Good morning everybody. I'm Sam Mudd, and I'm joined by Andrew Holden.

We do not usually have a call around our trading update, but we wanted to cover three things with you in addition to our FY26 headline results, and provide the opportunity for questions. Firstly, our guidance for FY27, secondly, the further alignment of our go-to-market approach, and lastly, some comments on AI, given how topical that has been since we last spoke to you in October.

Starting with our FY26 results, these were in line with the outlook provided at the half-year, with double-digit gross invoiced income growth, gross profit of around £167 million, and operating profit of around £62 million. This marked sequential improvement to growth rates across all three metrics in H2 on H1, despite the tougher comparatives.

Cash conversion exceeded 100%, with a year-end cash balance of over £98 million after returning £73 million to shareholders in the form of dividends and share buybacks. This reflects the board's continued confidence in the business.

As we've previously reported, FY26 was impacted by changes to Microsoft enterprise incentives and the phasing effects of the private sector sales alignment. We have now passed the anniversary of the incentive changes.

We've also passed the tough comparative from the private sector sales alignment, which drove a strong end to FY25, and are pleased with how that change has now bedded in. Encouragingly, performance strengthened in the second half, with gross profit growing circa 6% year-on-year in January and February 2026 against a strong high-teens comparative.

Moving on to FY27 guidance. In FY27, we expect to return to gross profit growth levels that we're used to delivering, and we are guiding to high single-digit to low double-digit percentage growth in gross profit.

This gross profit growth will not convert to operating profit growth at the level we are used to delivering in FY27, and we're guiding to operating profit broadly flat. This results from the group absorbing around circa £4.5 million of costs, reflecting higher technology costs following the completion of two strategic projects undertaken in FY25 and FY26, and a return to normal bonus levels on top of continued headcount investments to growth.

As a reminder, the two projects were a marketplace gateway for our customers to move to more seamlessly purchase products online from a range of vendors, and a platform to improve our operational efficiency around customer order processing. Turning to our further go-to-market alignment.

We're going to go into more detail on this with you in our full-year results in May, but we're keen to explain the strategy and execution of change, which is now underway. The strategy is for Bytes Software Services to focus solely on the private sector and Phoenix Software solely on the public sector.

This helps our businesses focus on their strengths, enable our teams to deliver increasingly specialized support to customers, and better leverages existing scale in the group. One example of an opportunity this change delivers is for current Bytes public sector customers to be sold Phoenix services, where it has developed a leading proposition for public sector clients, and we have continued the strong double-digit growth we reported in the first half.

The transition will be carefully sequenced and managed. We've learned a lot from the last year's private sector sales realignment.

It also involves a small number of colleagues moving within the group, and in the vast majority of cases, customer relationships will not be impacted. We estimate that the extent of the customer overlap where both Bytes and Phoenix serve the same customer is about £2 million of gross profit, and it's only in these instances where there could be a customer relationship change, as very sensibly the account manager with a stronger relationship would retain the account as we transition to having a single account manager.

Lastly, on AI. As we have the opportunity to speak to you today, I thought it would be appropriate to say a few words on AI given the news in the wider market over recent weeks.

There has been much debate on how this will impact the software industry, and I'm going to break this down into three areas: first, how AI impacts the products that we sell, second, how we're doing delivering AI products to customers, and lastly, how are we using AI ourselves. Firstly, we see AI as a driver of what we sell.

For our customers, at a high level, AI is driving lots of innovation and opportunity for them at the application layer, and this is driving demand for the infrastructure layer that we largely sell. AI needs cloud infrastructure for compute, storage, governance for data, networking, and connectivity for access, and this all needs to be secured.

Secondly, AI products and services are becoming meaningful sources of sales in their own right. We're seeing growth through the application of Microsoft AI and data suite, helping customers with quick wins and the development of agents, or stepping back and helping them reimagine processes with AI at the center.

These engagements often involve or lead to a broader infrastructure conversation by necessity. For example, a recent engagement we had helping a customer's AI adoption with Microsoft Foundry, also helping them with a platform for rebuilding and deploying agents, it comprised consultancy on consumer security, cloud for agent environments, in addition to governance, risk, and compliance, and adoption and change management, all for one customer engagement.

Lastly, for our own business, we view AI as a core discipline, not a one-off project. Our focus is on encouraging creativity across the whole workforce and identifying processes that are right for AI to add value, such as those with high predictability for our dedicated teams to build and deploy agents.

On the former, our account managers use Copilot to learn more deeply about their customers, as well as to engage with tools that we have built for them. We have tools such as Scout, which helps them explore our services catalog, Scam, which converts meeting transcripts into structured commercial outputs, and we're in the production for a referral engine that automates much of what is a very time-consuming process.

We are, of course, adopting AI across the business beyond the sales frontline, such as to triage and log tickets in our managed services, and for report generation across departments. Again, we'll speak on this in more detail in our results, but we remain strongly positioned to capitalize on significant potential opportunities that AI unlocks right across our customer base.

We will now open the floor to your questions. Thank you.

Morning, guys. Just a further clarification on the operating profit flat EBIT guidance for FY27.

Obviously, you have a range of possible outcomes in terms of GP growth from high single-digit to low double-digit. Could you maybe explain some of the sensitivity of whether you come at the bottom and top end of that, the sensitivity to your operating profit guidance?

Tintin, thanks for the question. We have modeled our forecasts and towards the high single-digits.

When Sam is calling out flat, you could model flat on high single-digits of sort of 8%, 9%. If we achieve the 11%, 12%, there'll be potential upside on the OP.

Great, thank you.

Morning. Thanks for doing the call.

I got two, if that's all right. Just following on from Tintin, just interested obviously fairly early in the year to be providing guidance for FY27.

I appreciate you're not in a position to call sort of all the geopolitical stuff that's going on in the world, but it does feel as though there'll be a real-world implication from that in terms of economic growth. To what degree is your guidance dependent upon the macro being sort of stable, stroke, normal, if that's an appropriate phrase?

Andrew, do you want me to take that and

Yeah, you can.

Hi, Andrew, thanks for the question. Look, I accept there is clearly impact globally.

We can only deal with the variables that we're in control of. Currently, our customers, I think, are feeling and thinking the same.

If they wake up every morning and try and make decisions based on the latest news, everybody just implodes and stops running businesses. At the moment, we are modeling based on I think being cautiously optimistic about what's going on in the world.

Andrew, if there's anything else to add, please do.

No, I think it is uncertain times, Andrew, and what we've modeled is what we know. We haven't seen any slowdown particularly from the customers in January, February, it is what we know at this point.

That's the best we can do, I guess.

Thanks. Then I just wanted to ask a second one just in relation to Microsoft.

Obviously, it was quite a material change in incentives last year. You've sort of lapped the comps now.

Can you just give us a sort of sense of where you are with Microsoft now, relationship-wise, and how you can help them deliver on their objectives? I appreciate they're sort of almost three quarters of the way through their financial year, but when you sort of look out to their FY27 financial year, presumably you'll have another sort of partner get together in the autumn.

Can you give us a sort of a flavor of what you expect from that?

Sure. Thanks, Andrew.

I'm feeling very, very confident that our relationship with Microsoft is in a good place. I talk frequently about it being our most longest, enduring, strategic partner.

There are many others, but when you've built a foundation over four decades and grown together, we are relevant. I'm heading out to Seattle in a couple of weeks' time.

These are global partner forums where we get the lowdown on some of the thinking for the next FY. Microsoft commence on the 1st of July.

We obviously have been participating very aggressively in a lot of the AI discussions at the AI Forum. Only two weeks ago, I had the pleasure of being in a room with Satya and many other leaders.

I think the strategy is clear for Microsoft. It hasn't changed.

It hasn't deviated. Partner incentives are stable, and we've mitigated the impact of the change.

Just to remind the audience, it was non-material. It was less than 5% with mitigations made around selling more services, transitioning our customers to CSP, and maintaining the focus on non-Microsoft vendors.

This links nicely to the strategy that we've obviously just updated you on, the evolving sales go-to-market. We're doing this very intentionally and with purpose for those reasons.

Hopefully that answers your question, Andrew.

Thanks, Sam.

Thanks very much. Morning, all.

Couple of questions on the Bytes-Phoenix commentary. With the move you've mentioned this morning, does that mean the businesses become sort of further apart and very distinct operating units with sort of even less communication, or does it mean, actually, some of those Chinese walls are now broken down because they're not cross-competing with customers, you can actually facilitate sharing a best practice and the two businesses become slightly more sort of aligned in that sort of sense?

Secondly, are you able to share the growth rates you saw in Phoenix versus the growth rates you're seeing in BSS and the upside to BSS or where that potential might be?

Julian, let me take the first part. You're absolutely right.

It was the latter explanation that you gave. We are very clearly working now, myself and Andrew, with the executive team at Bytes and have brought further alignment, cohesive discussions across the group, and you're absolutely spot on.

The ability now for each operation to focus on their go-to-market without having any siloed distractions, units that sit on the outside of the core strategy, is one of the benefits of what we're doing here. On the growth rates, Andrew, are you happy to take that one?

Thanks, Sam. Just broadly, we can disclose call it private sector versus public sector rather than the two underlying operations.

The public sector has grown very, very strongly in the second half against lower comparatives and, from FY25 to FY26, ending up on a high single-digit growth for the year. Corporate has been relatively flat for the year, which would have been an improvement from H1 into H2.

Again, that against fairly high comparatives in last year's area where we had a pull forward into H2 in FY25. We're relatively confident going into the new year with these sort of H2 results and more particularly the January, February results.

This is partly Julian, when you look at when we used to bid twice, or two bids going into a single area, we had to be very, very conscious of solid walls between the two organizations. Now we don't have to have that, and we continue to strive to integrate our services behind the scenes into sort of build once, offer twice, across the public and private domains.

Right. Thanks very much.

That's useful.

Hi. Good morning.

Thanks for taking my questions. I'll do two as well, if I can.

Firstly, just in terms of EBIT, I think you've been pretty explicit about your '27 ambitions, but what does the EBIT algorithm look like beyond 2027? I think in the case of Softcat, they would generally expect EBIT to grow slower than gross profit growth.

At Computacenter, I think they would probably expect it to grow faster than gross profit growth. What should we be thinking of as the algorithm at Bytes?

Then secondly, can you talk through some of the senior management changes that we've been reading about, particularly Jack Watson? Can you give us some background behind that, and do you think it's possible that we see other senior management changes through the course of the year?

Thank you.

Hi, Charlie. I'll go with your senior management question first.

Jack Watson, the Managing Director of Bytes Software Services, has left the business, and I guess the question is why did he leave. Leaders come and go, and we want to acknowledge and thank Jack for his dedication, his leadership, and contribution.

What matters is we've got a very strong executive team that remains in the business, and Andrew and I will be taking the opportunity to provide more direct support to that team. The Bytes SD and CTO will report into Andrew and everyone else, the sales, marketing, services, operations, into me.

Your latter question, any more senior managers looking to leave the business? I think given the interactions that we've had with them over the last few weeks around the project, around the announcement we've just given on private and public sector, I would be most surprised if we had any losses.

We have a very energized, focused, galvanized team working closely with myself and Andrew and with Clare Metcalfe as well at the Phoenix side. Then,

Charlie, I'll pick up the

Yeah. Thank you, Andrew.

Charlie, I'll pick up the question around the EBIT and the margin between operating profit and GP. This year, we've acknowledged the sort of £4.5 million coming back into the base.

If you work out the £4.5 million over the £62 million, it's around about 7%. We think that FY28 would see us more normalizing the growth between OP and GP being equal, and because that £4.5 million once baked into the cost again, is not a cost that will continue to rise.

Great. Thanks so much.

Now I'd just like to thank everybody for your time, and we look forward to seeing you in May and obviously going into more detail around some of the elements that we've shared with you today. We're busy getting this year going, look forward to seeing you in a few months' time.

Thank you.

Thank you very much. Bye.