Bytes Technology, the UK company spun out of Altron, is pushing through inflation costs, passing on rising prices to clients who need its cloud computing, cybersecurity and software services.
“Any inflationary costs that come in to our business in terms of pricing from vendors, we tend to pass on to our customers,” Bytes CEO Neil Murphy said at an investor presentation on Tuesday.
“Other inflationary pressures, for example on salaries, we’ve built in a 4% increase across the salary bands for the entire group and we will stick within that 4%. And so we’re comfortable with the sort of inflationary costs that the business is going to bearing.”
Murphy’s comments could be seen as showing confidence in the group’s steady income software income stream, which makes up the bulk of its earnings and should insulate it from a slowdown in IT spending due to the Russia-Ukraine war and supply chain constraints that has led to the cost of everything from food to fuel surging higher.
“Our business is much more dependent on software and annuity based software,” Murphy told Business Day. “The great bulk of our revenues are of the repeatable type, so we don’t suffer from the kind of issues that companies like Cisco have seen.”
Last week, global technology giant Cisco saw its stock plunge more than a tenth as it missed expectations for its third quarter and lowered its full-year earnings estimates.
Fellow JSE tech company Datatec reported that its Cisco solutions business had the biggest backlog due to supply chain issues.
This comes as Bytes reported headline earnings rose by almost two-thirds in its 2022 financial year as demand from corporate clients for its software, hardware and services climbed and it enjoyed sustained growth from public sector customers.
Headline earnings per share rose 61% to 13.72p (R2.843), the company said in its results statement for the year to end-February.
The company’s revenue increased 13.8% to £447.9m, with software generating 87.9% of the sales and the UK, its biggest region, generating 96.2% of revenue.
Bytes is the biggest reseller of tech giant Microsoft’s products in the UK and is chasing a market of 42,000 private sector companies, which collectively spent about £105bn on IT in 2019.
The board proposed a final dividend of 4.2p per share, amounting to £10.1m and a special dividend of 6.2p per share, or £14.8m in total. Shareholders will vote on the proposal in August.
Bytes listed on the London Stock Exchange in December, with a secondary listing on the JSE, after a demerger that created R13bn in value for Altron shareholders.
Bytes is now valued at R20.77bn on the JSE. Its share price was up 4.12% at R88.15 in early trade, paring some of those gains to trade 2.04% firmer in the afternoon.
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