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Bytes Technology Group issued a trading update ahead of its AGM yesterday. The Board stated that – due to deferral of customer buying decisions (particularly in the corporate sector), and a “longer than expected” readjustment period following the company’s overhaul of its corporate sales division – operating profit for the first half of FY26 was expected to be “marginally lower” than the same period last year (with gross profit around the same level).
Bytes predicts a return to “more normalised growth” in the second half of the fiscal year (September onwards). However, coming after the company stated in May that it was looking to deliver another year of double-digit gross profit growth (and high single-digit operating profit growth) across the year – see Mudd praises staff as Bytes closes strong FY – the market reacted unfavourably to yesterday's news, with shares closing over 30% down by the end of the day.
It wasn’t just Bytes’s shares that suffered yesterday, either. Rival UK-listed VARs Softcat and Computacenter were also hit (each finishing the day around 6% down on Monday’s prices) – suggesting that the company isn’t alone in having to face off the “more challenging macro environment” that Bytes’ CEO Sam Mudd alluded to in yesterday’s update.
This year’s changes to Microsoft’s Enterprise Agreements (EA) licensing model and restructuring of partner incentives are having an impact right across the channel. There’s less of a partner earnings skew to upfront deal sizes now, and Microsoft is reclaiming direct control of EA renewals. Byte’s sales restructuring is designed to better align with the new order of things, but it’s taking time to sort out (plus some customers are pausing large renewals to reassess deal structures). The market is waiting to see how VARs generally adapt to these shifts – though a fuller picture won’t become clear until the second half of the year.
Posted by: Craig Wentworth at 10:37
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