Bytes Technology Group this morning announced its first acquisition in several years as it claimed upcoming Microsoft incentive changes would have a positive impact on its business.
After upgrading its first-half expectations in September, the LSE-listed software licensing and services giant confirmed H1 gross invoice income leapt 19.6% year on year to £1.605bn.
BTG comprises private sector focused Bytes Software Services (BSS) and public sector specialist Phoenix Software, who are now 100% focused on their respective markets following a realignment of account managers in July.
In her results statement, CEO Sam Mudd said the results showed the Microsoft incentive changes that dogged it last year are now “behind us” and that a recent BSS sales restructure has paid off.
Microsoft caused short-term pain among its top partners when it slashed the incentives available on Enterprise Agreements on 1 January 2025.
But a further set of Microsoft incentive changes that will take effect this month are “expected to be positive for the Group”, BTG said this morning.
They reduce the rebates available on certain legacy products but increase the rewards on growth products (including security and AI) and boost the incentives available on CSP, it explained.
“The enhanced incentives on CSP give us a real opportunity to build longer, deeper commitments with our customers,” Mudd said.
Snapping up CyberOne
On a related note, BTG on 9 October moved to grab a piece of a UK cybersecurity services market set to grow to £5.2bn by 2029 by acquiring CyberOne for an initial cash payment of £19.6m.
Coming just weeks after LSE-listed peer Softcat made its second-ever acquisition, CyberOne marks BTG’s first acquisition in several years
The purchase is designed to cut Bytes Software Services’ reliance on third parties for 24×7 security operations capabilities (Phoenix already has its own security capability for public sector customers).
Employing over 80 staff in the UK and the Philippines, London-based CyberOne saw revenue grow “high double digits” to £9.5m in the 12 months to 31 July 2026.
The initial £19.4m consideration will be followed up with further contingent cash payments of up to £18m over the next 16 months, depending on performance.
“Very pleased”
In its fiscal first half ending 31 August 2026, BTG’s software GII rose 18.8% to £1.535bn, while its hardware top line advanced 39.7% to £20.4m. Internal and external services GII rose by 12.6% and 74.5% to £21.4m and £28.1m, respectively.
Operating profit for the period rose 6.6% to £35.3m, while gross profit pogoed 17.8% to £97.1m.
BTG said its use of agents built by its teams are enabling you to increase focus on customer delivery without adding headcount. Hiring in the first half was “measured” compared with previous periods, with headcount increasing just 2% since February to 1,353.
BTG’s second half “will be measured against a stronger comparative” it warned as it forecast that GP and operating profit growth for the full-year will hit “low to mid-teens” and “low to mid single digits” respectively.
While BTG’s public sector gross profit rose 23.1%, GP growth in its private sector business recovered to 14.6% following the completion of a sales rejig initiated 18 months ago (sales staff are now aligned by customer size).
In her results statement, Mudd said she was “very pleased” these changes “are evident in our performance”.
“Over the last two years we have deliberately evolved BTG from a licensing-led reseller into a customer-centric, solutions and services-led business. Our strategy is a simple one: win more customers, grow our share of wallet with the customers we already have, and build higher-value recurring services,” she stated.
“As AI, cyber security and cloud adoption accelerate, it is that combination of trusted advice, technical depth and managed services that allows us to take a greater share of our customers’ technology spend.”
