Bytes Technology hammered after surprising notice ahead of AGM

IT services company and software reseller Bytes Technology Group saw its share price decline by over 29% on Wednesday after issuing a notice to shareholders hours before it was due to hold its annual general meeting.

The company notified shareholders that it was adjusting its profit guidance for the year and would provide a full update when it releases its interim results in October 2025.

When Bytes published its annual financial results in May, it reported strong gross profit, operating profit, and cash growth. Its financial year ended on 28 February 2025.

“The group traded strongly in the 2024/25 financial year, while operating in highly competitive markets and despite challenging macroeconomic conditions,” it reported.

“We are well-positioned to respond to the evolving demands we see in our markets, including cloud computing, cybersecurity, AI and managed services.”

Bytes said it expected to deliver another year of double-digit gross profit growth and high single-digit operating profit growth in the 2025/26 financial year.

However, its notice to shareholders on 2 July 2025 warned that it would adjust its guidance as it had underperformed in the first few months of the year.

“For the first half, the board now expects gross profit to be at a similar level to last year and operating profit marginally lower, followed by more normalised growth in both metrics in the second half,” Bytes stated.

“We continue to prioritise investment in our front-line sales teams to drive growth, while taking a measured approach to other areas of the business.”

The company said “a challenging macroeconomic environment” impacted trading in the first months of the year, leading to some customers deferring buying decisions, particularly in the corporate sector.

“As indicated at our final results, we evolved our corporate sales division, shifting from a generalist model to specialised, customer-segment-focused teams, in line with our commitment to customer centricity,” said Bytes.

“While this transition has resulted in a longer than expected readjustment period, it positions us to deliver more relevant solutions and drive sustainable services annuity income growth during the second half of the financial year.”

Bytes also said the impact of changes to Microsoft enterprise incentives is weighted more towards the first half due to high renewal levels in March and April around the public sector year-end and June around Microsoft’s year-end.

In contrast, the benefit from services growth, where profit is spread over the contract term, builds up throughout the year.

“In recent weeks, we’ve navigated a more challenging macro environment, compounded by the near-term effect of transforming our corporate sales team,” said  Bytes CEO Sam Mudd.

“While this has affected trading, our value proposition remains strong. We’re seeing continued engagement, a healthy pipeline and remain confident that as these sales team changes bed in, we will be a stronger business.”

Bytes Technology Group was listed on the London Stock Exchange with a secondary listing on the JSE when Bytes UK was unbundled from Altron in 2020.

IT service provider to the Royal Family

Earlier this year, Bytes was awarded the Royal Warrant as the official supplier of IT managed services to the British monarchy.

The company said at the time that it expected the UK’s commitment to using artificial intelligence to make public services more efficient to be a boon for companies that resell and manage Microsoft services.

“You can see the determination that Microsoft has got, the billions they’re spending on data centres in the UK, and their ambition is very bold,” Mudd told Bloomberg in an interview.

UK Prime Minister Keir Starmer said earlier this year that a “digital revolution” to reshape the British state could unlock £45 billion (R1.1 billion) in annual productivity savings.

“We have the capability to go and help our customers understand more how that strategy can help them with their particular vertical,” Mudd said.

“So the application of Copilot and how you use that in the NHS might be different to how you would take that same conversation into a housing organisation.”

Bytes Technology Group’s share price had declined from R121.56 at market open on Wednesday to R86 at the time of publication — a 29.25% drop.