Bytes reassures but Deutsche Bank downgrades on limited upside

Bytes Technology Group PLC (LSE:BYIT, FRA:9NY, JSE:BYI) was downgraded by Deutsche Bank after the software reseller's latest trading update reassured investors but left little scope for further gains in the share price.

The bank moved to 'hold' from 'buy' but raised its target price to 410p from 390p, broadly in line with Thursday's closing price of 409.8p.

Bytes said at its annual general meeting that trading in the first four months of the 2027 financial year had been in line with expectations.

Gross invoiced income and gross profit both delivered double-digit year-on-year growth across the public and private sectors, while operating profit was broadly flat.

Deutsche Bank analyst Tintin Stormont described the update as "reassuring" and said it was consistent with guidance issued alongside the group's full-year results.

Bytes expects gross profit growth to accelerate to high-single-digit to low-double-digit percentages in the 2027 financial year, while operating profit is expected to remain broadly flat.

The flat profit outlook reflects about £4.5 million of cost normalisation following the completion of technology projects. This includes higher technology costs as previously capitalised developer salaries return to the profit and loss account, together with a return to more normal bonus payments.

Stormont said the update supported his forecasts but, with the shares now trading around its revised target price, no longer sees sufficient upside to justify a 'buy' recommendation.