TIDMGAMA

RNS Number : 9733E

Gamma Communications PLC

13 July 2021

Tuesday 13 July

Gamma Communications plc

Pre-close trading update

Continued growth in first half

Gamma Communications plc ("Gamma" or the "Group"), a leading provider of Unified Communications as a Service ("UCaaS") 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 2021. This is an update to the statement made at the time of the AGM on 20 May 2021.

Group overview

We are pleased to report that the Group has continued to perform well through the first six months of the year. Growth in the first half has been in line with the rate associated with market expectations for the full year. This is despite the first half again being characterised by lock downs in all of our territories which restricted sales activities for both Gamma and our partners.

In both the UK and Europe, our financial model has continued to be robust given that over 90% of revenue is recurring and billed monthly. Cancellations of existing contracts continue to be at very low levels and bad debt remains negligible.

United Kingdom

In our UK Indirect business, net additions across all UCaaS products have been positive and in line with the previous period.

The performance of the UK Direct business is slightly ahead of our expectations. Growth has been closer to that of previous years despite the lower order intake during the first lockdown period in 2020. We have been awarded several new contracts during the period, including The Berkeley Group (Cloud Contact Centre and UCaaS), RSM (MS Teams) and The Royal Berkshire NHS Trust (SIP)

Overseas: Netherlands, Spain and Germany

Despite the markets being at a relatively early stage of their development, each of our overseas businesses continues to grow its Cloud seat base. This has been coupled with positive net growth of both SIP and Mobile. Despite some difficult COVID-19 related market conditions, the overall performance of our overseas business has been in line with our expectations.

Product development

We have successfully launched a number of key products in the UK, some of which were demonstrated at our recent Capital Markets Day. These include Phone Line + (a replacement service for customers who currently use basic telephone services) and Horizon Contact (our fully integrated Cloud Contact Centre solution). Phone Line + was developed by our recent acquisition, Mission Labs, and Horizon Contact was developed by the team at Telsis (which we acquired in late 2019). We have also launched our new mobile service in partnership with Three UK.

We are very pleased with our continued new product development and, by the end of July, all Gamma customers will have the option to fully integrate their Horizon Cloud service with Microsoft Teams. This option will enable Microsoft Teams users to be able to make and receive calls from their desktop as they would have done previously with a traditional phone.

Corporate activity

On 3 March 2021, the Group acquired Mission Labs Limited for GBP40.2m (on a cash free basis) with up to an additional GBP6.0m contingent deferred consideration payable over the next three years. Integration of the business has gone well and its early performance has been slightly ahead of expectations.

We continue to actively appraise acquisition targets in Europe to gain scale and to strengthen capabilities.

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 GBP25.4m compared to GBP48.0m at the end of the previous year - the strong generation of cash from trading being offset by the acquisition of Mission Labs for GBP40.2m and a further payment of GBP5.0m in respect of our acquisition of HFO in 2020.

Outlook

Current management expectations for the full year ending 31 December 2021 are that results will be in the upper half of market consensus estimates.*

The Board expects to announce results for the half year ended 30 June 2021 on Tuesday 8 September 2021.

Andrew Taylor, Chief Executive, commented on the results:

"Despite the ongoing COVID-19 related difficulties across the UK and Europe, I am encouraged by our performance in the first half of 2021. All of our staff have continued to work incredibly hard to keep the business running remotely and our ongoing support of partners and customers has been excellent throughout the period. I am pleased with the development of our UCaaS strategy both organically and through the acquisition of Mission Labs, and with the release of an exciting range of new UCaaS products, including Phone Line Plus and Horizon Contact. I am delighted to welcome all of our new colleagues from Mission Labs into the Gamma family and I am pleased to see the continued growth of Circle Loop and Smart Agent (being the new products we gained as part of the acquisition)."

* The Company understand the range of market estimates for the year ending 31 December 2021 to be as follows: -

   --    Revenue GBP442.4m - GBP460.0m; 
   --    Adjusted EBITDA GBP86.0m - GBP95.0m; and 
   --    Adjusted EPS 54.9p - 63.1p. 

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 & Broker) Tel: +44 (0) 207 597 5970

Patrick Robb

Virginia Bull

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