UK's largest reseller of Microsoft software hit by slowdown

Times

02-07-2025

The UK's largest reseller of Microsoft software has warned that it will fail to generate any profit growth over the first six months of the year, blaming weaker corporate confidence and an overhaul of its sales teams.
Bytes Technology said that gross profits would be flat during the first half, with operating profit slightly lower, and it scrapped annual guidance.
The FTSE 250 group had said less than two months ago that it was on course for 'double-digit' gross profit growth over the first half of the year.
Shares in Bytes Technology were down 155p, or 30.5 per cent, at 353½p in afternoon trading, while shares in its rivals Softcat and Computacenter also fell 5 per cent and 5.8 per cent, respectively.
Sam Mudd, Bytes' chief executive, said the group had been affected by 'a more challenging macro environment', which had caused some of its corporate customers to defer orders. The issue has been compounded by a reorganisation of its sales teams into three smaller segments focused on different customers.
A change in the commission structure by Microsoft at the end of last year has also hit its public sector business.
In May, the company said that it was 'well positioned to respond to the evolving demands' and on course to deliver another year of double-digit gross profit growth, together with high single-digit operating profit growth.
Revenue rose 5 per cent to £217 million last year, which together with better growth in more lucrative software sales, pushed pre-tax profit 21 per cent higher to £74.6 million.
An update on the full-year outlook will be given in October, the company said, flagging an expected recovery in profits to more normal levels during the second half.
However, analysts at Investec, the investment bank, cut their revenue forecast by 10 per cent to £217 million, alongside a 13 per cent cut to expected operating profit to £62.3 million.
Bytes was founded in 1982 as a single shop in Surrey and operates predominantly as a software reseller. Analysts have estimated that the group generates about half of its gross profits from selling Microsoft products. The group listed on the London Stock Exchange when it was spun out of Altron, its South African parent, and it has a secondary listing in Johannesburg.
Mudd took over the running of the business, initially on an interim basis, at the start of last year after its former chief executive was forced to resign when he disclosed that he had made a number of trades in Bytes shares that had not been disclosed to the company or the market over a period of almost two years.
Softcat, another FTSE 250 seller of hardware and software services, echoed Bytes's caution earlier this year, warning of a 'continued macroeconomic uncertainty', but upgraded its full-year outlook to a 'low-teens' increase in operating profit, up from 'low double-digit'. Computacenter also said it was confident that it would 'make progress for the year as a whole in constant currency' and gain market share.