Insider: directors spend £300k at both this AI proxy and Rolls-Royce

A £300,000 purchase of shares by the long-serving boss of Bytes Technology Group Ordinary Shares (LSE:BYIT) has backed the Microsoft reseller to maintain its momentum amid AI tailwinds.

Neil Murphy’s investment was made last week at a price of 554.9p, near the high point for the year and close to the FTSE 250-listed firm’s record of 570p set two years ago.

It is also double December 2020’s flotation level of 270p when South Africa’s Altron listed the business in London and Johannesburg with a valuation of £646 million.

• Invest with ii: Open a Stocks & Shares ISA | What is a Stocks & Shares ISA? | ISA Offers & Cashback

Surrey-based Bytes is one of the UK's leading providers of IT software offerings and solutions, with a focus on cloud and security products.

Its involvement with Microsoft dates back to 1996 as one of the first resellers in the UK and has evolved to become one of the tech giant’s largest partnerships in this country.

In last month’s half-year results, Murphy reported another period of double-digit growth as adjusted operating profits lifted 13.8% to £33.9 million. High levels of customer demand meant headcount increased 10% to above 1,000 for the first time.

He said: “Our business continues to benefit from the wide-ranging product offering that we have developed, with a substantial suite of software, IT services and hardware solutions from the world's leading vendors and software publishers.”

Murphy, who has run the business since 2000, highlighted that his company is already trialling the Copilot AI assistant feature for Microsoft 365 applications.

“We are also looking forward to working with our other vendor partners that are developing AI software tools,” Murphy added.

The shares were 454p before the half-year results, with Bytes’s assured guidance on the second half outlook helping to calm City nerves after fellow FTSE 250-listed software company Softcat reported lengthening sales cycles.

Peel Hunt has a price target of 638p and said in the wake of the results that it viewed Bytes to be the “best AI proxy” in its coverage.

Barclays Capital has an “overweight” recommendation and price target of 640p.

It added: “We think sustainable double-digit organic growth is supported by a win-win attitude toward all stakeholders, an experienced management with large shareholdings and low market share.”

• Will there be festive cheer for UK investors in December 2023?
• FTSE 100 giants have £6bn dividend gift for investors this Christmas
• Stockwatch: will shift in rate expectations boost these two shares?

The shareholding of Murphy now stands at 1.21% after last week’s purchase. In June he sold £4.75 million of shares for estate planning purposes at a price of 500p, pledging at the time not to sell any more shares for at least the next 12 months.

The sale interrupted a run of purchases, including one worth £200,000 in February at an average price of 393p and another worth £170,000 the month before at 380p.

The day after Murphy made last week’s purchase, Bytes chair Patrick De Smedt spent £55,000 on shares at a price of 549.65p. Bytes closed last week at 545.5p.

Rolls-Royce pair pay high price

Rolls-Royce Holdings (LSE:RR.) shares worth £320,000 have been bought by two directors in the aftermath of chief executive Tufan Erginbilgic’s well-received strategy update.

They made their purchases in a week when shares jumped another 13% to close a fresh four-year high of 276.7p. That compares with 93p at the start of the year.

The boardroom buyers included non-executive director Dame Angela Strank, who joined the board in May 2020 and previously worked alongside Erginbilgic at BP.

The oil giant’s former head of downstream technology and chief scientist made two purchases of Rolls shares last week, the first on Wednesday at a price of 260p and worth £20,000. She returned on Friday with a bigger purchase of £50,000 when shares cost 13p more.

Dame Angela has made three smaller purchases of Rolls shares this year, including one in February at 125p and another in August at 156p.

Last week’s other boardroom buyer of shares was new non-executive director Stuart Bradie, who made a purchase worth £250,000 at 260p on Wednesday.

• Trading Strategies: the outlook for Rolls-Royce shares
• Rolls-Royce shares: here’s why they just surged to a four-year high
• Shares vs bonds: which offers the best opportunity for income seekers?

Deutsche Bank reiterated its “buy” and target price of 310p following last week’s capital markets day, which included a 2027 free cash flow target of £2.8-£3.1 billion. This was 30% above City forecasts and compared with the £505 million generated in 2022 and the company’s unchanged forecast for 2023 of between £900 million and £1 billion.

The overall margin target of 13-15% was also about 100 basis points above the midpoint of the City consensus, with estimates for all three divisions ahead of expectations.

Deutsche Bank said: “Management came across as confident and well in control. We were encouraged by improved visibility compared to the 2022 capital markets day (CMD). Overall, our optimism running into the CMD appears well founded.”