Bytes Technology Group Q4 Earnings Call Highlights

FY 2026 was broadly in line with guidance: the group delivered “double‑digit invoiced income” with gross profit of around £167m and operating profit of about £62m, achieved cash conversion of >100% and finished the year with >£98m of cash after returning £74m to shareholders.
For FY 2027 management expects gross profit to recover to high single‑digit to low double‑digit growth, but operating profit to be broadly flat as the group absorbs c. £4.5m of costs (completed technology projects, normalizing bonuses and headcount), with potential upside if gross profit reaches ~11–12%.
Bytes is realigning its go‑to‑market: Bytes Software Services will focus on the private sector and Phoenix on the public sector (limited customer overlap of ~£2m GP), while AI is highlighted as both a growing services revenue stream and an internal efficiency lever via Microsoft‑linked offerings and Copilot‑based tools.
Bytes Technology Group (LON:BYIT) detailed its FY 2026 trading update and offered early guidance for FY 2027 during a conference call led by CEO Sam Mudd and CFO Andrew Holden. Management said the company does not typically host a call around a trading update, but chose to do so to address FY 2027 expectations, a further alignment of its go-to-market approach, and recent developments around artificial intelligence (AI).
FY 2026 results in line with outlook; cash conversion topped 100%
Mudd said FY 2026 performance was in line with the outlook provided at the half-year stage, delivering “double-digit invoiced income growth,” gross profit of around GBP 167 million, and operating profit of around GBP 62 million. He added that the company saw sequential improvement in growth and margins across all three metrics in the second half versus the first half, despite tougher comparatives.
The company’s cash conversion exceeded 100%, ending the year with more than GBP 98 million in cash after returning GBP 74 million to shareholders via dividends and share buybacks. Mudd said this reflected the board’s continued confidence in the business.
Management reiterated that FY 2026 results were impacted by changes to Microsoft enterprise incentives and “phasing effects” from a private sector sales alignment. Mudd said the company has now passed the anniversary of the incentive changes and moved through tougher private sector comparatives that drove a strong end to FY 2025. He also highlighted strengthening performance in the second half, including gross profit growth of about 6% year-over-year in January and February 2026 against what he described as “a strong high teens comparator.”
Looking ahead, management guided to a return to more typical gross profit growth levels in FY 2027, forecasting high single-digit to low double-digit percentage growth. However, Bytes expects that improvement in gross profit will not translate into operating profit growth at the level investors may have been accustomed to, with operating profit guided to be broadly flat in FY 2027.
Holden attributed the flatter operating profit outlook to the group absorbing approximately GBP 4.5 million of costs. Those costs include higher technology costs following the completion of two strategic projects during FY 2025 and FY 2026, plus a return to “normal” bonus levels and continued headcount investment.
A marketplace gateway intended to allow customers to purchase products online more seamlessly from a range of vendors
A platform aimed at improving operational efficiency around customer order processing
In Q&A, Holden said the company modeled its forecasts “toward the high single digits” for gross profit growth. He added that if the company achieves growth in the 11%-12% range, there could be “potential upside” to operating profit versus the flat guidance.
When asked about macroeconomic uncertainty, Mudd said the company is “modeling based on…being cautiously optimistic” and focusing on variables it can control. Holden added that the company had not seen any slowdown in January and February customer behavior, emphasizing that guidance is based on what the company knows at this point.
Go-to-market change: Bytes Software Services to focus on private sector; Phoenix on public sector
Management said it is further aligning the group’s go-to-market approach and will provide more detail at full-year results in May. The strategy is for Bytes Software Services to focus solely on the private sector, while Phoenix Software focuses solely on the public sector. Mudd said this is intended to help each business concentrate on its strengths, improve specialization for customers, and better leverage the group’s scale.
As an example of the opportunity, Mudd pointed to selling Phoenix services into existing Bytes public sector customers, noting Phoenix has “a leading proposition” for public sector clients and that management has “continued the strong double-digit growth” reported in the first half.
The transition is expected to be “carefully sequenced and managed,” with management citing lessons learned from the prior year’s private sector sales realignment. The change will involve a small number of colleagues moving within the group, and management said that in the “vast majority” of cases, customer relationships will not be impacted.
Mudd estimated the extent of customer overlap—where both Bytes and Phoenix serve the same customer—at about GBP 2 million of gross profit. He said it is only in those overlap cases where there could be a relationship change, as the company moves to a single account manager based on who has the stronger customer relationship.
In Q&A, Mudd described the reorganization as enabling closer group alignment rather than creating more separation. Holden added that with fewer instances of cross-competition, the group can integrate services “behind the scenes” under a “build once, offer twice” approach across public and private markets.
On segment performance, Holden said the group can discuss results broadly as private versus public sector. He said the public sector grew very strongly in the second half against lower comparatives and delivered high single-digit growth for the full year, while the corporate (private sector) segment was “relatively flat” for the year but improved from the first half into the second half amid high comparatives linked to a pull-forward into FY 2025’s second half.
AI: management frames demand driver, growing services line, and internal efficiency lever
Mudd said AI has become a major topic since the company last spoke publicly in October, and he outlined three areas: the impact of AI on products Bytes sells, the company’s delivery of AI products to customers, and its internal use of AI.
First, he said AI is driving demand for infrastructure—the layer Bytes largely sells—because AI requires compute, storage, data governance, networking and connectivity, and security.
Second, he said AI products and services are becoming meaningful sources of sales in their own right. He cited growth tied to Microsoft’s AI and Data Suite, ranging from “quick wins” such as developing agents to broader process redesign with AI at the center. Mudd described a recent customer engagement around Microsoft Foundry that included consultancy spanning compute security, cloud environments for agents, governance, risk and compliance, and adoption and change management.
Third, he described Bytes’ internal AI approach as a “core discipline” rather than a one-off project. He said account managers use Copilot to deepen customer understanding and to engage with internal tools including:
Scout, which helps explore the services catalog
Scan, which converts meeting transcripts into structured commercial outputs
A referral engine in production intended to automate what management called a time-consuming process
Mudd added that AI is also being adopted beyond sales, including triaging and logging tickets in managed services and generating reports across departments.
Microsoft relationship described as stable; senior management change disclosed
Addressing Microsoft, Mudd said he was “very confident” the relationship is in a good place and described it as Bytes’ longest-enduring strategic partner, built over four decades. He said partner incentives are stable and that the company has mitigated the impact of last year’s incentive change, which he characterized as “non-material” at less than 5% after mitigations.
Mudd said those mitigations included selling more services, transitioning customers to CSP, and maintaining focus on non-Microsoft vendors. He added that he planned to attend partner forums in Seattle soon, and noted Microsoft’s financial year begins July 1.
Separately, management confirmed a senior leadership change: Jack Watson, managing director of Bytes Software Services, has left the business. Mudd thanked Watson for his contribution and said the company has a strong executive team in place, with Mudd and Holden providing more direct support. Mudd said he would be surprised to see further senior departures, describing the team as energized and focused.
On profitability beyond FY 2027, Holden said the company expects FY 2028 to see a more normal relationship between operating profit and gross profit growth, with operating profit growth expected to be “equal” to gross profit growth once the GBP 4.5 million is baked into the cost base and no longer represents a year-on-year headwind.
Management said it would provide additional detail at full-year results in May.
About Bytes Technology Group (LON:BYIT)
With a 40-year track record, Bytes Technology Group is one of the UK and Ireland's leading software, security, AI and cloud services specialists. We enable effective and cost-efficient technology sourcing, adoption and management across software, security, hardware, and AI and cloud services. Our strong relationships with many of the world's largest software companies enable our specialist staff to deliver the latest technology to a diverse and embedded customer base. This has resulted in our long track record of strong financial performance.