Bytes Technology’s value was cut by a tenth on Monday as the group shed more light on improper share trading activity associated with former long-time CEO Neil Murphy.
Details of more unauthorised transactions involving Murphy’s wife have surfaced.
In February, the UK firm spun out of Altron in 2020 said Murphy had notified the board that he had made a number of trades in the company’s shares that had not been disclosed to the company or the market in compliance with the person discharging managerial responsibility (PDMR) disclosure requirements.
PDMRs are individuals such as CEOs, CFOs, directors and senior managers who have access to inside information about a publicly traded company due to their position.
To prevent insider trading and ensure market transparency, such individuals are subject to strict disclosure requirements regarding their transactions involving the company’s financial instruments or shares.
Since then, the company has launched an urgent investigation into the matter. It has been found Murphy engaged in unauthorised and undisclosed trading of Bytes shares on 66 trading days between January 6, 2021 and November 10, 2023, totalling 119 transactions. The company was caught unaware by the revelations given it had conducted an unrelated share-dealing disclosure investigation in 2023, in which Murphy’s transgressions went undetected.
Through new information supplied by lawyers on March 12, the company has found that Murphy conducted 15 more transactions on 10 trading days on behalf of his wife, between December 29 2021 and November 20 2023.
Bytes shares sank 10% on Monday to R122.92 on the news, to trade at its lowest levels since November 2023.
“Given Mr Murphy’s long-standing leadership position in the company, the board of directors is saddened as well as shocked by Mr Murphy’s actions, which it finds hard to comprehend. His actions were entirely at odds with the values of openness, honesty, and transparency which have been and which remain central to the group’s culture and to its ongoing success,” said the company in a note to investors.
Performing well
Despite the scandal, Bytes’ core business is performing well.
The group said it “once again delivered growth comfortably in double digits” in its key metrics of gross profit and adjusted operating profit. Cash conversion is in line with the group’s target of 100%, at about £89m at the end of the full year to February.
Gross profit growth and adjusted operating profit growth for the full year are both expected to exceed 12%, with gross invoiced income growth of more than 25%.
The group said this reflected continued strong demand for software and IT services from corporate and public sector clients, despite macroeconomic headwinds.
Bytes is confident in its ability to deliver sustained double-digit growth.
“Our board, management and staff should be very proud of the performance delivered last year and celebrating a record year for the group,” interim CEO Sam Mudd said.
“We remain committed to our successful strategy of delivering great customer service to our existing customers, acquiring new customers and increasing our share of their IT expenditure. This strategy is underpinned by our strong vendor relationships and the commercial skills of our people and means we are well-placed to capture the significant growth opportunities ahead of us.”
Bytes is listed on the London Stock Exchange, with a secondary listing on the JSE, after a demerger that created R13bn in value for Altron shareholders in December 2020.
The firm is valued at R29.7bn. It 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.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.