TIDMGAMA
RNS Number : 4137T
Gamma Communications PLC
20 July 2020
Monday 20 July
Gamma Communications plc
Pre-close trading update
First half organic growth and acquisitions in Spain, Germany and
the Netherlands
Gamma Communications plc ("Gamma" or the "Group"), a leading
technology based provider of communications services to the
business markets in the UK, Germany, Spain, and the Netherlands, is
pleased to announce a trading update for the six months ended 30
June 2020. This is an update to the statement made at the time of
the AGM on 5 June 2020.
Group overview
We are pleased to report that in spite of the challenging
conditions, Gamma has continued to perform well through the first
six months of the year. Based on this performance, management
expects that EBITDA and EPS for the full year will be ahead of
consensus*.
Highlights from the period and post-period end include the
following:
Acquistions give us scale in Europe and accelerate technology
development
-- We continue to execute our European expansion strategy having
acquired Voz Telecom (Spain) in April 2020 and HFO Holdings
(Germany) on 1 July 2020. Integration of those businesses has
started and is proceeding in line with our plan.
-- We continue to appraise acquisition targets in Europe to
enter new territories and to gain scale and strengthen capabilities
in countries where we already operate. On Friday 17 July, we
completed a small acquistion of GnTel, a Cloud PBX provider in the
Netherlands, for a cash consideration of EUR 8.1m. This acquisition
will be fully integrated with our exisiting Netherlands business
and will give us access to a new group of channel partners.
-- The acquisition of GnTel will increase our Cloud PBX seats in
Europe to over 100,000. The pro-forma EBITDA for the combined
European business for FY 2019 would have been EUR 8.8m.
-- In February 2020 we acquired Exactive, a UK Microsoft Teams
specialist. Since the acquisition, we have secured over 6,000 new
direct routing seats with organisations such as Metro Bank, Fraser
Nash, Northern Marine and Baillie Gifford.
We have progressed our product development and digital
transformation programme.
-- We launched our Microsoft Teams Direct Routing service making
Gamma's market-leading SIP trunks available to Microsoft Teams
users. This is an expanding market and we have already connected
thousands of users to the platform since the launch in April. The
Indirect business has worked with partners to deploy the new
Microsoft Teams Direct Routing service into end users.
-- We continue to invest in our digital transformation program
and we have launched our Dealer Hub. We remain on target to launch
Release 2 of the platform in the second half of 2020, which
significantly optimises customer order delivery and provides
customers with an online community for support and digital
engagement with Gamma.
-- Building on the acquistion of Telsis in 2019, we are on track
to launch a multichannel cloud contact centre solution. This will
be targeted at the small / medium sized business segment. The
solution will be a fully integrated application within our Horizon
Cloud PBX platform, and will be available to both our indirect
channel and direct customers.
Our core business has continued to perform strongly.
-- In both the UK and Europe, our financial model has continued
to be robust given that 93% of revenue is recurring and billed
monthly. Cancellations of existing contracts continue to be at
normal (minimal) levels and we are still seeing no increase in the
level of bad debt.
-- In our UK Indirect business, we have continued to have net
additions for SIP Trunks, Cloud PBX and UCaaS although during Q2
they were at a lower level than pre-Covid. We offered a
"hibernation" option to customers who are not trading and this has
cost us GBP1.2m - this offer expired on 30 June. Post-period end,
the level of new business enquiries has begun to increase back
towards pre-Covid levels.
-- Our Direct business, has been awarded numerous new multi-year
contracts across Enterprise, Public Sector and SME including RNIB
(for UCaaS), Restore plc (for WAN), Sureserve (for Cloud PBX) and
Toyota Financial Services (for WAN).
Cash
Gamma continues to have a very robust balance sheet, with strong
cash generation from its trading activities which were in line with
previous levels. Closing net cash at the half year is approximately
GBP37.7m compared to GBP53.9m at the end of the previous year - the
reduction primarily driven by the acquisitions of Voz (payments to
date - before cash acquired - of GBP17.9m) and Exactive (initial
cash payment of GBP4.1m). The Company has decided not to utilise
the Government furlough scheme and all tax payments are up to date.
The Directors expect to propose an interim dividend in line with
our stated progressive policy.
The Board expect to announce results for the half year ended 30
June 2020 on Tuesday 8 September 2020.
Andrew Taylor, Chief Executive, commented on the results:
"I am encouraged by our performance in the first half of 2020
given the difficult economic conditions. Our staff have worked
incredibly hard to keep the business running remotely and to ensure
that we continued to deliver an excellent level of support to both
our channel partners and our end users. I am very pleased with our
continued focus on delivering against our near-term commitments as
well as the execution of our longer-term UCaaS strategy, as
exemplified by our geographical expansion into both Spain and
Germany, and the strengthening of our UCaaS capabilities through
the acquisitions of Exactive and Telsis in the UK. I am delighted
to welcome all of our new colleagues from Exactive, Voz, HFO and
GnTel into the Gamma family."
* Note: Company compiled consensus expectations for the full
year for Revenue, Adjusted EBITDA and EPS are GBP373.2m, GBP71.8m,
and 46.5p respectively.
Gamma Communications plc Tel: +44 (0) 333 006 5972
Andrew Taylor, Chief Executive
Officer
Andrew Belshaw, Chief Financial
Officer
Tulchan Communications LLP Tel: +44 (0) 207 353 4200
James Macey White
Matt Low
Investec Bank plc (NOMAD & Tel: +44 (0) 207 597 5970
Broker)
Patrick Robb
Virginia Bull
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END
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