduce
business travel and commuting emissions. The Group has successfully
deployed an electric vehicle scheme during the period.
Making positive impacts on our
society
Employee support and wellbeing
continue as key focus areas for the Group, particularly in light of
the continuing cost-of-living crisis, with wellbeing days an
important part in driving a healthier and happier workforce. In
addition to this, employees have been engaged in, and managers
trained in, the impact of menopause and in neurodiversity as part
of wider awareness programmes.
Our strong culture remains a driving
force behind our successful growth. We continue to support this
through staff events, incentive trips and the development of our
people with continued learning and training opportunities. In
2023/24, there has been an expansion of the apprenticeship scheme
into more areas of the business. Staff are also engaged with
through various channels and improvements are made based on their
ideas and initiatives.
During 2023/24, we supported our
communities through donations, fundraising events and volunteer
days, such as with the Wildlife Aid Foundation, the Rainbow Trust
and St Leonard's Hospice. Charity sport days have continued
over the summer months, engaging with vendors to widen the impact.
In addition to fundraising and volunteering, due to an IT refresh,
Bytes was also able to donate 140 laptops to employee-nominated
non-profit organisations and charities across the UK.
Board composition and committee
memberships
The below changes to the composition
of the Board and committee memberships were made in 2023/24, a
number of these changes followed the resignation of Neil Murphy.
The appointments of Sam Mudd as CEO and Ross Paterson and Anna
Vikström Persson followed a selection process led by the Chair and
with support from a leading external search firm. The appointments
bring a wealth of experience that complement and enhance the
existing expertise within the Board.
Changes to the Boad and committee
memberships made or announced during 2023/24:
-
12 July 2023: David Maw retired as Non-Executive
Director.
-
12 July 2023: Sam Mudd appointed as an Executive
Director at the Annual General Meeting while continuing in her role
as Managing Director (MD) of Phoenix Software Limited, a
wholly-owned subsidiary of the Group.
-
12 July 2023: Erika Schraner assumed the role of
Designated Non-Executive (DNED) for employee engagement, replacing
David Maw.
-
31 October 2023: Alison Vincent stepped down
from the Board as an Independent Non-Executive Director.
-
1 November 2023: Erika Schraner appointed Chair
of the Remuneration Committee.
-
1 February 2024: Shruthi Chindalur appointed as
an Independent Non-Executive Director and member of the Audit,
Nomination and Remuneration Committees.
-
21 February 2024: Neil Murphy resigned as Chief
Executive Director (CEO) and Executive Director.
-
21 February 2024: Sam Mudd appointed as Interim
CEO:
Further changes to the composition
of the Board and committee memberships were made or announced
following the period end:
-
25 March 2024: Mike Phillips resigned as an
Independent Non-Executive Director.
-
25 March 2024: Erika Schraner appointed as Senior
Independent Director and Interim Chair of the Audit
Committee.
-
25 March 2024: Shruthi Chindalur assumed the role
of DNED for employee engagement.
-
10 May 2024: Sam Mudd appointed as
CEO.
-
Effective 1 June
2024:
o Ross Paterson appointed as an Independent Non-Executive
Director, Chair of the Audit Committee, and member of the
Nomination and Remuneration Committees.
o Anna Vikström Persson appointed as an Independent
Non-Executive Director and member of the Audit, Nomination and
Remuneration Committees.
o ESG Committee of the Board established, members will be Anna
Vikström Persson (Chair), Patrick De Smedt, Erika
Schraner, Ross Paterson and Shruthi Chindalur.
Chief Financial Officer's
review
|
|
Year ended 29 February
2024
|
Year ended 28 February
2023
|
Change
|
|
Income statement
|
£'m
|
£'m
|
%
|
|
Gross invoiced income (GII)
|
1,823.0
|
1,439.3
|
26.7%
|
|
GII split by product:
|
|
|
|
|
Software
|
1,722.0
|
1,346.1
|
27.9%
|
|
Hardware
|
41.4
|
38.3
|
8.1%
|
|
Services
internal1
|
31.5
|
28.5
|
10.5%
|
|
Services
external2
|
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
internal1
|
31.5
|
28.5
|
10.5%
|
|
Services
external2
|
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
Finance costs
Share of profit of
associate3
|
5.1
(0.4)
0.2
|
-
(0.5)
-
|
|
|
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
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.
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 the years in our front-line sales teams, vendor and technology
specialists, service delivery staff and technical support
personnel, backed up by our marketing, operations, and finance
teams. It has been, and will remain, a carefully managed aspect of
our business.
In addition to continuing to hire in
line with growth and to ensure we have the expertise required to
provide our clients with the best service, our commitment to
develop, promote and expand from within the existing employee base,
giving our people careers rather than just employment, is at the
heart of our progress as a business. This has contributed to long
tenure from our employees which in turn supports the long
relationships we have established with our customers, vendors, and
partners. 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 income 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.
Balance sheet and cash
flow
|
|
As at
|
|
|
29
February
|
28
February
|
|
|
2024
|
2023
|
|
Balance sheet
|
£'m
|
£'m
|
|
|
|
|
|
Investment in associate
Property plant and
equipment
|
3.2
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 was 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 (2022/2023: 42).
The consolidated cash flow is set
out below along with the key flows which that affected
it:
|
|
|
Year ended 29 February
2024
|
Year ended 28 February
2023
|
|
|
Cash flow
|
£'m
|
£'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
Investment in associate
|
(36.6)
(3.0)
|
(30.7)
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.
The salient dates applicable to the
dividend are as follows:
|
Dividend announcement
date
|
Thursday, 23 May 2024
|
|
Currency conversion determined and
announced together with the South African (SA) tax treatment on
SENS by 11.00
|
Monday,
15 July 2024
|
|
AGM at which dividend resolutions
will be proposed
|
Thursday, 11 July 2024
|
|
Last day to trade cum dividend (SA
register)
|
Tuesday,
16 July 2024
|
|
Commence trading ex-dividend (SA
register)
|
Wednesday, 17 July 2024
|
|
Last day to trade cum dividend (UK
register)
|
Wednesday, 17 July 2024
|
|
Commence trading ex-dividend (UK
register)
|
Thursday, 18 July 2024
|
|
Record date
|
Friday,
19 July 2024
|
|
Payment date
|
Friday,
2 August 2024
|
Additional information required by
the Johannesburg Stock Exchange:
1. The GBP:ZAR
currency conversion will be determined and published on SENS on
Monday, 15 July 2024.
2. A dividend
withholding tax of 20% will be applicable to all shareholders on
the South African register unless a shareholder qualifies for
exemption not to pay such dividend withholding tax.
3. The dividend
payment will be made from a foreign source (UK).
4. At Thursday,
23 May 2024, being the declaration announcement date of the
dividend, the company had a total of 240,361,243 shares in issue
(with no treasury shares).
5. No transfers
of shareholdings to and from South Africa will be permitted between
Monday, 15 July 2024 and Friday, 19 July 2024 (both dates
inclusive). No dematerialisation or rematerialisation orders will be permitted between Wednesday,
17 July 2024 and Friday, 19 July 2024 (both dates
inclusive).
Principal
risks
The Group Board has overall
responsibility for risk. This includes maintaining our risk
management (ERM) framework and internal control systems and setting
our risk appetite. In doing this, it receives support from our
Audit Committee, our internal audit partner and our executive
management teams. However, through their skills and diligence,
everyone in the Group plays a part in protecting our business from
risk and making the most of our opportunities.
We have identified principal risks
and uncertainties that could have a significant impact on the
Group's operations, which we assign to five categories: financial,
strategic, process and systems, operational and regulatory. BTG's
management reviews each principal risk looking at its level of
severity, where it overlaps with other risks, the speed at which it
is changing and its relevance to the Group. We consider the
principal risks both individually and collectively, so that we can
appreciate the interplay between them and understand the entire
risk landscape.
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 continuous journey, requiring
review throughout the year. It starts with defining our risk
appetite, which was unchanged this year, as we maintained our
cautious approach. Our ERM framework enables us to identify and
manage risk, and we believe that it continues to serve us well. 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.
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. We now have 14
rather than 11 principal risks, taking into account the following
changes.
New principal risks:
· The
Climate change and sustainability risk 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 ahead of expectations from investors,
employees, customers and other 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.
New emerging risk:
· In
October 2023 we identified a third emerging risk from AI and the
impact this might have on our customers and their workforce due to
the potential to change the internal IT and working landscape and
to present risks from moral, legal and ethical
standpoints.
Existing principal risks with
updated focus:
· Our
Economic disruption and Inflation risks have been amended. Economic
disruption now focuses on economic impacts affecting our customers,
while Inflation now focuses on the internal effect on our
workforce.
· The
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 Competition to include the evolving
competitor landscape, such as through AI and
marketplaces.
· The
Relevance and emerging technology risk now incorporates the cost of
staying current and includes the cost of additional resources as
well as upgrading the technologies to use similar
technologies.
· We
have expanded the Business continuity failure risk to include risk
to and from people - like insider threats - and kept the risks from
processes and technology.
· Under the Attract and retain staff while keeping our culture
risk, we have amended skills shortage from a widespread IT shortage
to a shortage in emerging areas, such as AI, where expertise is in
high demand.
Existing emerging
risks:
· As noted above,
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.
|
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
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 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.
|
|
3
Changes to vendors' commercial model
|
Risk owner CEO
|
|
The
risk
We receive incentive income from our
vendor partners 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 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 vendor partners' goals so
that we don't lose out on these incentives. Close and regular
communication with all our major vendor partners 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
Staff costs make up most of our
overheads, so our attention has been focused on our staff 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 staff 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 targeted 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 cashflow.
|
|
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 continuously 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.
Artificial intelligence/machine
learning has been identified as a new emerging risk, and so will be
explored and monitored for risks and opportunities to our
business.
Currently, there is no sign of any
commoditisation that would be a serious threat to our business
model in the short or medium term.
|
|
The
impact
This risk could have a material
adverse impact on our business and profitability, potentially
needing a shift in business operations, including a strategic
overhaul of the products, solutions and services that we offer to
the market.
More consolidation could lead to
less competition between vendors and cause prices to value-added
resellers, like us, to rise and service levels to fall. Direct
resale to customers could also increase. This could erode reseller
margins, given the purchase cost is less for the distributor than
the reseller. This could reduce our market, margin and
profits.
|
|
8
Relevance and emerging technology
|
Risk owner CEO
|
|
The
risk
As the technology and security
markets evolve rapidly and become more complex, the risk exists
that we might not keep pace and so fail to be considered for new
opportunities by our customers.
|
How
we manage it
We stay relevant to our customers
by:
- Continuing to
offer them expert advice and innovative solutions
- Specialising in
high-demand areas
- Holding superior
levels of certification
- Maintaining our
good reputation and helping clients find the right solutions in a
complex, often confusing IT marketplace.
We defend our position by keeping
abreast of new technologies and the innovators who develop them. We
do this, for example, by running a cyber accelerator programme for
new and emerging solution providers, joining industry forums and
sitting on new technology committees. We have expanded the number
and range of our subject-matter experts, who stay ahead of
developments in their areas and communicate this internally and
externally.
By identifying and developing
bonds with emerging companies, we maintain good relationships with
them as they grow and give our customers access to their
technologies. This is core to our business, so the risk from this
is relatively low.
|
|
The
impact
Customers have wide choice and
endless opportunities to research options. If we do not offer
cutting-edge products and relevant services, we could lose sales
and customers, which would affect our profitability.
|
|
Processes and
systems
|
9
Cyberthreats - direct and indirect
|
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.
|
|
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 locations 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:
-
Inflation, which is still influencing salary
expectations and wage growth
-
Skills shortage in emerging, high-demand areas,
such as artificial intelligence and machine learning
-
With remote or hybrid working becoming the norm,
potential employees in traditionally lower-paid geographical
regions being able to work remotely in higher-paying areas like
London.
Maintaining our BTG culture also
affects how we attract and retain staff, which growth can
change.
|
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 to create a new
security skill set. 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.
|
|
|
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 actions is taken.
Phoenix has appointed a Procurement
Manager and BSS 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:
- Provide
unethical working conditions and pay
- Are involved in
financial mismanagement and unethical behaviour
- Cause
environmental damage
- Operate in
sanctioned regions.
Escalating conflicts could also
affect our supply chain - for example, rerouting shipping around
South 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 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 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:
- Legal
compliance, such as adhering to global standards
- Retaining
customers, as they push to reduce emissions
- Investor
relations, such as meeting criteria for ESG funds
- Attracting and
retaining employees, as younger generations seek to work for more
purpose-driven businesses.
|
|
|
14 Regulatory and compliance
|
Risk owner CEO
|
|
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 company'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 effect multiple areas of the
business.
|
|
The
impact
Operational teams and process 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.
|
Going concern
disclosure
The Group has performed a full
going concern assessment for the year ended 29 February 2024. As
outlined in the Chief Financial Officer's review above, trading
during the year demonstrated the Group's strong performance in the
period and our resilient operating model. The Group has a healthy
liquidity position with £88.8 million of cash and cash equivalents
available at 29 February 2024. The Group also has access to a
committed revolving credit facility that covers the going concern
period to 31 August 2025 and that remains undrawn. The directors
have reviewed trading and liquidity forecasts for the Group, as
well as continuing to monitor the effects of macroeconomic,
geopolitical, and climate-related risks on the business. The
directors have also considered a number of key dependencies, which
are set out in the Group's principal risks report, and including
BTG's exposure to inflation pressures, credit risk, liquidity risk,
currency risk and foreign exchange risk. The Group continues to
model its base case, severe but plausible and stressed scenarios,
including mitigations, consistently with those disclosed in the
annual financial statements for the year ended 28 February 2023,
with the key assumptions summarised within the financial statements
below. Under all scenarios assessed, the Group would remain cash
positive throughout the whole of the going concern period without
needing to utilise the revolving credit facility.
Going concern conclusion
Based on the analysis described
above, the Group has sufficient liquidity headroom through the
forecast period. The directors therefore have reasonable
expectation that the Group has the financial resources to enable it
to continue in operational existence for the period up to 31 August
2025. Accordingly, the directors conclude it to be appropriate that
the consolidated financial statements be prepared on a going
concern basis.
Responsibility statement pursuant to the Financial
Services Authority's Disclosure and Transparency Rule 4 (DTR
4)
Each director of the company
confirms that (solely for the purpose of DTR 4) to the best of
his/her knowledge:
·
The financial information in this document,
prepared in accordance with the applicable UK law and applicable
accounting standards, gives a true and fair view of the assets,
liabilities, financial position and result of the Group taken as a
whole.
·
The Chief Executive Officer's and Chief Financial
Officer's reviews include a fair review of the development and
performance of the business and the position of the Group
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
On behalf of the Board
Sam
Mudd
Andrew Holden
Chief Executive
Officer Chief
Financial Officer
23 May 2024
Consolidated statement of
profit or loss
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
Note
|
|
£'000
|
£'000
|
|
Revenue
|
|
3
|
|
207,021
|
184,421
|
|
Cost of sales
|
|
|
|
(61,243)
|
(54,848)
|
|
Gross profit
|
|
|
|
145,778
|
129,573
|
|
Administrative expenses
|
|
4
|
|
(87,839)
|
(77,753)
|
|
Impairment on trade
receivables
|
|
17
|
|
(1,227)
|
(937)
|
|
Operating profit
|
|
|
|
56,712
|
50,883
|
|
Finance income
|
|
7
|
|
5,111
|
-
|
|
Finance costs
|
|
7
|
|
(393)
|
(491)
|
|
Share of profit of
associate
|
|
12
|
|
166
|
-
|
|
Profit before taxation
|
|
|
|
61,596
|
50,392
|
|
Income tax expense
|
|
8
|
|
(14,745)
|
(9,971)
|
|
Profit after taxation
|
|
|
|
46,851
|
40,421
|
|
Profit for the period attributable to owners of the parent
company
|
|
|
|
46,851
|
40,421
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence
|
Pence
|
|
Basic earnings per ordinary
share
|
|
28
|
|
19.55
|
16.88
|
|
Diluted earnings per ordinary
share
|
|
28
|
|
18.85
|
16.28
|
|
|
|
|
|
|
|
The consolidated statement of profit
or loss has been prepared on the basis that all operations are
continuing operations.
There are no items to be recognised
in other comprehensive income and hence, the Group has not
presented a statement of other comprehensive income.
Consolidated statement of
financial position
|
|
|
|
|
|
|
As at
29
February
|
As
at
28
February
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
|
|
|
Note
|
£'000
|
£'000
|
|
Assets
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
9
|
8,478
|
8,380
|
|
Right-of-use assets
|
|
|
|
|
10
|
1,411
|
783
|
|
Intangible assets
|
|
|
|
|
11
|
40,646
|
41,526
|
|
Investment in associate
|
|
|
|
|
12
|
3,193
|
-
|
|
Contract assets
|
|
|
|
|
13
|
2,689
|
397
|
|
Deferred tax asset
|
|
|
|
|
8
|
834
|
-
|
|
Total non-current assets
|
|
|
|
|
|
57,251
|
51,086
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
15
|
60
|
58
|
|
Contract assets
|
|
|
|
|
13
|
11,756
|
10,684
|
|
Trade and other
receivables
|
|
|
|
|
17
|
221,815
|
185,920
|
|
Cash and cash
equivalents
|
|
|
|
|
18
|
88,836
|
73,019
|
|
Total current assets
|
|
|
|
|
|
322,467
|
269,681
|
|
Total assets
|
|
|
|
|
|
379,718
|
320,767
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
10
|
(1,314)
|
(917)
|
|
Contract liabilities
|
|
|
|
|
14
|
(2,137)
|
(1,976)
|
|
Deferred tax
liabilities
|
|
|
|
|
8
|
-
|
(635)
|
|
Total non-current liabilities
|
|
|
|
|
|
(3,451)
|
(3,528)
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade and other
payables
|
|
|
|
|
19
|
(277,917)
|
(231,717)
|
|
Contract liabilities
|
|
|
|
|
14
|
(19,348)
|
(23,914)
|
|
Current tax liabilities
|
|
|
|
|
|
(243)
|
(36)
|
|
Lease liabilities
|
|
|
|
|
10
|
(423)
|
(75)
|
|
Total current liabilities
|
|
|
|
|
|
(297,931)
|
(255,742)
|
|
Total liabilities
|
|
|
|
|
|
(301,382)
|
(259,270)
|
|
Net assets
|
|
|
|
|
|
78,336
|
61,497
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
20
|
2,404
|
2,395
|
|
Share premium
|
|
|
|
|
20
|
633,650
|
633,636
|
|
Share-based payment
reserve
|
|
|
|
|
|
11,050
|
7,235
|
|
Merger reserve
|
|
|
|
|
21
|
(644,375)
|
(644,375)
|
|
Retained earnings
|
|
|
|
|
|
75,607
|
62,606
|
|
Total equity
|
|
|
|
|
|
78,336
|
61,497
|
|
|
|
|
|
|
|
|
|
The consolidated financial
statements were authorised for issue by the Board on 22 May
2024.
Consolidated statement of
changes in equity
|
|
|
|
Attributable to owners of
the company
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
Share
premium
|
Share-based payment
reserve
|
Merger
reserve
|
Retained
earnings
|
Total
equity
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 March 2022
|
|
2,395
|
633,636
|
3,072
|
(644,375)
|
52,839
|
47,567
|
|
Total comprehensive income for the
year
|
|
-
|
-
|
-
|
-
|
40,421
|
40,421
|
|
Dividends paid
|
26(b)
|
-
|
-
|
-
|
-
|
(30,654)
|
(30,654)
|
|
Share-based payment
transactions
|
27
|
-
|
-
|
4,188
|
-
|
-
|
4,188
|
|
Tax adjustments
|
8
|
-
|
-
|
(25)
|
-
|
-
|
(25)
|
|
Balance at 28 February
2023
|
|
2,395
|
633,636
|
7,235
|
(644,375)
|
62,606
|
61,497
|
|
Total comprehensive income for the
year
|
|
-
|
-
|
-
|
-
|
46,851
|
46,851
|
|
Dividends paid
|
26(b)
|
-
|
-
|
-
|
-
|
(36,641)
|
(36,641)
|
|
Shares issued during the
year
|
20
|
9
|
14
|
-
|
-
|
-
|
23
|
|
Transfer to retained
earnings
|
27
|
-
|
-
|
(2,791)
|
-
|
2,791
|
-
|
|
Share-based payment
transactions
|
27
|
-
|
-
|
5,708
|
-
|
-
|
5,708
|
|
Tax adjustments
|
8
|
-
|
-
|
898
|
-
|
-
|
898
|
|
Balance at 29 February 2024
|
|
2,404
|
633,650
|
11,050
|
(644,375)
|
75,607
|
78,336
|
Consolidated statement of
cash flows
|
|
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
Note
|
|
|
|
|
£'000
|
£'000
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Cash generated from
operations
|
22
|
|
|
|
|
67,333
|
48,889
|
|
Interest received
|
7
|
|
|
|
|
5,111
|
-
|
|
Interest paid
|
7
|
|
|
|
|
(330)
|
(443)
|
|
Income taxes paid
|
|
|
|
|
|
(15,109)
|
(10,295)
|
|
Net cash inflow from operating activities
|
|
|
|
|
|
57,005
|
38,151
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Payments for property, plant and
equipment
|
9
|
|
|
|
|
(1,334)
|
(1,363)
|
|
Investment in associate
|
|
|
|
|
|
(3,027)
|
-
|
|
Net cash outflow from investing activities
|
|
|
|
|
|
(4,361)
|
(1,363)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issues of
shares
|
|
|
|
|
|
23
|
-
|
|
Principal elements of lease
payments
|
10
|
|
|
|
|
(209)
|
(233)
|
|
Dividends paid to
shareholders
|
24(b)
|
|
|
|
|
(36,641)
|
(30,654)
|
|
Net cash outflow from financing activities
|
|
|
|
|
|
(36,827)
|
(30,887)
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
15,817
|
5,901
|
|
Cash and cash equivalents at the
beginning of the financial year
|
|
|
|
|
|
73,019
|
67,118
|
|
Cash and cash equivalents at end of year
|
18
|
|
|
|
|
88,836
|
73,019
|
Notes to the consolidated
financial statements
1 Accounting
policies
1.1 General information
Bytes Technology Group plc,
together with its subsidiaries ('the Group' or 'the Bytes
business') is one of the UK's leading providers of IT software
offerings and solutions, with a focus on cloud and security
products. The Group enables effective and cost-efficient technology
sourcing, adoption and management across software services,
including in the areas of security and cloud. The Group aims to
deliver the latest technology to a diverse and embedded
non-consumer customer base and has a long track record of
delivering strong financial performance. The Group has a primary
listing on the Main Market of the London Stock Exchange (LSE) and a
secondary listing on the Johannesburg Stock Exchange
(JSE).
1.2 Basis of preparation
The Group's consolidated financial
statements have been prepared in accordance with UK-adopted
International Accounting Standards (IAS) in conformity with the
requirements of the Companies Act 2006.
The Group's material accounting
policies and presentation considerations on both the current and
comparative periods are detailed below.
The financial information
contained in this preliminary announcement does not constitute the
Group's statutory accounts for the years ended 29 February 2024 or
28 February 2023. The statutory accounts for the year ended 29
February 2024
will be filed with the Registrar
of Companies in due course. The auditors report on these accounts
was not qualified or
modified and did not contain any
statement under Sections 498(2) or (3) of the Companies Act 2006. A
separate
announcement will be made in
accordance with Disclosure and Transparency Rules (DTR) 6.3 when
the annual report and audited financial statements for the year
ended 29 February 2024 are made available on the Company's
website,
which is expected to be in June
2024.
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.
·
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.
·
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.
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.
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.
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.
·
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').
(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 program
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.
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 regulation is
subject to interpretation. It establishes provisions, where
appropriate, based on amounts expected to be paid to the tax
authorities.
Deferred income tax is provided
for in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that,
at the time of the transaction, affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by
the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised, or the deferred
income tax liability is settled.
Deferred tax assets are recognised
only if it is probable that future taxable amounts will be
available to utilise those temporary differences and
losses.
Deferred tax liabilities and
assets are not recognised for temporary differences between the
carrying amount and tax bases of investments in foreign operations
where the Group is able to control the timing of the reversal of
the temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and
liabilities are offset where there is a legally enforceable right
to offset current tax assets and liabilities and where the deferred
tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is
recognised in profit or loss, except to the extent that it relates
to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity,
respectively.
1.14 Leases
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.
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.
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.
Software
Costs associated with maintaining
software programs are recognised as an expense as incurred.
Development costs that are directly attributable to the design and
testing of identifiable and unique software products controlled by
the Group are recognised as intangible assets where the following
criteria are met:
·
It is technically feasible to complete the
software so that it will be available for use
·
Management intends to complete the software and
use or sell it
·
There is an ability to use or sell the
software
·
It can be demonstrated how the software will
generate probable future economic benefits
· Adequate
technical, financial and other resources to complete the
development and to use or sell the software are
available
·
The expenditure attributable to the software
during its development can be reliably measured.
The useful lives for software is 2
to 8 years.
Research and
development
Research expenditure and
development expenditure that do not meet the criteria above are
recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a
subsequent period.
1.22 Trade and other payables
Trade payables, sundry creditors
and accrued expenses are obligations to pay for goods or services
that have been acquired in the ordinary course of business from
suppliers. They are accounted for in accordance with the accounting
policy for financial liabilities as included above. Amounts
received from customers in advance, prior to confirming the goods
or services required, are recorded as other payables. Upon delivery
of the goods and services, these amounts are recognised in revenue.
Other payables are stated at their nominal values.
1.23 Borrowings
Borrowings are initially
recognised at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period
of the borrowings using the effective-interest method. Fees paid on
the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is
deferred until the drawdown occurs. To the extent that there is no
evidence that it is probable that some or all of the facility will
be drawn down, the fee is capitalised as a prepayment for liquidity
services and amortised over the period of the facility to which it
relates.
1.24 Provisions
Provisions are recognised when the
Group has a present legal or constructive obligation because of
past events, for which it is probable that an outflow of economic
benefits will be required to settle the obligation, and where a
reliable estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected future cash
flows at a pre-tax discount rate that reflects current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability.
1.25 Employee benefits
Short-term
obligations
Liabilities for wages and
salaries, including non-monetary benefits, annual leave and
accumulating sick leave, that are expected to be settled wholly
within 12 months after the end of the period in which the employees
render the related service are recognised in respect of employees'
services up to the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities are settled.
The liabilities are presented as current employee benefit
obligations in the balance sheet.
Post-employment
obligations
The Group operates various defined
contribution plans for its employees. Once the contributions have
been paid, the Group has no further payment obligations. The
contributions are recognised as employee benefit expense when they
are due. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future payments is
available.
Termination
benefits
Termination benefits are payable
when employment is terminated by the Group before the normal
retirement date, or when an employee accepts voluntary redundancy
in exchange for these benefits. The Group recognises termination
benefits at the earlier of the following dates: (a) when the Group
can no longer withdraw the offer of those benefits; and (b) when
the Group recognises costs for a restructuring that is within the
scope of IAS 37 and involves the payment of termination benefits.
In the case of an offer made to encourage voluntary redundancy, the
termination benefits are measured based on the number of employees
expected to accept the offer. Benefits falling due more than 12
months after the end of the reporting period are discounted to
present value.
Share-based
payments
Equity settled share-based payment
incentive scheme
Share-based compensation benefits
are provided to particular employees of the Group through the Bytes
Technology Group plc share option plans. Information relating to
all schemes is provided in note 27.
Employee options
The fair values of options granted
under the Bytes Technology Group plc share option plans are
recognised as an employee benefit expense, with a corresponding
increase in equity. The total amount to be expensed is determined
by reference to the fair value of the options granted. The
share-based payment reserve comprises the fair value of share
awards granted which are not yet exercised. The amount will be
reversed to retained earnings as and when the related awards vest
and are exercised by employees.
The total expense is recognised
over the vesting period, which is the period over which all the
specified vesting conditions are to be satisfied. At the end of
each period, the Group revises its estimates of the number of
options issued that are expected to vest based on the service
conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
1.26 Share capital
Ordinary shares are classified as
equity. Incremental costs directly attributable to the issue of
ordinary shares are recognised as a deduction from equity, net of
any tax effects.
1.27 Dividends
Dividends paid on ordinary shares
are classified as equity and are recognised as distributions in
equity.
1.28 Earnings per share
(i) Basic earnings per
share
Basic earnings per share is
calculated by dividing:
·
The profit attributable to owners of the company,
excluding any costs of servicing equity other than ordinary
shares
·
By the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the year and excluding treasury
shares.
(ii) Diluted earnings per
share
Diluted earnings per share adjusts
the figures used in the determination of basic earnings per share
to consider:
·
The after-income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares
·
The weighted average number of additional
ordinary shares that would have been outstanding, assuming the
conversion of all dilutive potential ordinary shares.
1.29 Rounding of amounts
All amounts disclosed in the
consolidated financial statements and notes have been rounded off
to the nearest thousand, unless otherwise stated.
2 Segmental
information
2(a) Description of segment
The information reported to the
Group's Chief Executive Officer, who is considered to be the chief
operating decision maker for the purposes of resource allocation
and assessment of performance, is based wholly on the overall
activities of the Group. The Group has therefore determined that it
has only one reportable segment under IFRS 8, which is that of 'IT
solutions provider'. The Group's revenue, results, assets and
liabilities for this one reportable segment can be determined by
reference to the consolidated statement of profit or loss and the
consolidated statement of financial position. An analysis of
revenues by product lines and geographical regions, which form one
reportable segment, is set out in note 3.
2(b) Adjusted operating profit
Adjusted operating profit is an
alternative performance measure which excludes the effects of
intangible assets amortisation and share-based payment
charges.
Adjusted operating profit
reconciles to operating profit as follows:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
Note
|
|
£'000
|
£'000
|
|
Adjusted operating
profit
|
|
|
|
63,300
|
56,377
|
|
Share-based payment
charges
|
|
27
|
|
(5,708)
|
(4,188)
|
|
Amortisation of acquired
intangible assets
|
|
4
|
|
(880)
|
(1,306)
|
|
Operating profit
|
|
|
|
56,712
|
50,883
|
|
|
|
|
|
|
|
3 Revenue from contracts with
customers
3(a) Disaggregation of revenue from contracts with
customers
The Group derives revenue from the
transfer of goods and services in the following major product lines
and geographical regions:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
Revenue by product
|
|
|
|
£'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
|
|
|
|
207,021
|
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 29 February
2024
£'000
|
Year
ended 28 February 2023
£'000
|
|
United Kingdom
|
|
|
|
199,912
|
177,882
|
|
Europe
|
|
|
|
4,326
|
4,358
|
|
Rest of world
|
|
|
|
2,783
|
2,181
|
|
|
|
|
|
207,021
|
184,421
|
3(b) Gross invoiced income by type
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
£'000
|
£'000
|
|
Software
|
|
|
1,721,993
|
1,346,110
|
|
Hardware
|
|
|
41,389
|
38,355
|
|
Services internal
|
|
|
31,517
|
28,454
|
|
Services external
|
|
|
28,103
|
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
|
|
|
207,021
|
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.
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:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
Note
|
£'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
|
|
Expenses relating to short-term
leases
|
|
|
10
|
250
|
25
|
|
Foreign exchange losses /
(gains)
|
|
|
|
137
|
(32)
|
5 Employees
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
Employee benefit expense:
|
|
|
|
£'000
|
£'000
|
|
Employee remuneration (including
directors' remuneration1)
|
|
|
|
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
|
4,188
|
|
|
|
|
|
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.
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
The average monthly number of employees during the year
was:
|
|
|
|
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.
6 Auditors'
remuneration
During the year, the Group
obtained the following services from the company's auditors and its
associates:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 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
services1
|
|
|
|
101
|
95
|
|
|
|
|
|
1,187
|
762
|
|
|
|
|
|
|
|
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 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
|
£'000
|
£'000
|
|
Finance income
|
|
|
|
|
|
|
Bank interest
received1
|
|
|
|
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 Interest received on cash deposited on money
market
8 Income tax
expense
The major components of the Group's income tax
expense for all periods are:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 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
|
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 29 February
2024
|
Year
ended 28 February 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%)1
|
|
|
|
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 Prorated rate for change in tax rate from 19% to 25% on 1
April 2023
Amounts recognised directly in equity
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 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)
|
|
|
|
|
|
|
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Deferred tax asset / (liabilities)
|
|
|
£'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
|
1,189
|
|
|
|
|
834
|
(635)
|
|
|
|
|
|
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Deferred tax asset/ (liabilities)
|
|
|
£'000
|
£'000
|
|
At 1 March
|
|
|
(635)
|
(1,189)
|
|
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.
9 Property, plant and
equipment
|
|
Freehold land and
buildings
|
Computer
equipment
|
Furniture, fittings and
equipment
|
Computer
software
|
Motor
vehicles
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cost
|
|
|
|
|
|
|
|
At 1 March 2022
|
8,921
|
3,875
|
1,305
|
746
|
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
|
2,143
|
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
|
7,798
|
|
On disposals
|
-
|
(25)
|
-
|
-
|
(27)
|
(52)
|
|
Charge for the year
|
421
|
584
|
51
|
163
|
17
|
1,236
|
|
At
29 February 2024
|
2,937
|
4,028
|
1,094
|
861
|
62
|
8,982
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Buildings
|
Motor
vehicles
|
Total
|
|
Right-of-use assets
|
|
£'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
|
|
|
|
|
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
As at 1
March 2022
|
|
Lease liabilities
|
|
£'000
|
£'000
|
£'000
|
|
Current
|
|
423
|
75
|
185
|
|
Non-current
|
|
1,314
|
917
|
992
|
|
|
|
1,737
|
992
|
1,177
|
|
|
|
|
|
|
|
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 29
February 2024
|
Year
ended 28 February 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 1
March 2023
|
Additions
|
Cash
flows
|
Interest
|
As at 29
February 2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Lease liabilities
|
992
|
891
|
(209)
|
63
|
1,737
|
|
Total liabilities from financing
activities
|
992
|
891
|
(209)
|
63
|
1,737
|
|
|
|
|
|
|
|
|
|
As at 1
March 2022
|
Additions
|
Cash
flows
|
Interest
|
As at 28
February 2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Lease liabilities
|
1,177
|
-
|
(233)
|
48
|
992
|
|
Total liabilities from financing
activities
|
1,177
|
-
|
(233)
|
48
|
992
|
|
|
|
|
|
|
|
11 Intangible assets
|
|
|
Goodwill
|
Customer
relationships
|
Brand
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cost
|
|
|
|
|
|
|
At
1 March 2022, 28 February 2023 and 29 February
2024
|
|
37,493
|
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
|
|
37,493
|
4,033
|
-
|
41,526
|
|
At
29 February 2024
|
|
37,493
|
3,153
|
-
|
40,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
Long-term growth
rate
|
Discount
rate
|
Goodwill carrying
amount
|
|
29
February 2024
|
%
|
%
|
£'000
|
|
Bytes Software Services
|
2
|
9.15
|
14,775
|
|
Phoenix Software
|
2
|
9.15
|
22,718
|
|
|
|
|
37,493
|
|
|
Long-term growth rate
|
Discount
rate
|
Goodwill
carrying amount
|
|
28 February 2023
|
%
|
%
|
£'000
|
|
Bytes Software Services
|
2
|
9.10
|
14,775
|
|
Phoenix Software
|
2
|
9.10
|
22,718
|
|
|
|
|
37,493
|
Growth
rates
The Group used what it considers
to be a conservative growth rate of 2% which was applied beyond the
approved budget periods. The growth rate was consistent with
publicly available information relating to long-term average growth
rates for the market in which the respective CGU
operated.
Discount
rates
Discount rates used reflect both
time value of money and other specific risks relating to the
relevant CGU. 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:
|
|
|
Bytes Software
Services
|
Phoenix
Software
|
|
29
February 2024
|
|
£'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)
|
|
|
|
Bytes
Software Services
|
Phoenix
Software
|
|
28 February 2023
|
|
£'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
|
|
45,179
|
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.
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 29 February
2024
|
As at 28
February 2023
|
|
|
|
|
£'000
|
£'000
|
|
Contract assets
|
|
|
14,445
|
11,081
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Contract assets is further broken
down as:
|
|
|
£'000
|
£'000
|
|
Short-term contract
assets
|
|
|
11,756
|
10,684
|
|
Long-term contract assets
|
|
|
2,689
|
397
|
|
|
|
|
14,445
|
11,081
|
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.
14 Contract liabilities
|
|
|
|
As at 29 February
2024
|
As at 28
February2023
|
|
|
|
|
£'000
|
£'000
|
|
Contract liabilities
|
|
|
21,485
|
25,890
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Contract liabilities is further
broken down as:
|
|
|
£'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 29 February
2024
|
As at 28
February 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:
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Financial assets
|
|
Note
|
|
£'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
|
|
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Financial liabilities
|
|
Note
|
|
£'000
|
£'000
|
|
Financial liabilities at amortised
cost:
|
|
|
|
|
|
|
Trade and other payables - current,
excluding payroll tax and other statutory tax
liabilities
|
|
19
|
|
259,661
|
217,253
|
|
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.
17 Trade and other receivables
|
|
|
|
As at 29 February
2024
|
As at 28
February 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)
|
|
Current
|
Past due 0 to 30
days
|
Past due 31 to 60
days
|
Past due 61 to 120
days
|
Past due 121 to 365
days
|
Total
|
|
29
February 2024
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Expected loss rate
|
0.07%
|
0.41%
|
4.16%
|
7.62%
|
80.02%
|
|
|
Gross carrying amount - trade
receivables
|
180,289
|
23,688
|
4,994
|
3,744
|
2,207
|
214,922
|
|
Loss allowance
|
134
|
97
|
208
|
285
|
1,766
|
2,490
|
|
|
Current
|
Past due
0 to 30 days
|
Past due
31 to 60 days
|
Past due
61 to 120 days
|
Past due
121 to 365 days
|
Total
|
|
28 February 2023
|
£'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:
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
Trade receivables
|
|
|
£'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.
18 Cash and cash equivalents
|
|
|
|
As at 29 February
2024
|
As at 28
February 2023
|
|
|
|
|
£'000
|
£'000
|
|
Cash at bank and in hand
|
|
|
88,836
|
73,019
|
|
|
|
|
88,836
|
73,019
|
|
|
|
|
|
|
19 Trade and other payables
|
|
|
|
As at 29 February
2024
|
As at 28
February 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
|
|
|
|
|
277,917
|
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.
The carrying amounts of trade and
other payables are considered to be the same as their fair values,
due to their short-term nature.
20 Share capital and share
premium
|
|
Number of
shares
|
Nominal
value
|
Share
premium
|
Total
|
|
Allotted, called up and fully paid
|
|
£'000
|
£'000
|
£'000
|
|
At 1 March 2022 and 28 February
20231
|
239,482,333
|
2,395
|
633,636
|
636,031
|
|
Shares issued during the
year
|
874,565
|
9
|
14
|
23
|
|
At 29 February 20242,
3
|
240,356,898
|
2,404
|
633,650
|
636,054
|
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 29 February
2024
|
Year
ended 28 February 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.
22 Cash generated from
operations
|
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
Note
|
|
£'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
|
|
|
|
|
|
|
|
|
23 Financial risk management
This note explains the Group's
exposure to financial risks and how these risks could affect the
Group's future financial performance. Current year consolidated
profit or loss and statement of financial position information has
been included where relevant to add further context.
Management monitors the liquidity
and cash flow risk of the Group carefully. Cash flow is monitored
by management on a regular basis and any working capital
requirement is funded by cash resources or access to the revolving
credit facility.
The main financial risks arising
from the Group's activities are credit, liquidity and currency
risks. The Group's policy in respect of credit risk is to require
appropriate credit checks on potential customers before sales are
made. The Group's approach to credit risk is disclosed in note
17.
The Group's policy in respect of
liquidity risk is to maintain readily accessible bank deposit
accounts to ensure that the company has sufficient funds for its
operations. The cash deposits are held in a mixture of short-term
deposits and current accounts which earn interest at a floating
rate.
The Group's policy in respect of
currency risk, which primarily exists as a result of foreign
currency purchases, is to either sell in the currency of purchase,
maintain sufficient cash reserves in the appropriate foreign
currencies which can be used to meet foreign currency liabilities,
or take out forward currency contracts to cover the
exposure.
23(a) Derivatives
Derivatives are only used for
economic hedging purposes and not speculative
investments.
The Group has taken out forward
currency contracts during the periods presented but has not
recognised either a forward currency asset or liability at each
period end as the fair value of the foreign currency forwards is
considered to be immaterial to the consolidated financial
statements due to the low volume and short-term nature of the
contracts. Similarly, the amounts recognised in profit or
loss in relation to derivatives were considered immaterial to
disclose separately.
23(b) Foreign exchange risk
The Group's exposure to foreign
currency risk at the end of the reporting period, was as
follows:
|
|
|
As at 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)
|
(1,981)
|
(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 29 February
2024
|
Year
ended 28 February 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.
(3) Contractual maturity of
financial liabilities
The following table details the
Group's remaining contractual maturity for its financial
liabilities based on undiscounted contractual payments:
|
|
|
Within 1
year
|
1 to 2
years
|
2 to 5
years
|
Over 5
years
|
Total contractual cash
flows
|
Carrying
amount
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1
year
|
1 to 2
years
|
2 to 5
years
|
Over 5
years
|
Total
contractual cash flows
|
Carrying
amount
|
|
28 February 2023
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade and other payables
|
19
|
217,253
|
-
|
-
|
-
|
217,253
|
217,253
|
|
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
|
|
Ordinary shares
|
Pence per
share
|
£'000
|
|
Pence
per share
|
£'000
|
|
Interim dividend paid
|
2.70
|
6,466
|
|
2.40
|
5,748
|
|
Special dividend paid
|
7.50
|
17,961
|
|
6.20
|
14,848
|
|
Final dividend paid
|
5.10
|
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).
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 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
|
£'000
|
£'000
|
|
Short-term employee
benefits
|
|
|
|
3,653
|
4,158
|
|
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.
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 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
|
£'000
|
£'000
|
|
Equity settled share-based payment
expenses
|
|
|
|
5,708
|
4,188
|
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
2024
Number
|
29 February
2024
WAEP
|
28 February
2023
Number
|
28 February
2023
WAEP
|
|
Outstanding at 1 March
|
|
8,760,684
|
£3.59
|
5,227,362
|
£3.43
|
|
Granted during the year
|
|
1,666,660
|
£0.80
|
4,215,285
|
£3.84
|
|
Forfeited during the year
|
|
(874,565)
|
£2.28
|
(681,963)
|
£3.98
|
|
Exercised during the year
|
|
(874,565)1
|
£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 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
2024
PISP
|
29 February
2024
SAYE
|
29 February
2024
DBP
|
|
Weighted average fair value at
measurement date
|
|
|
£4.86
|
£1.79
|
£5.15
|
|
Expected dividend yield
|
|
|
1.53%
|
1.53%
|
0.00%
|
|
Expected volatility
|
|
|
31%
|
30%
|
30%
|
|
Risk-free interest rate
|
|
|
4.29%
|
4.79%
|
4.44%
|
|
Expected life of options
|
|
|
3
years
|
3
years
|
2
years
|
|
Weighted average share
price
|
|
|
£5.16
|
£5.11
|
£5.16
|
|
Model used
|
|
|
Black-Scholes and Monte Carlo
|
Black-Scholes
|
Black-Scholes
|
|
Assumptions
|
|
28 February 2023
PISP
|
28 February 2023
CSOP
|
28 February 2023
SAYE
|
28 February 2023
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 and Monte Carlo
|
Black-Scholes
|
Black-Scholes
|
Black-Scholes
|
The expected life of the options
is based on current expectations and is not necessarily indicative
of exercise patterns that may occur. The expected volatility
reflects the assumption that the historical volatility of the
company and publicly quoted companies in a similar sector to the
company over a period similar to the life of the options is
indicative of future trends, which may not necessarily be the
actual outcome.
28 Earnings per share
The Group calculates earnings per
share (EPS) on several different bases in accordance with IFRS and
prevailing South Africa requirements.
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 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
share1
|
|
|
21.78
|
18.83
|
|
Diluted adjusted earnings per
share1
|
|
|
21.01
|
18.16
|
28(a) Weighted average number of shares used as the
denominator
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 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:
|
|
|
|
|
|
|
- share
options1
|
|
|
|
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:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
|
Note
|
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
|
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:
|
|
|
|
|
Year ended 29 February
2024
|
Year
ended 28 February 2023
|
|
|
|
Note
|
|
£'000
|
£'000
|
|
Profits attributable to owners of
the company
|
|
|
|
46,851
|
40,421
|
|
Adjusted for:
|
|
|
|
|
|
|
- Amortisation of
acquired intangible assets
|
|
4
|
|
880
|
1,306
|
|
- Deferred tax effect on
above
|
|
|
|
(220)
|
(301)
|
|
- Share-based payment
charges
|
|
27
|
|
5,708
|
4,188
|
|
- 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.
|
Name of entity
|
Country of incorporation
|
Ownership interest
|
Principal activities
|
|
Bytes Technology Holdco
Limited1
|
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
Limited2
|
UK
|
100%
|
Dormant for all periods
|
|
License Dashboard
Limited2
|
UK
|
100%
|
Dormant for all periods
|
|
Bytes Security Partnerships
Limited2
|
UK
|
100%
|
Dormant for all periods
|
|
Bytes Technology Group Holdings
Limited2
|
UK
|
100%
|
Dormant for all periods
|
|
Bytes Technology Training
Limited2
|
UK
|
100%
|
Dormant for all periods
|
|
Elastabytes Limited
|
UK
|
50%
|
Deregistered. Dormant in prior
periods
|
1 Bytes Technology Holdco
Limited is held directly by the company. All other subsidiary
undertakings are held indirectly by the company.
2 Taken advantage of the audit exemption set out within
section 479A of the Companies Act 2006 for the year ended 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 in the directors' remuneration
report.
Corporate Information
The directors are responsible for
the maintenance and integrity of the corporate and financial
information included on the company's website. Legislation in the
UK governing the preparation and dissemination of financial
information differs from legislation in other
jurisdictions.
Directors at the date of this
report
PJM De Smedt
SJ Mudd
AJ Holden
E Schraner
S Chindalur
Group Company Secretary
WK Groenewald
Company registration
number
12935776
Bytes LEI
213800LA4DZLFBAC9O33
Registered office
Bytes House
Randalls Way
Leatherhead
Surrey
KT22 7TW
Corporate brokers and financial advisers
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
JSE
sponsor
Investec Bank Limited
100 Grayston Drive
Sandton
Johannesburg
2196
South Africa
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF