- Bytes shares slide 8% as profit dips and Microsoft changes bite
- Operating profit down 7% to £33 million as rebate changes hit margins
- Microsoft incentive shift and sales restructure weigh on performance
- Analysts note 20% valuation discount to rival Softcat despite solid outlook
Bytes Technology Group PLC (LSE:BYIT, JSE:BYI) shares fell 8% in early trading after the IT services group blamed the impact of Microsoft’s partner incentive changes and adjustments to its corporate sales structure on lower first-half profits.
For the six months to 31 August, gross profit was flat at £82.4 million, while operating profit slipped 7% to £33.1 million.
Revenue rose 2.5% to £108 million, supported by a 9% increase in gross invoiced income.
The company declared an interim dividend of 3.2p, up 3% from last year, and said it remained on track to meet full-year expectations.
Chief executive Sam Mudd said Bytes had shown resilience through a “challenging economic climate” and was benefiting from strong demand for cloud, cyber security and AI services, with the order pipeline remaining healthy and cash holdings rising to £82 million
Services gross profit rose more than 40%, offsetting a decline in software margins linked to Microsoft’s changes.
The group expects to deliver full-year results within market expectations as its restructured sales teams settle and demand for IT services holds firm.
Panmure Liberum said the results were broadly in line with guidance, noting that the first half was more affected by Microsoft’s public sector rebate overhaul and the reshuffling of roughly 750 corporate accounts.
The broker pointed out that rival Softcat achieved 23% gross profit growth in a similar period, helped by large infrastructure deals, leaving Bytes trading at about a 20% valuation discount.
The shares fell 32p to 380p.