Gamma Communications Regulatory News (GAMA)

11 January 2021

Gamma Communications plc

Trading Update

UCaaS product suite continues to deliver strong growth

Full year adj EBITDA and adj EPS anticipated to be slightly ahead of market expectations

Gamma Communications plc ("Gamma"), a leading provider of Unified Communication as a Service ("UCaaS"), announces a trading update for the year ended 31 December 2020.

Trading

We are pleased to report a financial performance significantly ahead of last year with adjusted EBITDA and adjusted EPS for the year ended 31 December 2020 expected to be slightly ahead of the range of market forecasts; revenues are expected to be towards the top of the range of expectations*. This performance reflects a continued strong demand in the UK and European business markets for Gamma's portfolio of UCaaS products.

Cash

The closing gross cash balance for the year was £54.1m compared to £53.9m at the end of the previous year. Net cash was £48.4m due to a small amount of debt within companies which were acquired.

The closing cash balance is above market expectations due to the sale of "The Loop". On 31 December 2020 Gamma sold its non-core Manchester based fibre business which traded as "The Loop" for an undisclosed sum. The business sold consisted of a duct and sub-duct based fibre network in Greater Manchester together with the customer base which includes major data centre operators, enterprises and public sector organisations. Gamma previously reported revenue of £0.7m for The Loop for the first half of 2020. 

The increase in cash balance from the previous year end is pleasing given that during the year Gamma spent £48.0m on acquisitions. These acquisitions have given Gamma an entry into both the German and Spanish markets as well as increasing both our market presence and product capabilties in the UK and the Netherlands.

Gamma has also maintained its dividend policy, despite the Covid 19 pandemic, and paid dividends to shareholders totalling £10.4m in 2020. It did not receive any government funding or support.

Overview of the year

Some of the highlights from the year include:

· The business performed well throughout 2020 despite the economic downturn caused by Covid-19. Its recurring revenue model has proved robust and its product set supports businesses which have had to work remotely. The group has seen cancellations and bad debt remain at the low levels experienced historically. 

· During the year, the group acquired UCaaS providers in two additional countries - Voz Telecom (Spain) and HFO Telecom (Germany). Integration is going well. The UCaaS market in both countries is significantly less developed than in the UK but is expected to grow rapidly.

· Gamma also acquired Exactive in the UK (which supports companies wishing to use Microsoft Teams as a UCaaS solution) and GnTel in the Netherlands (which provides a product capability and opens up a new route to market through partners who are based in the IT space)

· The group has continued to develop its product suites and expects to launch its Cloud Contact Centre as a Service ("CCaaS") solution during the first half of 2021; this will be targeted at the SME market.

The Board expects to announce results for the year ended 31 December 2020 on Tuesday 23 March.

Andrew Taylor, Chief Executive, commented on the results:

"We are pleased that Gamma has continued to grow strongly whilst also geographically expanding into Spain and Germany. The execution of our UCaaS product strategy is progressing very well and our product set has continued to perform well and has enabled our end users to work flexibly during the difficult conditions prevalent in 2020. I would like to thank our staff and partners for all of their hard work throughout the year."

END

* Note: Company compiled consensus ranges for Revenue are £371.8m - £396.7m; Adjusted EBITDA £73.9m - £76.0m; and Adjusted EPS 47.0p - 51.0p.