Bytes lifts its FY27 outlook as costs hold back operating profit
A half-year trading update shows gross profit growing three times faster than operating profit at the UK software and security reseller, ahead of full results on 13 October
- Period: first half of FY27, the six months to 31 August 2026
- Net cash: about £68m at the half-year end, after returning £41.3m to shareholders
- Returns: a £16.3m final dividend for FY26 and £25m of share buybacks
- Cash conversion: around 45%, against 34% a year earlier
As a listed reseller that updates investors every half-year, Bytes gives a useful read on the wider market. Demand is there, but serving it costs more: a 12-point gap between gross profit and operating profit growth suggests platform investment and pay are absorbing much of the extra margin.
Partners pitching AI services should check their own cost to serve before assuming AI-led demand turns into profit. The 13 October results may show how much of that spending is one-off.
“Customer demand for software, cloud and security solutions has remained strong, and AI is becoming a more meaningful driver of growth in our core business areas.”Sam Mudd, chief executive, Bytes Technology Group
Bytes Technology Group said on 17 September that it had traded ahead of expectations in the six months to 31 August and raised its outlook for the year. This was a trading update that gave estimated growth rates only. Full half-year results, with absolute profit figures, are due on 13 October.
The gap between gross profit and operating profit growth is the story. Gross invoiced income rose by about 19% and gross profit by about 18%, but operating profit grew by only about 6%. Bytes put that down to the cost normalization it had already flagged: higher technology costs linked to strategic projects and a return to normal bonus levels.
The board now expects gross profit growth in the low to mid-teens for the full year, with operating profit growth in the low to mid single digits. Bytes reported positive momentum in both its private and public sector businesses.
