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6th Sept - Half Year report to 30th June 2022 - strong business IMHO
Key Highlights - The Group continued to perform strongly in the first six months of the year with good gross profit growth flowing through to Adjusted EBITDA and significant cash generation.
Financial highlights
The UK business units continued to perform well. In Europe, Germany's strong growth out performed the more subdued performance in the smaller Spanish and Dutch businesses:
· Revenue and gross profit grew by 8% to £234.7m and £120.4m respectively (H1 2021: £217.4m and £111.7m), with gross margin being maintained and Adjusted EBITDA growing by 13% to £51.9m (H1 2021: £46.0m).
· Recurring revenue (being revenue which is recognised "over time" as per note 3) in the year grew to £208.7m (H1 2021: £194.3m) being maintained at 89% of total revenue.
· UK Indirect Business continued to grow strongly with a focus on the existing partner base. Gross profit increased by 10% to £76.3m (H1 2021: £69.2m) with a stable gross margin.
· UK Direct Business returned to growth, with gross profit increasing 6% to £27.9m (H1 2021: £26.4m). A strong contracted pipeline, significantly ahead when compared to this time last year, supports the growth we anticipate for the full year. As expected gross margin decreased slightly as a result of higher installations and hardware sales which are lower margin.
· European Business, in local currency, delivered gross profit growth of 4%, seeing strong growth in UCaaS users and a good performance from our German business being tempered by some headwinds in our smaller Spanish business. After foreign exchange ("FX") translation, the European business gross profit was stable at £16.2m (H1 2021 £16.1m).
Product highlights
There continues to be strong volume growth across the major product groups:
· The number of installed SIP Trunks increased, driven by voice enablement of the Microsoft ("MS") Teams via Direct Routing and Operator Connect.
· The number of Horizon (Cloud PBX) users increased by 6% to 716,000 from 676,000 as at 31 December 2021; sales of the Collaborate module grew faster than the core module, increasing by 10% to 69,000 from 63,000.
· The number of Cloud PBX seats in our European business increased by 7% to 137,000 from 128,000 at 31 December 2021 - a slightly higher rate of growth than we are experiencing in the UK and in line with the growth in the European market.
Andrew Belshaw, Interim Chief Executive Officer, commented:
"I am pleased to be presenting the first set of results since I took on my new role. Gamma has had a strong first half. Our Direct business in the UK has returned to growth as we had indicated it would once the effects of COVID had worked through. The UK Indirect business continues to be strong with good growth in the new variants of SIP which support MS Teams users. Our European business has increased the number of Cloud seats by 7% despite a challenging economic environment.
I do not think the TG can make up its mind it states buy and hold on the same page.
Tipped by Questor in the DT today.
Thought it would do better than this.
People come, people go, that's normal.
CEO has left. Interim put in place.
Not looking good.
Hosting is only one part of the business, they have other high margin products with blue chip customers.
Hosted phone systems are like flat tvs, you make the upgrade but then once you have one you don’t need to upgrade for years. Most businesses are now upgraded to SIP or Hosted these days.
They have made some poor choices of new products, the phone line plus , the 1 or 2 user hosted system, has been a flop!
Growth has now slowed a lot. I’m in the telecom industry. Know Gamma inside out.
The new German market is an unknown gamble.
Reoccurring income is very strong. But growth will be slower than expected.
£11 now maybe growth in Germany won't happen due to war economy.
Worked sell? at 2:35 p.m.?
SP action has been looking weak all day.
" Have found nothing horrible in the numbers yet."
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- Try examining Net Profit v expected market guidance then!
Supposed to be only 3% down against last year. Without advising the market the annual results came in well over 16%+ down/adrift!!
The next 2 years are budgeted to show truly wonderful performance/gains but the market is now doubting the veracity of those claims.
Not back home for another week. If you can't dig out the figures I'll reveal them upon my return.
Have found nothing horrible in the numbers yet.
The market's have been spooked, possibly by what the CEO said in his statement, with regards to outlook;
>Within our Indirect business, we will continue to evolve and adapt our partner proposition to support growth opportunities across all markets, ensuring that our channel partners have the tools to compete and be successful. Within our Direct business, we have seen delays to some projects for our Enterprise customers caused by the global chip shortage; this means that sometimes it takes longer than we had anticipated for billing to start and this may affect growth in 2022.<
I don't believe this will affect overall growth in the company, in the way that the market has reacted.
The growth in Europe is a good sign. Germany is the largest economy, it seems that Gamma have timed their entry to that market very well.
Gamma is a growth stock, and we continue to grow.
1440p this morning down 4% on Ukraine invasion, not sure Gamma do any business in Eastern Europe?
New reality, Inflation is depressing valuations and Covid was still interfering with business at the end. Growths numbers look down to between 12-15%. Still making a profit, plenty of cash. If inflation persists could take three years to get back to last years highs unless growth picks up above 20% plus. Though looking less likely as interest rates start to move up. Will be opportunities to acquire other businesses with depressed valuations and there is the dividend. Had my investment been at £20 plus would have sold all by now. As it is will hold, review the results and any outlook statement. Am thinking of my holding as a three year investment from now. Better prospects than many stocks out there.
currently £15.44 to buy so the Jeffries HOLD 1550 target has been achieved
This will bounce back to 20 by June ;-)
PS.
" . . . This is all because Jefferies issued a hold note with an outlier target price of 1550p, . . . "
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Hmm:
Or maybe instead, only another 30p-ish or so to go, before licking its wounds???
All is extremely bearish with Gama's SP trajectory; and has been since early September of last year, and is now entering the 5th consecutive month of consistent decline in the SP - without let up!
However (Last Chance Saloon scenario) I calculate that the v low 1450's is the last major Fibbo turning point. (All the others have been trashed with contempt by the SP).
So, If the SP continues southwards but commences to turn away from that price area (v low 1450's) then I'm topping up with confidence. But . . . . . .
. . . . But should it go screaming past that level, then all is lost and it's chucking out time in the Last Chance Saloon, and I'll sell my holding for a small-ish loss without question, and won't reconsider until April 1st
- as April for Gama has characteristically always been the most bullish month of the year for Gama, by far.
Hi Allenby,
many thanks for going to the trouble of providing the details of the major shareholders in Gamma. I apologise for not wording my post clear enough. If a bid for GAMA were to emerge, it would be interesting to look over the major holdings list of the company, if public, which is actually making that bid.
This is all because Jefferies issued a hold note with an outlier target price of 1550p,( a reversal of a year of 20% plus growth, by going back to Sept 20 sp levels). They may know something that Barclays and Peel Hunt don't know. If there is a problem, shareholders should be told.
Hi fastduckharry, The major shareholders are,
Lion trust 9.84%
Aberdeen inv 9.84%
Blackrock 9.41%
Kerry group 7.90%
Octopus 6.95%
Jupitor assoc 6.75%
Argon ass 5.75%
Close Bro 4.87%
in Total the institutions own 74.84% of the company
Hope this answers your question
Just a quickie. Busy last night and missed the late Holdings in Company rns. The answer to my question of who was buying the shares, was already out there; BlackRock. Should a bid emerge for Gamma will be curious to find out, who the major shareholders of the company involved are.
I agree with sledgey121. The price had gone crazy. Don't usually trade but selling in response Jefferies 1550p target hold note, was the fourth time had sold all my GAMA since mid July. Back in now. Am suspicious of the motivation for the note. That makes me suspicious of the move over 2300p. The obvious logical guess is that GAMA are being softened up for a takeover bid by a US telecommunications company and Jefferies are involved somehow. Would give that company a solid foothold both in the UK and the EU. It could well be that company are also coveting Gamma's software, which might augment their operations in the US.
As for Gamma am sure that H2 will be better than H1 including in Europe, therefore either way will not be tempted to sell again below 2100p even if drops to 1550p though unlikely, would be buying more. Have noticed some solid after hours buying at current levels. Am wondering by whom. Recent history suggests that Gamma will not issue a trading update until January. If all is well, perhaps their advisors might feel it is prudent to issue one, by the end of next month, just to reassure the market.
If the sp collapses again tomorrow, I promise to avoid posting on here again, don't worry about that. Won't change my opinion unless the evidence suggests I'm wrong.
GLA (don't weaken)
" . . . see anything of concern that might explain this sell-off? Just wondering . . . "
" . . . It is a solid company and yesterday's drop is very confusing considering they have just reported a 23% improvement in revenue in its first half. . . "
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From what I've read, it's being suggested that the market was expecting more than was actually achieved in Europe, despite the upbeat results.
- Hence the SP pullback since the trading update.
Perhaps the market is too greedy on this occasion?
From £1.87 launch back in late 2014 to £23.40's of the ATH the day before the H1 trading results were published, turned Gamma into a 12-bagger in relatively short order!
Currently (£18) that's over circa 22%x pullback since the morning of the results, earlier this month.
What's interesting is that the SP is currently under the significant 200 day trend. (Only just sank under it from Tuesday this week).
- Approx once per year, give or take slightly less, slightly more some years, the SP does that when it climbs too far from the 200 (reversion to the mean).
As it's below the 200 as of now, the guessing game is to spot when the SP will commence rising back above that level; which should be imminently based on history.
Many occasions the SP sank quite a fair distance below the 200 before recovering, other times , similar to know, just a handful of days only, so could it do similar on this occasion too?
£18-ish the floor, or further south before the pullback terminates?
Candlesticks suggest £18 is the likely floor, however short-term trend lines have yet to cross to the upside.
- Think I'll wait until they cross, the final arbitrator, just in case I'm wrong about the market being too greedy, and it's something else.
I think £20 was a reasonable SP, it seemed to accelerate past £20 too quickly for me.
Did anyone who looked at the update figures/report see anything of concern that might explain this sell-off? Just wondering - it seems more than just a little profit taking as the share price has been trending down for the past couple of weeks. I hope the fact that this is a very well-run company in a structurally growing sector should steady the drop, and eventually return to its excellent long-term track record.