Gamma Communications Regulatory News (GAMA)

27 January 2015

Gamma Communications plc

Post year end trading update

Gamma Communications plc ("Gamma"), a leading, technology based provider of communications services to the UK business market, is pleased to announce a trading update for the year ended 31 December 2014.

Group overview

Following our successful flotation on the Alternative Investment Market in October 2014, we are pleased to report that the Group's Revenue and Adjusted EBITDA* for the year ended 31 December 2014 is slightly ahead of the Board's original expectations. This reflects a strong demand in the business market for Gamma's portfolio of products. This positive performance was principally driven by the following factors:

· Growth in the number of channel partners in our indirect business from 650 to 730

· Significant contract wins in our direct sales business, which focuses on more complex solutions, including Oxford University and Hearst Magazines.

· Continued strong growth in both Gamma SIP Trunks and active seats on Gamma's Cloud PBX services

We have continued to successfully execute our corporate strategy of improving our revenue mix from lower margin traditional voice services to higher margin strategic services such as Cloud PBX, SIP and Inbound call control which have greater know-how and software content. At the same time, we have managed the structural decline in wholesale calls and lines ahead of the negative trend which has been a feature of the market for some years.

Acquisitions and Investments

In November, we finalised a £2.6m deferred consideration payment for our 2012 acquisition of Varidion Ltd, resulting in an aggregate consideration for the business of £3.6m - a 2.2x ebitda multiple. In addition we entered into new leases on two properties in London and Glasgow to cater for the continued expansion of the business.

Just prior to year end, the Group also made an opportunistic, but nonetheless strategic, acquisition of assets to strengthen its position in the growing market for converged fixed & mobile services and will update the market more fully on this at the time of our full year results.

Exceptional items & Share based payments

Exceptional items will be £2.1m, including £1.3m of IPO costs and £0.6m due to the change in the fair value of contingent consideration relating to the Varidion acquisition. Share Based Payment charges will be £3.4m that relate to options issued around the time of the flotation as well as the private company share options that vested as a consequence of the share capital reorganisation on IPO.

Cash

The Group continued to generate strong cash from its trading activities. The closing cash balance for the year was £13.4m compared to £14.6m at the end of the previous year as a consequence of the settlement of the deferred consideration of Varidion, the asset acquisition just prior to the year end and IPO related cash expenses.

The Directors expect to propose a dividend in line with the policy that was stated in the Admission document.

The results for the full year ended 31 December 2014 are expected to be released in late March 2015.

*Note: Adjusted EBITDA is stated before exceptional items and share based payment charges.

Bob Falconer, Chief Executive, commented on the results:

"We are very pleased with the performance of Gamma throughout 2014, the successful flotation on the AIM market in October, and the underpinning trends in the business. As a channel focused business, our growth continues to demonstrate the appetite that new partners have to join us and our existing partners have to work closely with us to take additional services to their customers.

We were also pleased that, for the third year in a row, we were recognised as one of the "The Sunday Times 100 Best Mid Companies to Work For 2015"."

Enquiries:

Gamma Communications +44 (0) 333 014 0000

Bob Falconer, Chief Executive

Andrew Belshaw, Group Finance Director

Investec Bank PLC +44 (0) 207 597 5970

NOMAD & Broker

Andrew Pinder, Dominic Emery, Patrick Robb

Tulchan Communications +44 (0) 207 353 4200

James Macey White

Tom Buchanan

Notes to Editors

Gamma is a rapidly growing, technology based, provider of communications services to the UK business market. Gamma's services, such as Cloud PBX, Inbound Call Control Services and SIP Trunking, are designed to meet the increasingly complex voice, data and mobility requirements of businesses, through the exploitation of its know-how and own intellectual property.

Gamma also provides services such as business-grade broadband, Ethernet and mobile and data services and, as a consequence of its history, has a substantial voice service capability. These services enable Gamma to provide a comprehensive range of communications services. 

Gamma has enjoyed strong organic revenue and EBITDA growth driven by high percentage of repeat revenues. The business has over 500 employees, of which 20% are employed in product development. It operates across six main locations - headquartered in Newbury - with offices in Fareham, Manchester, Glasgow, London & Budapest.