Bytes Technology Group plc (BYIT) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to our results presentation and Q&A. Just a bit of housekeeping this morning. After the presentation, if you've got any questions, could you please type them out in the Q&A box? I'd really be grateful if they could be fairly concise. My intention is to read out the questions to the entire audience so that they will understand the answer I'm giving. So that will be at the end of the presentation. And I think I'll now crack on because you're probably all waiting with bated breath as to what we're going to be saying this morning. So having listed in December 2020, these results are our first full year results as a listed entity and a proud member of the FTSE 250. Worth pointing out that the short time we have been listed, though, is dwarfed by the fact that Bytes is now in its 40th year of successful trading. We will be celebrating our 40th with staff and customers at a big event we have planned next month at Somerset House in London. So it's a really big year for the company. Now just moving on to today's agenda. Well, I'm Neil Murphy, many of you know me. I'm the CEO of the Bytes Group, but I actually joined Bytes as the Sales Director way back in the last century, seems odd saying that. I'm pretty certain I won't make it into the next century, which is a bit disappointing. I've written in brackets there, audience laughs at this point, close brackets. So that was sort of my joke for the day. I'm sure you'll find that all very amazing. So Andrew, our CFO, joined us in June of last year, but he does know the business extremely well, having been my boss at our previous parent company before our demerger at IPO from the Altron Group. So Andrew has extensive financial, operational and commercial experience and has happily accepted the fact that I am now the boss and not him. So I'm going to provide a high-level overview of the last financial year. Andrew will then provide the financial highlights and further detail or I then remind the audience of the business and its opportunity for growth and then give an outlook for the company for the year ahead. So turning to the overview of the Bytes Technology Group. With a 40-year track record, Bytes is one of the U.K.'s leading providers of software, IT services, solutions, hardware and cloud services. In these results, you will see, we have delivered strong organic growth with all areas of the business contributing to record sales and profits across all customer segments. Our historic investment in sale stock and technical capabilities enabled us to win an additional GBP 250 million of sales during the year, and we finished the year with gross invoiced income of GBP 1.2 billion. Gross profit grew by 20% over the period, helping us to sustain our record of almost 17% compound annual growth over the past decade in gross profit. Our adjusted operating profit grew to GBP 46.3 million at a growth rate year-on-year of 23.6%, reflecting the benefits of scale and also a greater overall operational efficiencies, thus producing a healthy 43.1% AOP to GP ratio, slightly higher than last year's 41.8%. Once again, our cash conversion rate was in excess of 100% with a very healthy cash position at year-end. We served a record number of customers during the year, partly due to the expansion of our people bandwidth in sales, support and the technical side of the business, a constant theme of our business is the year-on-year investment in sales and technical staff to fuel the future growth of the company. We had 773 staff at year-end, which was up 13% from the previous 685 heads. This increase in resources is in line with previous years and helps us to manage the very strong relationships we have with the world's largest and most successful software and hardware companies. These companies choose to go to market through large-scale IT resellers who are prepared to do a lot of the heavy lifting for the vendors to make margins on the recent resale side. We've invested heavily in ensuring we have a deep and embedded relationship with many of these vendors. Our relationship with Microsoft goes back to the mid-1990s, and those close ties have been a very important factor in our growth story over the years. This multi-vendor capability allows us to be in the driving seat of technology selection and commercial negotiation with the customer. Our pedigree with the vendors was rewarded during the year when our Phoenix operation was awarded the Microsoft U.K. Partner of the Year Award. And additionally, Bytes was awarded the Darktrace Partner of the Year award during the year 2. I'll now turn to the next slide, delivering on our successful strategy. Yes, we've delivered another set of record results, further cementing our long-term story of year-on-year growth by keeping our strategy simple and repetitive. With the addition of more scale and more confidence, more capability into our operations, the 10-year profit story with solid annual growth illustrates that the business is both resilient and also defensive through challenging economic cycles. Last year's top line growth of 26.1% should be seen as part of our 10-year compound annual growth rate of 25.5%. This sales growth was across all major customer segments as we continue to invest in highly motivated employees delivering great results. We have a diverse range of public and private sector customers, including some that have been with us since the late 1990s when I was the sales director. The second KPI is our gross profit growth of almost 20%. Once again, this last year's performance helps to improve our 10-year compound annual growth rate average of 16.8% and was the result of our strategy to increase our share of the customer wallet by focusing on cloud, cybersecurity and other solutions. The final box, AOP, up almost 24% in the year, has enabled us to realize an operating margin ratio of 43%. We've previously stated that we are comfortable with this ratio remaining in the low 40s. Now I just want to turn to some key data points, which support the organic growth story and validate our strategy further. Firstly, customers, our biggest asset. We are passionate about looking after our customers and we are great fans if the American can do service culture. And I've mentioned that to many of you in the past when we've had one-to-one meetings. This laser-like focus has enabled us to reach a high NPS score of 64. We have made great progress executing against our strategy of expanding our customer base with notable new logos, such as [ Boden ], Anglian Water, Somerset County Council and [indiscernible]. I wish I hadn't said that, no. Very importantly, we continue to have a highly derisked client base with no single customer contributing more than 1% of our GP. This low customer concentration also helps the business from a diversification and risk management perspective. From a financial perspective, I'm pleased to say that we've grown the average gross profit per customer by almost 16% to GBP 20,100. This expansion of share of wallet is key to our growth and is dependent on account manager continuity, value-added services and longevity of customer relationship. I've said before that our top 50 salespeople are a loyal and dependable bunch. Their tenure of service and strong customer relationships will help us maintain a high degree of stickiness with our clients. Pleasingly, we have lost only one of our top 50 salespeople in the last 6.5 years. And I know from talking to our staff that we are getting a lot right when it comes to company culture and career development here at Bytes. An examination of our gross profit generation gives us an annual renewal rate of 111%. This is a strong and important metric as winning new businesses is a lot harder and costlier than keeping existing clients. A similar percentage to last year and, again, very noteworthy is that 93% of our gross profit comes from customers that traded with us in the previous financial year. This again supports our customer service culture and our focus on operational excellence. Finally, with the core sales focus on organizations that have between 250,000 and 10,000 users, our public sector versus private sector split once again provides great resilience for the business with no dependency on any one-off large clients or a handful of customers. During the year, we saw a slight rebalancing of business with gross profit in our private sector base, now at 65% of the mix and gross profit from public sector moving to 35%. Now just turning to our employees. I've just picked up our strategy. But as many of you know from my previous slides and presentations, I talk about Peter Drucker and his culture eats strategy for breakfast. And I agree with him to a great degree, culture does eat strategy for breakfast. No matter how detailed and solid your strategy is, if the people executing it don't nurture the appropriate culture, your projects might fail. If you remember, I started off this presentation by saying that I joined the company way back in the last century. What I loved back then and what we all try to replicate now is the small company feel, the close into personal but fast-moving and agile dynamic fund company that really cares about people, staff, customers, suppliers and the local community. This is much more challenging as we've become bigger, but we all still work very hard to do the best we can in this regard. We work hard at creating and maintaining the right culture to begin happy staff, happy plans and great results. This is why during the year our Phoenix operation came 5th in the national great places to work awards and a very well deserved and prestigious accolade indeed. The magic source that is our Bytes culture is created by focusing in on some of these key metrics and activities that are listed here on this page. An employee NPS score that we can be proud of, a highly experienced and loyal management team and a group of staff who enjoy working, whether at the office or from home. I think our flexible success from anywhere culture resonates extremely well with our staff. We are investing now for the future growth of the company, so that the performance graphs we talked about earlier continue on their upward trajectory. So that means investment in people and our own IP in order to give us some USPs that enable us to win more often than we lose. And finally, we look after our sales engine. Salespeople need their tummies rubbing on a regular basis, and we've created a high-performance, high-reward environment, which is proven. It's fair to say that none of our success would be possible without the energy and enthusiasm of our employees. And at this point, I'll hand over to Andrew now for the financial review.

Thanks, Neil. As introduced earlier, I'm Andrew Holden, and I'm the CFO of Bytes Technology Group. It will be my pleasure to take you through the financial aspects of our results for the year ending [indiscernible]. So if we start at the income statement, just change the slide. So in the income statement, I want to draw the attention to the gross income -- invoice income, which is up GBP 250 million or 26.1% to a new hire, a little bit over GBP 1.2 billion. In line with the prior year, the sale of software solutions make up most of our sales at 94% of the total, with hardware and services coming in at 2.4% and 3.6% respectively. Our public sector grew by 35.7% and now makes up 60% of our total or GBP 726 million. Our corporate market grew by 14% to contribute GBP 481 million. Revenue, revenues derived from whether we act as agent or principal when selling out to our customers. When we see our sales in the role of agents, we're selling cloud solutions and security solutions as well as some other IT services. In the role of agent, we only recognize the gross profit is driven whilst in the road of principal, we recognized gross invoiced income is driven. We can see by the comparative growth percentages, 26.1% versus 13.8%, the trend towards cloud and security is accelerating within our business. At a gross profit level, which for one of us -- for us is the best measure of the company's performance is up 19.9% to a little bit over GBP 107 million. At the half year, we reported gross profit had grown 14%. In the second half, we've seen that growth accelerate to 26.1%. And there are 2 main reasons for it. Firstly, in the first half, we see the majority of our lower gross margin income coming from the public sector, whilst in the second half, we see that we are dominated by a higher-margin corporate sector. As I said, a reflection of the effort. Both businesses are put into ensuring that the various pending propositions are correctly priced to the market. Administrative costs reflect a small growth of 3.9%. However, this view includes share-based payments and the previous year's exceptional IPO cost of GBP 8.1 million. So stripping out both of those, we get to a comparative of GBP 62.7 million versus for this year and versus the prior year of GBP 53.6 million, which is a 17% year-on-year increase. Soaries make up 78% of these total administrative costs, and they grew by 17.2% to GBP 51 million. At half year, we commented that we expected to see an acceleration in the admin expenses in the second half. In the first half, we spent GBP 29.7 million, whilst in the second half, we spent GBP 33 million. These additional costs are mostly in the solar arena with our new sales intake occurring in October. As predicted, spend in travel and entertainment areas have not increased back to prove profit levels. Adjusted operating profits are up by 23.6% to GBP 43 million. At half year, our efficiency ratio of adjusted operating profit divided by gross profit was GBP 47.3 million. As alluded to during H1 presentation, this ratio has come down to a much more sustainable 43.2%, a slight increase in the prior year, which was 41.8%. A last comment on this slide would be to draw your attention to the tax rate. In the prior year, our effective rate was 25.2%, higher than the expected rate of 19%, mostly due to the exceptional IPO cost and the share-based payments. For this year, the effective rate is 21%, only share-based payments making up most of the disable reductions as far as tax is concerned. Moving on to the balance sheet. Looking at the balance sheet, I'll focus on 3 key messages. Firstly, the capital nature of the business. We own our buildings in Leatherhead in York and all our premises -- other premises are leased or in shared spaces, like innovation hubs or Regus like premises. We have no intention of changing this model, and we prefer the flexibility of the shared environments as we dip our toes into additional representations in cities like Manchester and Edinburgh. From an IT point of view and a business application perspective, our contract management modules, cloud management platforms and software asset management capabilities and developed in-house with our own resources or subcontracted resources. In line with prior years, we continue to expense these costs. Secondly, a quick look at the receivables and poses. And as you can see, trade receivables increased by GBP 50.9 million to GBP 157.6 million and payables increased by GBP 6.5 million to GBP 217 million. Despite the large numbers, both of these increases are due to normal trade, and they are not exceptional in nature. Looking at how we treat our customers and suppliers, I'm pleased to say that both stakeholders remain broadly in line with our commitments to each other, they just reflecting 34 days, and in credit today is coming in at 45 days. The last comment to complete this slide must be on cash. We continue to guide that our cash conversion target is greater than 100%. Given the size of our monthly collections and the payments, even a small movement in a few days can [indiscernible] cash provision of 131.9%, slightly up from the prior year, leaving us with cash and cash equivalents of GBP 67.1 million. On to the next slide, and we've really spoken about the capital-light nature of the business. So it covers no surprise that we see a relatively small amount of GBP 600,000 being spent on CapEx. Although we are debt free, we do have a revolving credit facility that we entered into in December 2020. The initial facility was for GBP 50 million, which then reduced by GBP 10 million in December 2021 and will reduce by further GBP 10 million in December of this year. Although we have not utilized the facility, the setup and maintenance costs of this facility is reflected as interest of GBP 500,000. As stated before, we ended the financial year with a cash balance of GBP 67.1 million. However, how much of this we need to keep on our balance sheet is not a simple answer. The complex answer is currently around GBP 40 million mark. As holding this amount of cash will enable us to navigate the monthly movements in working capital as well as ensure that we maintain a position to pay our liabilities as the fold. The most important levers that can vary this number is the cash conversion rate and our debt facilities. And as we continue to deliver cash conversion rate in excess of 100% every year and in parallel, reducing our revolving credit facility, the higher amount of cash that we would need to keep on our balance sheet. At the beginning of my journey as a listed organization, we stated our intent was to return 40% to 50% of our post tax adjusted operating profit to the shareholders via ordinary dividends. At half year, we further refined this guidance to 40% or 2.5x cover. I'm therefore pleased to announce that the Board is proposing a final dividend of 4.2p per share, in addition to the 2p per share that was paid as an interim dividend in December 2021. Without repeating exactly what's on the slide, as far as capital allocation is concerned, at half year, we guided that if we have no acquisition on the horizon, we would return excess cash to our shareholders. With that, the Board also considers it appropriate to propose a special dividend of 6.2p per share. This will take the total to 80% of our after-tax adjusted operating profit that we will return to the shareholders. So with that, back to Neil to have the summary and to talk about the outlook for our organization.

Sorry, I just realized I was on mute there. schoolboy error. Total addressable market. This slide encapsulates our existing total addressable market or do I prefer to call our growth opportunity. This slide also has other uses as well as it facilitates a good night sleep for me when I see the opportunity that we are faced with. Knowing that no matter how this is analyzed, we are not short of opportunity or potential. And when I look back at our history and join up the dots, I realize our lift is still on the ground floor, and we've got many more levels to aspire to in the years ahead. These figures were produced by IDC in October of last year, and they produced a predictive market spend in the U.K., moving from a total of EUR 75 billion in 2021 to almost GBP 94 billion in 2025. And this is for software, IT services and hardware. As you can see from the slide, we have a single-digit market share of the software segment at 4.95% and negligible penetration of the hardware and IT services market, both of which the naturally represent opportunities for our business. We operate mainly in the software segment, as you know, and it's this segment that IDC predict will grow the most over the next few years at a compound annual growth rate of 9.7%. There continues to be a significant and broad-based tailwind driving IT spend across all verticals and all technologies. As geopolitical events, potential recession, pandemics, supply chain issues and deglobalization emerges themes for politicians, economists and businesses to think about, the one thing I'm sure organizations will need is to stay competitive and to become even more efficient. And this overriding requirement will continue to benefit the sector that we operate in. Software publishers and cyber companies are increasingly seeking to work with resellers to reach a wider audience. We provide the vendors with an interface to thousands of customers that they can't reach themselves very easily. This puts resellers like fights in a very strong position. And with well over 42,000 companies and 10,000 public sector organizations with over 100 users in the U.K. We're at the tip of the iceberg in terms of total addressable market. So a huge opportunity for bikes going forward. If we turn to the next slide and maintaining our strategy for growth. Our very simple strategy is to achieve consistent profit growth while maintaining our focus on providing high-quality services to customers and maintaining a positive and dynamic workplace culture. As a reminder, we aim to achieve these objectives by increasing the share of wallet with existing customers and by expanding our customer base. I know you've heard this all before. We would expand our customer base by expanding our sales engine, and we already have 3 rounds of graduate intakes planned for this financial year for both our Northern and our southern operations. We'll also drive innovative solutions to the market by greater collaboration with our vendor partners. We'll continue to increase wallet share by focusing on upsell and cross-sell or vendors' product suites and winning more and more annuity-type business. One way we often win new customers or the loyalty of existing clients is to advise them on cost avoidance. This allows us to genuinely become a trusted adviser. Why buy software licenses when you don't need to. We're happy to put off a deal or have no deal with the customer because effectively, we're long-term greedy and we know the value of patients. And when it comes to cultivating long-term relationships with customers, we know it will pay off in the longer term. We will also continue to drive greater adoption of our own IP with products like licensed taskbar or Quantum for Azure to further embed ourselves into our customers and deliver incremental value. With over 100 vendor partners or with multiple solutions, our product mix opportunity is vast, and we want to be in the driving seat when it comes to technology selection and commercial negotiation. Digital transformation, hybrid data center, cybersecurity and working from home technologies are all still playing a part in the IT tailwinds story. Then outside of organic growth, there is always the potential for M&A and bolt-on acquisitions that could further enhance our growth prospects should we deem that appropriate. However, my view at the moment is our organic growth opportunity is so attractive that M&A is not currently high on my agenda. Turning now to the next slide. Sustainability and ESG are important components of our overall business strategy. And with that in mind, we took steps during the year to improve governance. We strengthened our Board with the appointment of Andrew Holden, our CFO, who brings with him an enormous amount of hands-on experience at Board level and operational level. And we appointed an additional independent NED in Dr. Erika Shane, who brings additional experience to the Board, having worked for U.S. based software companies and also professional services firm. Overall, these 2 appointments have greatly strengthened our Board skills. We've also appointed PWC as internal auditors to provide additional assurance and external objective views on how we can see continuous improvement operationally. Our established CSR policies and activities continue to play an important part in our lives at work. The whole company has a lot of fun and enjoyment participating in fundraising events and volunteer days, and these activities help with our aim to direct up to 1% of our post-tax profits to good causes. Our Phoenix operation launched its women in IT series. This is a series of 22 short films and other collateral designed to promote IT to females as a career destination. Staff talk about how to build digital skills and game employment. And we've left these films deliberately unbranded so that the customers can use them for their own purposes free of charge. In fact, I'm very pleased to say that Liverpool City Council have done just that and are using these films as their own to support local job seekers. Supporting employees through mental health and well-being programs is something we are especially proud of given widespread reporting and diagnosis of many in the country suffering from COVID-related anxiousness and associated issues. Our managers have been trained to identify and manage issues and problems that staff may have. Our view is if we look after our staff, they will help look after the organization. Now turning to our carbon-reducing actions. We recognize that reducing our carbon emissions and operating in a more environmentally sustainable way is very important. We've adopted a low carbon action plan, setting our carbon reduction goals, both for the short term and over the longer term. As part of implementing this plan, we are proud to be carbon neutral from the start of this financial year. More importantly, we continue with various energy efficiency projects and actions to actually reduce our carbon footprint towards carbon net 0 over time. We've also partnered with an external environmental organization doing great work in carbon reduction projects around the world. While we have had green teams in our operating companies for several years, this year, we also established a group environmental steering committee with representation also from our employees with knowledge and passion in this area. And finally, we also published our first TCFD statement, which will be available in our annual report. Now turning to my last slide. I know we've delivered good results, but I can already hear you saying, yes, but what about the outlook? What about the rest of the year? Well, we're very pleased with our start to the new financial year. We are almost 3 months in, and we've carried the momentum forward from last year. Our biggest partner, Microsoft, also happens to be the most successful company in the world, and there are no signs of this particular juggernaut slowing down, and that certainly bodes well for us. Our sales pipelines in our public sector and corporate sales teams reflect the double-digit growth outlook that we are seeing. Whilst we're confident, we're also very well aware of the social and economic pressures on some parts of the economy and society. But our business will continue to invest so that we're in a position to deliver growth and capitalize on the vast opportunities ahead of us. So our continued focus on customer satisfaction, effective sales execution and company culture give me the confidence that our business model is very well placed for the years ahead. And this concludes the presentation, and I would now like to move on to the Q&A session, if that's okay.

And so I'm going to go to the very first question that was raised by [ Miles ], are Bytes and Altron partnering in the U.K.? If yes, how large is the addressable market for the Bytes' existing clients. We partner with many companies to deliver solutions of the security nature in the U.K. and are open to partnerships of all kinds. We do have some small partnering with the Altron Group. James Zaremba, thank you very much for your question. How competitive is the labor market in the context of you running the company? My time running the company. And is this mainly a cost issue or is there a real threat to your ability to grow head count? We tend to grow a lot of our talent, James. And we prefer that way of recruiting people, nurturing that talent and, I guess, feeding and watering natural talent and growing skill sets. We've not had a major challenge in hiring talent into the organization. James asks, how does Microsoft's new cloud partner program impact Bytes positioning versus other resellers? And are there any changes in investments we're having to make? So the cloud solution partner program for us is the fastest-growing part of our Microsoft partnership, and we've invested an awful lot of resource, time and money in developing the tools to administer that appropriately for our client base. We've become almost an omni-partner with Microsoft in that we're providing these Microsoft software and services not only to end-user customers, but also to smaller resellers. And this is because Microsoft would rather those smaller resellers are dealt with large -- dealt with by large partners as opposed to with Microsoft directly themselves. So yes, we have had to invest more in that, but it's certainly giving us the return that we're after. Denton asks, can you describe your sales activity around Microsoft price increases and the potential upside that arises from these engagements? And my answer to that is, of course, we were made aware of the Microsoft price increases last year, and that led to a higher degree of activity from our sales force to communicate those changes to not only our own clients, but to potential new clients as well. And I would say that, that activity will generate a return for us during this coming year. What is Microsoft's suite of products as a percentage of our GII? I can give you that answer in terms of gross profit in that Microsoft represents about 50% of our group's GP. A question from my old Chief Executive and Chairman, Robbie, thank you. Appreciate the special dividend, given consistent cash conversion of over 100% and unutilized debt facility is the normal dividend policy at 40% of after-tax profits not conservative? Well, I'll ask Andrew to answer that one. Andrew?

Thanks, Neil. And if you look at the sort of the history going back to 2020, we had quite extraordinary costs, and we had paid up a dividend into Altron of around GBP 30 million in the IPO costs. So basically, what we need to do over the next couple of years is keep that cash balance on our balance sheet. So I would think that despite the sort of the cash conversion, let's say, it's 107%, 110%, there's an additional sort of creditors cash that we need to keep on the balance sheet. We also need to replace the revolving credit facility of GBP 10 million. So if you do that calculation, probably you could look at 40% being a little bit conservative. However, we would also like to contemplate some bolt-on acquisitions on an annual basis. However, if we -- like we've done this year, if we're not using the cash effectively, we're not going to hoard it on our balance sheet other than sort of working capital requirements, and we'll more return that back into the shareholder.

Thanks, Andrew. Ben asks -- Benes said, you delivered 16% growth in gross profit from existing customers and 4% gross profit growth from new customers. When we look into FY '23, should we anticipate a similar mix on growth, 43% AOP to GP ratio, can this be sustained going forward? So I'll just answer those first 2 questions first. We think low 40s is sustainable, Ben. The question about the GP mix, should we anticipate a similar mix on growth? It's hard to predict, but we think that, yes, a similar sort of mix would be about right, give or take. Yes, the second half of our financial year saw more rapid growth on GP growth from private rather than public sector, but we still saw double-digit growth from public sector in the second half of last year. We've certainly seen that continue through in the first part of this year. By moving on to the next question from Andrew. How much FY '22's GBP 394 million software revenue was security and cloud-related and how fast did these categories grow? So Andrew, the interesting thing about our software revenue is increasingly large parts of our overall software revenues are of an annuity or cloud type. Most of our vendor partners are moving away from on-premise software to annuity. It's fair to say, therefore, that broadly speaking, 90% or so of our software will be of a cloud or Software-as-a-Service type. And of that, the majority is -- well, half of it is Microsoft related, so that is either cloud or office, which is also cloud. There is still 18% of our Microsoft revenue is still on-premise, which is quite a high number. So there's a real mix there. The key theme for all of it is it's -- well, the majority of it is now becoming much more of an annuity type. So we can see now towards 70% of our software revenues being of an annuity type. Another question, a lot of technology investment growth over the last 2 years was driven by COVID-19. Do you see that growth trend continuing? Or has that tapered? We've seen how Cisco has been impacted by this decreased spending in the U.S. already. But I suppose the answer to that question is our business is much more dependent on software and annuity-based software. So the great bulk of our revenues are repeated. There are other repeatable types. So we don't suffer from the kind of issues that companies like Cisco have seen, only 4% of our business is of a hardware type. And that tends to be bought in cycles. Software is renewed annually. So we don't -- we're not exposed as much of those sorts of threats whilst we're still obviously pay attention to that as a risk going forward. I think I've answered 9 questions in the inbox at this stage. I'll just see if there's any more questions coming through. This presentation will be available on the Bytesplc.com website as well shortly in fact, already in fact. And I'm obviously available for various calls during the course of this week, and I have some calls scheduled with many people on this call at the moment. I look forward to speaking with you later. I think I've got one more question coming in. No, I don't. Are there any more votes [indiscernible]? Yes, one more question. How do Bytes' annuity revenues cater for inflation? The answer to that is any inflationary costs that come into our business in terms of pricing from vendors, we tend to pass on to our customers. I can't think of an exception to that. Clearly, you're all aware of the Microsoft price increases, which came into effect on March 14 of this year, we've just passed those on to our customers, either inflationary pressure, 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%. So we're comfortable with sort of the inflationary costs that the business is going to be bearing. Charles, thanks for your question. The statement references increased public tech to competition. Can you expand on this? Yes, I think what we've seen during the year, it's always been a highly competitive environment. And what we saw during the year, which led to a slight degradation in gross margins on our public sector business was a continuation of that theme, no letting up on the competition, it's fair to say. And that's partly why we're introducing more of our own IP into some of the relationships we have with public sector bodies, so that it actually becomes a bit more difficult for them to move away. And we've seen that sort of rewarding us certainly in the last few months, I'm pleased to say. And a question from James. My earlier question was on Microsoft's new cloud partner program coming in October as opposed to CSP program. Okay. Yes, fair point. There was an announcement on the Microsoft blog about Microsoft's cloud partner program and the rebates and so on and some changes that are coming along the lines. There's nothing major that was announced in that blog. There are still some more detail that we are awaiting. For those Microsoft announcements are an annual theme. So every October, there are changes. You can imagine a big company like Microsoft needs to change its programs on a regular basis. They give us plenty of notice of changes so that we can prepare our business accordingly. Charles asked, what are the chances to increase public sector competition spinning over into the private sector? I suppose my answer to that is for the 25 years I've been working at Bytes we've had enormously competitive environments that we've had to deal with. I don't see increased competition being any more of a threat really today or tomorrow than it ever has been in the past. You win some, you lose some. We tend to win more than we lose. I think what's important for us is the focus on customer service so that we don't see those threats as frequently as you might imagine. If I look at the 90-odd percent of business we did this year with the customers in the previous year, the majority of that doesn't come into a competitive bid situation because the very reason we deliver good service, they don't feel the need to go elsewhere. So a great deal of our business doesn't sort of come under that sort of competitive environment. But Charles, I don't see it becoming any more of a threat, to be honest with you. We're really well versed at dealing with these kinds of competitive situations. But thanks for the question. I think it's important to get that across. Any other questions from the audience? I'm not going anywhere. I'm going to be in this office all day long. I've got some calls scheduled, but I've probably got a few more minutes, but some more questions, if there are any. I'll give you a couple of minutes to type them out if there are any. Otherwise, we might call it today. Okay. I think that's probably it. Just like to thank everybody for coming on the call today. Really appreciate that, and look forward to talking to some of you in more detail during the course of the next few weeks. So that concludes today's presentation and Q&A. Thank you. Thank you very much.

Thank you from our side.