TIDMGAMA
RNS Number : 5194F
Gamma Communications PLC
22 March 2022
22 March 2022
Gamma Communications plc
Results for the year ended 31 December 2021
Increase in Revenues and cash generation driven by new product
launches and a full year of trading in Europe
Gamma Communications plc ("Gamma" or "the Group"), a leading
provider of Unified Communications as a Service ("UCaaS") into the
UK and European business markets, is pleased to announce its
results for the year ended 31 December 2021.
Year ended 31 December
2021 2020 Change (%)
-------------- ------------- ----------
Revenue GBP447.7m GBP393.8m +14%
-------------- ------------- ----------
Gross profit GBP228.5m GBP200.8m +14%
-------------- ------------- ----------
Gross margin 51% 51%
-------------- ------------- ----------
Profit from operations** GBP68.3m GBP75.7m -10%
-------------- ------------- ----------
Adjusted EBITDA* GBP95.4m GBP79.0m +21%
-------------- ------------- ----------
PBT ** GBP67.2m GBP75.0m -10%
-------------- ------------- ----------
Adjusted PBT* GBP77.2m GBP61.7m +25%
-------------- ------------- ----------
EPS (Fully Diluted, "FD")** 55.2p 66.6p -17%
-------------- ------------- ----------
Adjusted EPS (FD)* 64.0p 51.3p +25%
-------------- ------------- ----------
Total dividend per share 13.2p 11.7p +13%
-------------- ------------- ----------
Cash generated by operations GBP89.8m GBP70.3m +28%
-------------- ------------- ----------
Cash generated by operations /
adjusted EBITDA 94% 89%
-------------- ------------- ----------
Cash and Cash Equivalents less
Borrowings ("Net Cash") GBP49.5m GBP48.0m +3%
-------------- ------------- ----------
*All adjusted measures set out above and throughout this
document which are described as "adjusted" represent Alternative
Performance Measures ("APMs") and are separately presented within
the statement of profit or loss or reconciled in the Financial
Review section or segment note and are applied consistently. Where
reference is made to adjusted EPS this is stated on a fully diluted
basis. Definitions of APMs are included in the Financial Review.
Our policy on the use of APMs is included in note 2.
** In 2020 Profit from Operations, statutory EPS and the
statutory PBT figures included the profit on disposal of The Loop
(GBP19.5m); therefore the fall in statutory PBT is not a reflection
of a change in trading patterns.
Key Highlights
The Group had a strong financial performance with good growth
across all key product categories during the year.
Financial highlights
All business units continued to perform well:
-- Revenue grew by 14% from GBP393.8m to GBP447.7m. The UK
Revenue growth in the period was 9% (from GBP345.3m to GBP375.0m).
The European Business grew revenues from GBP48.5m to GBP72.7m which
includes a full year of acquisitions made in 2020 in Spain and
Germany.
-- Recurring Revenue (being Revenue which is recognised "over
time" as per note 3, grew from GBP359.3m to GBP400.1m (being 89% of
total Revenue; 2020 - 91%). The percentage reduction is due to the
acquisition of HFO in Germany. Its Epsilon subsidiary offers mobile
connections on which the commissions earned are non-recurring.
-- Gross Margin percentage is unchanged across both years at 51%
with an increase in margins in the UK businesses being offset by
the decreased margin in Europe as a result of the prior year
acquisition of the Epsilon subsidiary which operates in a sector
which has lower margins.
-- UK Indirect Business continued to grow strongly with a focus
on the existing partner base. Gross profit increased from GBP132.2m
in 2020 to GBP143.2m in 2021 (+8%).
-- UK Direct Business continued to deliver positive growth, with
Gross Profit increasing 14% from GBP46.3m in 2020 to GBP52.6m in
2021. The 2021 figures include the results of Mission Labs since
its acquisition on 3 March 2021 and reflects the exclusion of
revenues from The Loop subsequent to its sale on 31 December
2020.
-- The European Business saw Gross Profit increase 47% from
GBP22.3m in 2020 to GBP32.7m in 2021, primarily as a result of the
inclusion of twelve full months of trading results for acquisitions
which happened in 2020. The level of Gross Profit in H2 2021
(GBP16.6m) was higher than that earned in the first half of 2021
(GBP16.1m).
Product launches
In its core UK market, Gamma successfully launched a number of
key products (all of which have been well received by both Channel
Partners and end users) -
-- We have enabled both new and existing Gamma customers to
fully integrate their Horizon Cloud PBX service with Microsoft
Teams.
-- The success of our Microsoft Teams Direct Routing product (a
variant of SIP) has meant that we have met the criteria for
Microsoft to add us to the list of providers of Microsoft Operator
Connect; this consists of only a small number of carriers globally.
In March 2022, we also announced our intention to launch this
service in the Netherlands.
-- PhoneLine+ is a cloud based voice application replacement
service for a basic telephone line. It is easier to adopt than a
full UCaaS solution. The development was made possible through our
acquisition of Mission Labs.
-- Horizon Contact is a Cloud Contact Centre solution which is
fully integrated with Gamma's Horizon cloud PBX service, and which
was fully developed by our own in-house software development
team.
-- We have delivered an enhanced mobile service to our customers
which deepens Gamma's existing relationship with Three and gives
end users access to both 5G and Wi-Fi calling.
-- SoGEA Broadband provides end users with broadband without the
need for a traditional phone line.
Product highlights
There continues to be strong growth across the major product
groups in the United Kingdom:
-- The number of installed SIP Trunks as at 31 December 2021
increased by 20.7% to 1,430,000 from 1,185,000 at 31 December 2020;
these figures include sales of the MS Teams Direct Routing product
and seats on Exactive's Cloud UCX platform.
-- Overall Cloud seats increased by 15.0% to 743,000 as at 31
December 2021 from 646,000 at 31 December 2020 (this includes
Horizon, Collaborate and our Cloud Contact Centre). Within this,
the number of Horizon (Cloud PBX) users increased by 12.5% to
676,000 from 601,000 and the number of Horizon users taking the
additional Collaborate service increased by 37.0% from 46,000 to
63,000.
The number of Cloud PBX seats in our European business increased
by 12.6% to 128,000 at 31 December 2021 from 114,000 at 31 December
2020.
Acquisitions
On 3 March 2021 we acquired Mission Labs. The initial
consideration (net of cash acquired) was GBP40.8m with up to an
additional GBP6.0m contingent deferred consideration payable over
the next three years assuming certain development milestones are
met.
We had been partnering with Mission Labs over the previous 18
months on various projects such as PhoneLine+. The addition of
Mission Labs has enabled us to work with the team to continue to
develop the existing Mission Labs products (Circle Loop and Smart
Agent) as well as gaining a development capability which has
already started working on our next generation of UCaaS products.
The additional development capability has proved valuable in an
environment where employment of software developers has become more
competitive.
Outlook
The Board is positive about the outlook for the Group in 2022
and beyond. We believe that more and more businesses of all sizes
are seeing the advantages of cloud communications and as a result
of a rapid shift to a more flexible and digitally enabled working
environment, we expect to see continuous demand across all markets,
and ongoing growth in UCaaS product sales.
Andrew Taylor, Chief Executive Officer, commented,
"Our overall business performance in 2021 has been strong in an
exciting growth market, and we have delivered an excellent set of
financial results. Throughout the year, and with a focus on
delivering long-term growth, we have further developed and
strengthened our technology, product, and people capabilities
across Gamma, with our software development capabilities being
significantly augmented with our acquisition of Mission Labs in
March 2021.
"As part of a structured growth strategy and group operating
model, we have made very good progress with the integration of all
our acquisitions and have significantly broadened and strengthened
our market capabilities through the development and launch of a set
of new UCaaS products and services. This is designed to enable and
accelerate our long-term growth objectives across the UK and
Europe, while providing a technology platform capability for the
future.
"Despite the economic and business market impact of the COVID-19
pandemic, our performance was very robust throughout the year,
driven by excellent partner and end-customer engagement levels, and
a continued acceleration to cloud based products and services. We
delivered strong unit growth across all key products. Our newly
launched bolt-on products and services have achieved attachment
rates in line with our expectations.
"As ever, we have continued to invest and strengthen both our
direct and indirect channel propositions across all markets, with a
focus on positively enabling our partners and our end-customers to
be competitive and highly successful in their respective
markets."
Enquiries:
Gamma Communications plc Tel: +44 (0)333 006 5972 Andrew Taylor,
Chief Executive Officer
Andrew Belshaw, Chief Financial Officer
Investec Bank plc (NOMAD & Broker) Tel: +44 (0)207 597 5970
Patrick Robb / Virginia Bull
Tulchan Communications LLP (PR Adviser) Tel: +44 (0)207 353
4200
James Macey White / Matt Low
Chair's statement
Overview of results
Group revenue for the year ended 31 December 2021 increased by
GBP53.9m to GBP447.7m (2020: GBP393.8m) an increase of 14% on the
prior year. Profit before tax for the year was GBP67.2m, a decrease
of 10% from the prior year figure of GBP75.0m; the reduction is
driven by the 2020 exceptional gain on the sale of our subsidiary,
The Loop (the fibre business based in Manchester). Adjusted EBITDA
for the Group increased by GBP16.4m (21%) to GBP95.4m (2020:
GBP79.0m). Adjusted items are explained and reconciled in the
Financial review and note 2.
Fully diluted earnings per share for the year decreased by 17%
to 55.2p (2020: 66.6p); the prior year figure was increased by the
profit of GBP19.5m made on the sale of our subsidiary, The Loop.
Adjusted earnings per share (Fully Diluted) for the year increased
by 25% to 64.0p (2020: 51.3p).
The cash generated by operations for the year was GBP89.8m
compared to GBP70.3m in 2020. The closing Net Cash balance for the
year was GBP49.5m (2020: GBP48.0m). It is pleasing to see that this
cash balance has increased despite investing GBP16.8m on capital
expenditure, GBP49.3m on acquisitions and paying GBP11.7m in
dividends. This is testament to a strong focus on cash generation
from management.
Overview of the year
As outlined in this report, the year has been one of strong
strategic execution for Gamma with the following highlights:
-- The whole business has continued to respond well to the
ongoing difficulties COVID-19 has brought; we have demonstrated
that we are able to run the business with the vast majority of our
staff working from their homes. We are moving to hybrid working for
some parts of our business which we believe will allow us to
attract and retain staff.
-- The Group's revenue model has proved robust and its product
set supports businesses which have either had to work remotely or
have chosen to do so because they see the advantages of flexible
working patterns.
-- On 3 March 2021 we significantly expanded our software
development capability through the acquisition of Manchester based
Mission Labs. Gamma had been partnering with Mission Labs for over
18 months on projects such as PhoneLine+. The acquisition gives
Gamma additional development capabilities in the rapidly evolving
markets of Cloud Contact Centre and Cloud Communications.
-- The acquisition also enables us to accelerate our digital
strategy. Mission Labs owns a digitally based voice application
CircleLoop (www.circleloop.com). This is a UCaaS technology
platform which provides a cloud-based telephony product fully
serviced through web, desktop and mobile applications. It isaimed
at the micro-business market. The fact that we own this capability
will enable us to roll it out in other territories to address a key
market opportunity in the UK and Europe.
-- During the year we have increasingly seen the importance of
partnering with Microsoft Teams. We had previously launched a
Microsoft Teams Direct Routing product to our Channel Partners,
making Gamma's market-leading SIP trunks available to Enterprises
which use Microsoft Teams. On 27 September 2021 we announced we had
been successful in our efforts to work with Microsoft to join its
Operator Connect for Microsoft Teams programme. Operator Connect is
a new operator-managed programme from Microsoft designed to enable
seamless and integrated PSTN calling to Teams.
-- In July 2021 we launched a product enhancement which allows
users to integrate their Horizon Cloud product with Microsoft
Teams.
-- During the first half we launched our Cloud Contact Centre
product - Horizon Contact. This was developed by our team of
in-house software developers and is a fully integrated additional
module that attaches to our core Horizon Cloud product.
-- We committed to becoming a Carbon Net Zero business by 2042.
Board and governance
In December 2021, I was pleased to announce two key appointments
which reiterate our focus on developing our senior leadership
capacity, ensuring that we capitalise on Gamma's significant growth
opportunities.
First, Andrew Belshaw, who has been Chief Financial Officer
since Gamma's IPO in 2014, will be appointed Deputy Chief Executive
from 1 May 2022. He will continue to report to Andrew Taylor and to
be a member of Gamma's Board of Directors. In this role, Andrew
will take on a range of strategic and operational responsibilities
to support the development and growth of the Group. These
responsibilities will include overseeing aspects of product
management, product development and operations and the execution of
M&A. Andrew will also oversee Gamma's group people strategy,
ensuring that Gamma attracts and retains great talent while
continuing to be a great place to work.
Taking over from Andrew Belshaw, Bill Castell has been appointed
Chief Financial Officer. Bill will report to Andrew Taylor and will
join the Company and the Board of Directors on 1 May 2022. Bill is
currently Chief Financial Officer at OVO Energy, the technology-led
green energy business. Before joining OVO Energy in 2020, Bill
spent three years at Virgin Media which he joined as Deputy Chief
Financial Officer and later became acting Chief Financial Officer.
From 2005 to 2017, Bill was at Barclays Bank where he held a number
of senior finance roles including Chief Financial Officer at
Barclays Corporate Bank and Chief Financial Officer of Barclaycard
Europe.
We continue to adhere to the QCA Corporate Governance Code (2018
edition) (the 'QCA Code').
Employees
At 31 December 2021, we had 1,745 employees in the Group based
in seven countries (2020:1,530). During the year I was pleased to
welcome the staff of Mission Labs into the Gamma Group.
We encourage all employees to own shares in the Company. For our
UK based employees, we offered a Sharesave scheme for the fifth
year in a row. Once again, it was pleasing to see the high take-up,
with 402 staff choosing to participate in the scheme (2020: 449).
We also run an "Evergreen SIP" scheme which gives employees a
further opportunity to buy shares in the company in a tax efficient
way. We are actively exploring ways in which our non-UK based
employees can own Gamma shares.
During the year we have found recruitment harder than previously
and we are also seeing inflationary pressure in wages. However, we
continue to see the Gamma culture as a differentiator which allows
us to recruit and retain the talented individuals that we need to
drive the business forwards.
We would like to express our thanks to all of our staff for
their dedication, hard work and enthusiasm.
Dividend
Gamma remains committed to a progressive dividend policy which
has seen the dividend increase by between 10-15% every year since
our IPO in 2014. Gamma has paid one third of the dividend as an
interim dividend with the final two thirds paid as a final dividend
once the results for the full year are known.
The Board is pleased to propose a final dividend, in respect of
the year ended 31 December 2021, of 8.8 pence per share (2020: 7.8
pence), an increase of 13%. Subject to shareholder approval at the
forthcoming AGM, this dividend will be payable on Thursday 23 June
2022 to shareholders on the register on Friday 3 June 2022. When
added to the 4.4 pence interim dividend (2020: 3.9 pence) this
would make a total dividend of 13.2 pence for the year as a whole
(2020: 11.7 pence).
Environmental
As a business which enables other companies to reduce their
carbon footprint by communicating and collaborating from multiple
sites and thereby reducing the need to travel, we continue to
challenge ourselves on our own environmental credentials.
Over the last 12 months Gamma has made significant progress in
extending its reporting boundary in line with the Streamlined
Energy and Carbon Reporting (SECR) regulations and has increased
the scope of reporting to include all recent acquisitions in
Europe. Using this extended scope in 2021 Gamma has set its
baseline energy and carbon emissions data which will be used to
support future emissions reduction targets.
I am pleased to announce that Gamma has developed a plan for
carbon reduction which allows us to commit to moving from a Carbon
Neutral business to become a Carbon Net-Zero business by 2042,
supporting both the Paris Treaty's aims to limit the temperature
increase to 1.5degC globally by 2050 and the UN Sustainable
Development Goal 13: Climate Action.
Current Trading and Outlook
Gamma will continue to concentrate its efforts and investment to
develop a product set which facilitates flexible working for
businesses of all sizes, building on an already strong reputation
for operational excellence and service quality. We will also
partner with organisations such as Microsoft (Teams) and Amazon
(Amazon Connect) to provide solutions to our Enterprise and Public
Sector customers.
Our business is confined to the countries in which we operate.
We therefore are not expecting a significant direct impact on our
results caused by the war in Ukraine. Our sympathies are with all
those who are affected by the conflict, and I am proud of the Gamma
family who are raising funds to support those affected.
We have had a positive start to the year following the pre and
post Christmas lock down periods in most countries, and the Board
is positive about the outlook for the Group in 2022 and beyond. We
believe that more and more businesses of all sizes are seeing the
advantages of UCaaS and we expect to see continuous growth in UCaaS
product sales.
Richard Last
Chair
Chief Executive Review
I am pleased to report another excellent set of financial
results for 2021, and to highlight the great progress that we have
made in the development and execution of our shorter term
operational and longer term strategic objectives.
Despite the very strong performance, the year was once again
impacted by the pandemic, and I am very pleased with how the whole
Group responded to the challenges and opportunities that this
presented. At some point in the year, each country in which we
operate was in lock down, and although our overall business
performance was very robust, both our direct and indirect partner
sales efforts were impacted to some degree.
The level of support and engagement from all our staff and key
stakeholders has been excellent throughout, and I want to give my
thanks and gratitude to the entire Gamma team for how they have
responded to what has been a challenging but highly successful
year.
Development of our UCaaS suite
I am delighted with the continued investment and progress we
have made throughout 2021, to both expand and strengthen our
technology platforms, products and services, and delivery
capabilities across Gamma. As our Chair has set out in his report,
we released a number of our in-house developed UCaaS products and
services in 2021 which complement our growing UCaaS portfolio.
Gamma partners and end-customers can now purchase -
-- Our core market leading Cloud PBX product - Horizon
-- Horizon Call recording - a fully integrated product with Horizon
-- Horizon Collaborate - also a fully integrated product with
Horizon which adds a suite of additional features including instant
messaging and video conferencing
-- Horizon Contact - also fully integrated with Horizon, this
CCaaS product was designed for informal call centres but has
functionality which will support any user who needs omnichannel
capability (i.e. e-mail, social media, web chat, text, etc.)
-- PhoneLine + which is a cloud-based product designed to enable
partners and end-customers to replace a single telephone line,
which presents a significant market opportunity over the next 2-3
years.
I am very happy to report that the attachment rates to our core
Horizon Cloud PBX are 20% for new sales of Horizon Collaborate and
10% for Horizon Contact which is very pleasing and making an
increasing contribution to ARPU levels. Our strategy is very much
focused on maintaining and driving higher attachment levels with
both new, and importantly, existing Horizon customers. This will
enable us to grow current ARPU levels, while ensuring that we
provide an opportunity for channel partners to up-sell and
cross-sell additional features and functionality to end-users.
Partnering with global providers
Gamma differs from pure providers of UCaaS software because we
have the capability in each of the countries in which we operate to
send and receive calls from the public telephone network. This
enables us to not only provide the UCaaS product set which is used
by our customers, but we can also provide high quality voice calls.
Our ability to provide both sets of services is important to
customers who need quality and reliability alongside
functionality.
Many providers of UCaaS software do not have this capability and
hence they partner with an organization like Gamma to ensure that
their customers can get the best from their software. Whilst Gamma
works with organisations like 8x8, Vonage and Five9 to provide
these services, we also focus on two partnerships which have
developed strongly during 2021 - Amazon and Microsoft.
Amazon Connect
Amazon Connect is an omnichannel cloud contact centre that helps
larger Enterprises provide customer service at a lower cost. As
part of our acquisition of Mission Labs we have acquired a market
leading technology and software application called SmartAgent This
is an in-house developed software product which provides our
customers' contact centre agents with all of the data, information
and reporting that they need to provide excellent levels of
customer experience. We have two revenue streams associated with
this product - software licence fees and professional services
associated with the development and implementation of the product.
Current customers include large online retailers and travel
companies, and we see strong demand in many other business
sectors
Unlike pure software companies, Gamma is able to use its network
capability to route calls to and from the agents using Amazon
Connect. This means that not only can Gamma assist businesses who
wish to deploy Amazon Connect to get the most from the application,
but we can also provide connection to the PSTN.
This product compliments our Horizon Cloud Contact offering
which is aimed at the SME end of the market, whereas Smart Agent is
designed for larger businesses.
Microsoft
Gamma has always maintained a strong relationship with Microsoft
to ensure that our products work seamlessly with Microsoft
products, and as a result of the increasing customer demand that we
saw for Microsoft Teams, in February 2020 we acquired Exactive
Holdings to support and strengthen our reputation and capabilities
in this space. Our relationship with Microsoft is important and
strategic to us and is focused on three core areas:
-- Microsoft Teams Direct Routing. In October 2020, we launched
Microsoft Teams Direct Routing which is a variant of SIP which
allows Microsoft Teams users to make and receive calls from the
PSTN network (i.e., using phone numbers). We sell this service to
the business market both directly and via our channel partners and
are considered a market leader in this space, with examples of some
very significant Enterprise and Public Sector deployments.
-- Microsoft Operator Connect. We were delighted that in
September 2021 Microsoft added Gamma to the Operator Connect for
Microsoft Teams programme (and we are presently one of a small
number of partners globally on the programme), which is a new
operator-managed programme designed to enable seamless and
integrated PSTN calling to Teams. Customers using Operator Connect
benefit from an augmented set of services from Gamma (e.g. Gamma
native fraud management and Gamma enhanced Teams Phone capabilities
through our SIP Trunk Call Manager).
-- Horizon Cloud PBX and Teams Integration. Some Teams users
require full PBX functionality, and this can now be achieved
because Gamma's Horizon Cloud PBX product can now be integrated
into Teams. For those customers who need a complete managed
service, we also offer the Exactive Cloud UCX product.
Business review
I am pleased to report that each of our businesses has performed
strongly throughout 2021.
UK Indirect Business
The UK Indirect Business accounted for 60% of our group revenue
in 2021, with gross profit up 8% to GBP143.2m and revenue up by 9%
to GBP270.2m. Gross margin reduced slightly from 53.5% to 53.0% due
to mix.
Our indirect channel partners have provided Gamma with a robust
and reliable platform for growth, and in the face of a challenging
economic and business environment, they have adapted their
businesses well and delivered strong financial results. They have
focused on providing excellent customer support, and as a result
have delivered strong retention levels, net positive product growth
and very low levels of attrition and bad debt. In addition, their
strong business models have enabled them to invest in order to
strengthen their businesses and maximise growth in what is a highly
attractive marketplace.
Our channel partners continue to benefit greatly from Gamma's
product development program, including the successful launch of
those new UCaaS products highlighted earlier, coupled with new
fixed and mobile access products (e.g., SoGEA and Gamma Mobile)
which we launched during 2021. Gamma's current technology and
product capabilities and our exciting product roadmap, coupled with
our very targeted partner support program is designed to strengthen
partner capabilities and enable them to compete and win against the
competition in the marketplace. Our partners have demonstrated real
commitment and success in embracing our new products and
successfully up-selling and cross-selling these to existing
customers, while winning new customers in both existing and new
market segments. It has been pleasing to see high and increasing
product attachment levels and continued strong engagement from the
channel as we drive sales and marketing to both existing and new
end-customers.
We have continued to increase the number of active Gamma
partnerships, while being very focused on expanding the business
that we do with existing channel partners. With those larger more
strategic partners we have been very successful in re-signing new
contracts which are delivering increased rates of growth for Gamma
(opening new product and market segments for both Gamma and the
partner) and ensuring a joined-up approach that maximizes our
long-term growth opportunities.
Relationships across the indirect channel have continued to
strengthen, reflecting our overall consistency and loyalty as a
strategic partner, which is evidenced by us receiving a record
number of industry awards in 2021. This included "Best Carrier
Sales Team" at the Global Carrier Awards and winning both "Best
Wholesale Provider" and "Best UCaaS Platform" at the Comms National
Awards.
The immediate and longer-term market opportunity for the channel
and for Gamma is significant and is driven by several structural
growth drivers which Gamma and our channel partners are both
strategically and operationally well positioned to benefit from.
These include:
-- An acceleration of the adoption of UCaaS across all markets
and business segments to support remote and flexible working.
-- A rapid roll-out of fibre which will substitute legacy
broadband products and services with new high-speed
replacements.
-- The wider roll-out and rapid adoption of 5G mobile services
which will be transformational in supporting businesses.
-- BT 2025 switch off which will drive a significant opportunity
to provide new cloud-based communication product and services to
businesses of all size.
UK Direct Business
The UK Direct Business accounted for 24% of our group revenue in
2021, with gross profit up 14% to GBP52.6m and revenue up by 7% to
GBP104.8m. Gross margin increased from 47.2% to 50.2% as we had
fewer lower margin installations in the year.
Overall, we have delivered a strong financial performance in
2021, and despite the impact of the pandemic which delayed customer
decision making and new sales during 2020 and H1 2021, our team
delivered a strong sales performance in H2, and we therefore enter
2022 with a high-quality contracted order book. As part of our
growth strategy, a key feature of our performance has been the
high-level of cross-selling and up-selling that we achieved with
existing customers. Our customers are fully benefiting from Gamma's
broad and growing product portfolio, which includes the
contributions from the acquisitions that we made recently to extend
our UCaaS, CCaaS and overall Microsoft and Amazon product and
service capabilities. In addition, we have been very pleased with
the quality of new customers that we have won during the period,
all of which are procuring multiple products and services from
Gamma.
We have won several multi-year, multi-product contracts,
including those with NFU Mutual (SDWAN), The Automobile Association
(Inbound), Carr's Group (SDWAN & UCaaS) and CJ Lang & sons
(SDWAN & UCaaS).
In addition, in the Public Sector we have made excellent
progress and were awarded a significant number of contracts across
local, regional, and central Government, including a very large and
strategic UCaaS (Managed Microsoft Teams) deployment for the DWP.
Other notable contract awards included:
-- Five new County Councils who contracted for a mix of SIP & UCaaS.
-- Seven NHS trusts who contracted for a mix of UCaaS, SIP and connectivity.
-- Three further central Government agencies who contracted for
a mix of SIP and mobile services.
-- We have also been awarded over 14,000 mobile connections via
the public sector procurement frameworks, demonstrating the
strength of Gamma's new mobile product within this sector.
As highlighted previously, the acquisition of Exactive in 2020
significantly enhanced Gamma's Microsoft capabilities, and we are
now one of the largest providers of Microsoft Teams Direct Routing
in the UK. Exactive is now fully integrated as a Microsoft "centre
of excellence" within Gamma, and we are providing services to a
broad set of customers and partners across all business segments,
and as highlighted previously, in October 2021 Gamma's direct
routing service became available directly from the Microsoft Teams
platform via their Operator Connect service.
We include the results of CircleLoop the digital UCaaS service
and channel which we acquired with Mission Labs in our Direct
business. We now have almost 4,000 customers who are using the
CircleLoop service via our digital platform.
European Business
We continue to be pleased with the development and growth of our
European business. The growth was predominantly through the
inclusion of a full year of trading from acquisitions made in 2020,
with gross profit increasing 47% to GBP32.7m and revenue increasing
by 50% to GBP72.7m. Gross margin decreased from 46.0% to 45.0%
because of a full year of lower gross margins from Epsilon, the
mobile focused distribution business which we acquired as part of
our acquisition of HFO in Germany. In 2021 our overseas business
represented 16% of our Group revenue and 10% of our Group adjusted
EBITDA.
Gamma Germany
Despite the impact of COVID-19 throughout the year, we have made
very good progress in transforming our German business from a pure
SIP provider to a provider of cloud communications. We are
achieving this through the implementation of a multi-product
strategy and by investing and strengthening our indirect channel
capabilities, including investment in our channel sales and
marketing efforts. This is designed to fully support our partners
and their end-customers in their transition to the cloud and ensure
that we collectively build the strong business, operational and
sales and marketing foundations which are required to maximise what
we see as a significant long-term market opportunity.
As part of our structured Group operating model, our team in
Germany has been fully involved in the planning and implementation
of our broader Group technology and product strategy, and in 2021
we integrated the German component of GnTel (the Dutch / German
cloud PBX business which we acquired in July 2020) into our German
operations. This now forms a important part of our cloud product
portfolio and our go to market sales and marketing capabilities in
the German market. Although small, this is performing well, and we
have well-defined plans to introduce other Group products which
will enable us to broaden our market and business segment
reach.
Our Epsilon mobile distribution business has delivered a very
strong performance throughout 2021. As a part of this we have
continued to focus investment into our IOT (Internet of Things)
business (Fusion IOT) which provides IOT solutions to the SME
business segment. Although early days, the business is performing
well, and we have closed some very encouraging customer wins and
have signed longer-term partnership agreements with Vodafone Global
and Telefonica Spain.
Throughout 2021, and as part of our M&A integration plan, we
have been planning to transition to a full Gamma brand in the
German market. This will be implemented during the first half of
2022, in addition to launching a reinvigorated wholesale cloud
partner proposition across the marketplace. This proposition is
designed to appeal to IT integrators within the channel who prefer
a wholesale model where they own the end-customer, and where we
believe Gamma can provide a key differentiator in the market.
Gamma Spain
Notwithstanding the more difficult COVID-19 related trading
conditions in Spain throughout 2021, we have been pleased with the
performance of our Spanish business.
Importantly, our cloud business has performed well, and similar
to our cloud growth strategies in our other Gamma markets, we have
continued to strengthen and invest in developing both our product
capabilities and existing and new direct and indirect channels to
market. For example, we have launched a reseller program which is
targeting PBX resellers, and providing them with the best cloud
communication product, marketing tools and financial support to
succeed in the UCaaS market. Initial partnership contracts were
signed during 2021 and we expect more partners to be onboarded in
2022. Our efforts are beginning to deliver results and we continue
to see a significant long-term growth opportunity.
Overall, our cloud and mobile product performance has been
positive, and we delivered strong net growth from both existing and
new channel partners. We established a new channel partnership with
Másmóvil (one of Spain's largest mobile network operators) which is
strategic and delivered excellent results for both cloud and mobile
sales throughout 2021. On the mobile side, this relationship
enables us to compete very well in the market, while we have
established a wholesale cloud capability that enables Másmóvil to
deliver bundled mobile and cloud products and services directly to
their business customers. A true partnership!
In H2, we launched a second channel programme aimed at Microsoft
partners who are expanding their business by adding telephony
services to their customers (through MS-Teams). This programme is
one of the first in the Spanish market and is generating a lot of
interest in the sector. In addition to this, we launched Microsoft
Teams integration, enabling any Gamma customers in Spain who are
using our cloud PBX or SIP products to use the Teams application to
make and receive calls in a seamless and easy way. Additionally, we
have integrated cloud contact centre features to our UCaaS
product.
The non-cloud part of our Spanish business (Comymedia and VT
Andalucía) has been more severely impacted by COVID-19 and
underperformed against our expectations in 2021. Our sales
performance and overall outlook improved through H2, and we have
taken actions to ensure an improved performance of these businesses
in 2022.
Gamma Netherlands
The COVID-19 pandemic had a more serious impact on the economy
and overall business market in the Netherlands, resulting in
restrictions and lower levels of cloud growth in the market.
Notwithstanding this, we delivered positive net growth across our
key cloud and mobile products.
Our multi-tenant business (Schiphol Connect and Nimsys)
benefited from increased activity at Schiphol airport and from
businesses optimizing their way of working. During the year we
signed several large long-term contracts and focused on
cross-selling and up-selling to existing customers, all of which
delivered net new business, improved retention, and an overall
stronger performance for the business.
Throughout the year, and building on our work in 2020, we have
continued to focus on developing and strengthening both our cloud
and overall wholesale partner proposition in the market. Examples
were the launch of Collaboration and voice recording as part of our
Cloud PBX offering, while we also launched Microsoft Teams Direct
Routing to support the increasing demand for Microsoft services in
the market. Looking forward, and as part of our Group Operating
Model, we have an exciting roadmap of new products and features
which we are planning to launch in the market during 2022.
As well as being focused on strengthening our sales and overall
go to market activities, after making several acquisitions during
the last years, we have made good progress in moving towards a more
simplified and fully integrated operating environment. We have
integrated Dean One, GnTel, Schiphol Connect and Nimsys, and in Q4,
we launched the new Gamma Benelux brand in the market. Alongside
our brand launch, we also introduced a renewed wholesale partner
program. which supports our ambitious partners with dedicated
initiatives in marketing, lead generation and training.
In addition to strengthening our cloud products, we also renewed
our long-term partnership contract with T-Mobile, which will enable
us to continue to deliver a strong and competitive retail and
wholesale mobile offering to our mobile dealers and channel
partners.
Summary and outlook
I am particularly pleased with how we have performed as a
business in 2021. We have focused on maximizing opportunity, while
responding to challenges and mitigating risk. We have delivered
strong results, and while executing very well against our
short-term business and financial objectives we have continued to
invest widely across our business and make significant progress
against our strategic objectives. Importantly, I am absolutely
delighted with our continued focus on supporting our staff, our
channel partners, and our end-customers.
Looking forward, we will stay focused on developing and
strengthening our technology and product capabilities across the
Group. We have created a strong technology and software development
capability and although this is work in progress, we do have an
exciting product roadmap, which will reinforce and further enhance
our market credentials. We have launched several new products and
features during 2021 which have been positively received by the
market, and these are now making a meaningful contribution to our
product and financial performance, and I expect this to continue in
2022. As part of our Group operating model, we plan to launch these
products across all Gamma markets.
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.
As an important part of our strategy, we will continue to assess
acquisition opportunities that enable us to strengthen our
technology and product capabilities and expand and strengthen our
position in our core UK and European markets. We believe that scale
in these key markets is important, and this will continue to be a
key focus for Gamma during 2022 and beyond. The technology and
product-based acquisitions we have made, have enabled us to
accelerate our strategy and fundamentally strengthen our
technology, product, and software development capabilities across
Gamma. This is a core foundation that will support our strategy to
deliver long-term sustainable growth and long-term shareholder
value.
We continue to see the structural changes in the UCaaS market as
very positive and reinforcing our strategy and future growth
opportunities. The awareness and adoption of cloud communication
services, and the shift towards a more flexible and remote way of
working, we believe will support significant growth in the market
and an acceleration towards cloud communications. The significant
benefits of the UCaaS, CCaaS and fixed and mobile access products
that we sell across the UK and Europe have never been more
important, and notwithstanding the risks of possible economic and
business market headwinds, we continue to see a positive business
and long-term market outlook.
As a final point, I would like to personally thank our staff,
partners and customers for their contribution and ongoing
support.
Andrew Taylor
Chief Executive Officer
Financial review
Overview
Gamma has performed well during the year increasing revenue by
14% to GBP447.7m (2020: GBP393.8m) and gross profit by 14% to
GBP228.5m (2020: GBP200.8m). The two UK businesses have in
aggregate seen growth in Revenue of GBP29.7m (+9%) and Gross Profit
of GBP17.3m (+10%). The growth in the Revenue of the European
Business of GBP24.2m from GBP48.5m to GBP72.7m is primarily due to
a full twelve months of results of businesses acquired in 2020.
Adjusted EBITDA increased by 21% to GBP95.4m (2020: GBP79.0m).
Adjusted EPS (FD) increased by 25% to 64.0p (2020: 51.3p).
Revenue and gross profit
UK Indirect
2021 2020 Increase
GBPm GBPm
Revenue 270.2 247.2 +9%
----- ----- --------
Gross Profit 143.2 132.2 +8%
----- ----- --------
Gross Margin 53.0% 53.5%
----- ----- --------
Overall, the growth in the UK Indirect Business unit has been
strong. There have been no acquisitions in either year which
affected revenue or gross profit and hence the growth shown in the
above table is entirely organic.
Gross Margin has been broadly consistent with the prior year
which is a change in trend following growth historically. The
historical growth was largely driven by an improving mix of high
margin UCaaS products against lower margin legacy products but this
mix has now stabilised. The revenue from the sale of legacy product
is now negligible and hence the mix is more constant. This change
is in line with our expectations. We do not expect Gross Margin to
increase as the mix of UCaaS and access products stays broadly
constant.
UK Direct
2021 2020 Increase
GBPm GBPm
Revenue 104.8 98.1 +7%
----- ----- --------
Gross Profit 52.6 46.3 +14%
----- ----- --------
Gross Margin 50.2% 47.2%
----- ----- --------
The UK Direct business continued to grow. There was some
inorganic growth driven by the Mission Labs acquisition in March
2021; this was in part offset by the disposal of The Loop
Manchester Limited in 2020.
As previously communicated, the growth in revenue for 2021 was
lower than it would have been had sales activity in mid 2020 not
been severely hampered by COVID-19. We won fewer new projects in
2020 which meant less work started in 2021. This situation has now
reversed and we have seen significant levels of sales activity in
late 2021 and we enter 2022 with a strong pipeline.
Notwithstanding, the global chip shortage has the potential to
cause some installations to become delayed which will mean that
billing starts later than planned which may dampen growth
slightly.
The gross margin has increased due to mix - first, as a result
of Mission Labs which is a higher margin as a result of being a
SaaS model; and second, as mentioned earlier, fewer new projects
started in the year (the start of a project is lower margin due to
low margin installations and hardware sales).
Europe
2021 2020 Increase
GBPm GBPm
Revenue 72.7 48.5 +50%
----- ----- --------
Gross Profit 32.7 22.3 +47%
----- ----- --------
Gross Margin 45.0% 46.0%
----- ----- --------
Our European business saw growth primarily as a result of the
inclusion of a full twelve months of results of the acquisitions
made in 2020 - Voz Telecom in Spain (acquired April 2020), HFO in
Germany (July 2020) and Gamma Communications Benelux expanded in
July 2020 with the acquisition of gnTel.
Because of acquisitions, the year on year growth is not
indicative of business performance. The revenue in H1 for Europe
was GBP35.4m and this grew by 5% to GBP37.3m in the second half.
The growth in revenue was driven by increased commissions earned by
our Epsilon business in Germany (where revenues can fluctuate).
Revenues from UCaaS seat sales grew in all European territories but
the associated traffic revenues were lower - unlike the UK, in
Europe traffic is not bundled into the seat pricing which results
in more fluctuation.
Gross margins have decreased from the prior year as a result of
"high revenue/ low margin" business within the Epsilon subsidiary
of the HFO business which offers mobile connections - which was
acquired in July 2020. The margins on a product by product basis
are consistent with those in the UK.
Operating expenses
Operating expenses grew from GBP125.1m to GBP160.2m; when the
exceptional items are eliminated then operating expenses grew from
GBP144.7m to GBP160.2m - much of the increase comes from including
a full year's costs of business acquired in 2020 and also an
increase in our development activity. We break these down as
follows:
2021 2021 2020 2020
GBPm GBPm GBPm GBPm Growth
Expenses included within cash generated from
operations
- UK Businesses 101.8 95.5 7%
- European Business 23.3 18.3 27%
- Central Costs 8.0 8.0 0%
------ -----
Depreciation and amortisation 133.1 121.8
- tangible and intangible assets 14.9 14.7 1%
- right of use assets 2.7 2.2 23%
- acquisition 9.5 6.0 58%
------ -----
27.1 22.9
------ -------
Operating expenses (before exceptional
items) 160.2 144.7 11%
------ -------
Exceptional items - (19.6)
Operating expenses 160.2 125.1 28%
---------------------------------------- ------ ------ ----- ------- -------
Movements in expenses were driven by:
-- The UK Businesses' operating expenses growing by 7% (compared
to Gross Profit growth of 10%). This growth has been lower than
originally expected as a result of continued lock downs in 2021
resulting in unexpected cost savings (for example, travel and
subsistence expenses continue to be significantly lower). Not all
of these savings are expected to continue in the long run as
"normality" returns post COVID-19. We expect to see our travel and
marketing (event attendance) costs increasing "post COVID-19" in
2022. We are also seeing signs of wage inflation being above
historical norms.
-- There were two areas of overhead growth which were disproportionate -
o We continue to invest in the development and maintenance of
our voice application products and associated software tools (for
example our portal). Our spend in this area during the year was
GBP19.6m (of which GBP14.8m was charged to the profit and loss and
GBP4.8m was capitalised; in 2020 these figures were GBP10.2m and
GBP2.7m respectively). The increase is driven by our desire to
develop more of our own technology which included the acquisition
of Mission Labs which brought more development costs into our cost
base.
o Share based payments costs increased from GBP3.5m to GBP4.8m
(+GBP1.3m).
o Aside of the effect of development and share based payments,
the UK business overheads grew by only GBP0.4m year on year; as
noted above we do not expect to be able to keep overheads increases
to this level in 2022.
-- The increase in European costs is reflective of the cost base
growing by acquisitions (that is to say that it is not organic
growth). In 2022 we intend to invest more in sales heads in each of
the three countries which will cause a small increase in the cost
base (i.e. below GBP1m). The increase in sales heads is expected to
increase the rate of sales of Cloud PBX seats by investing in the
sales function.
-- Central costs are inline with the prior year. They include
the costs of our M&A programmes (which are not adjusting
items).
Depreciation and amortisation on tangible and intangible assets
have increased from GBP14.7m in 2020 to GBP14.9m in 2021. This is
slightly below our annual capital spend and may therefore increase
slightly in future years.
Exceptional Items
There were no exceptional items in 2021.
In the prior year there were exceptional transactions related to
the disposal of a subsidiary (The Loop Manchester Limited) where an
exceptional gain of GBP19.5m was recognized relating to the
proceeds on disposal less the book value of the net assets of the
business and a difference between the estimated deferred
consideration and amount paid in relation to Nimsys.
Alternative performance measures
Our policy for alternative performance measures is set out in
note 2.
The tables below reconcile the alternative performance measures
used in this document:
Measure Statutory Amortisation Change Adjusting Exceptional Adjusted
Basis of intangibles in fair tax items items ** basis
value of
acquisitions
2021
PBT (GBPm) 67.2 9.5 0.5 - - 77.2
PAT* (GBPm) 53.6 9.5 0.5 (1.5) - 62.1
EPS (FD) (p) 55.2 9.8 0.5 (1.5) - 64.0
-------------- ---------- ---------------- -------------- ----------- ------------ ---------
2020
PBT (GBPm) 75.0 6.0 0.3 - (19.6) 61.7
PAT* (GBPm) 64.2 6.0 0.3 (1.5) (19.6) 49.4
EPS (FD) (p) 66.6 6.2 0.3 (1.5) (20.3) 51.3
-------------- ---------- ---------------- -------------- ----------- ------------ ---------
*PAT is the amount attributable to the ordinary equity holders
of the Company.
** See note 4 for further details.
We believe that these measures provide a user of the accounts
with important additional information by providing the following
alternative performance metrics:
-- Profit before tax is adjusted for exceptional items and it is
also adjusted for the amortisation of intangibles which were
created on acquisition and the change in the fair value of
acquisitions. This enables a user of the accounts to compare
performance irrespective of whether the Group has grown by
acquisition or organically.
-- Profit after tax is adjusted in the same way as Profit before
tax but it also considers the tax impact of these items. To exclude
the items without excluding the tax impact would not give a
complete picture.
-- Adjusted earnings per share takes into account all of the
factors above and gives users of the accounts information on the
performance of the business that management is more directly able
to influence and on a basis comparable from year to year.
In addition to the above adjustments to statutory measures, we
add back the depreciation and amortisation charged in the year to
Profit from Operations (2021: GBP68.3m; 2020: GBP75.7m) to
calculate a figure for EBITDA (2021: GBP95.4m; 2020: GBP98.6m)
which is commonly quoted by our peer group internationally and
allows users of the accounts to compare our performance with those
of our peers. We further adjust EBITDA for exceptional items as
this gives a reader of the accounts a view of the trading picture
which is comparable from year to year (adjusted EBITDA: 2021:
GBP95.4m; adjusted EBITDA: 2020: GBP79.0m).
Adjusted EBITDA
Adjusted EBITDA grew from GBP79.0m to GBP95.4m (21%).
Taxation
The effective tax rate for 2021 was 19% (2019: 14%). The
effective tax rate in 2021 applied to trading profits was slightly
above the 19% statutory UK rate due to disallowable expenditure,
the increasing impact of higher taxation rates in European
countries and an upcoming change in tax rates in the UK from 19% to
25% which is increasing deferred tax charges in the year. We would
expect these trends to continue and hence to see the effective rate
of tax increase slightly above the UK headline rate in future
years.
The rate in 2020 was depressed due to non-taxable income on the
disposal of our subsidiary, The Loop.
Net Cash and cash flows
The Group has Net Cash of GBP49.5m (2020: GBP48.0m) - "Net Cash"
is Cash and Cash Equivalents less Borrowings. The Cash and Cash
equivalents balance at the end of the year was GBP52.8m a slight
decrease from the previous year and the Group had borrowings of
GBP3.3m (2020: GBP5.9m) which are held by trading subsidiaries
outside of the UK and pre-dated their acquisition by Gamma. We do
not class contingent consideration or IFRS 16 lease liabilities as
debt for the purpose of quoting a net cash figure.
Cash conversion from trading during the year increased from
previous years. The ratio of adjusted EBITDA to cash generated from
operations was 94% (2020: 89%).
Items which are not directly related to trading were:
-- Capital spend was GBP16.8m, which is an increase from
GBP15.4m in the comparative period. This is discussed below.
-- GBP49.3m was the total payment for acquisitions net of cash
acquired (2020: GBP47.7m) of which GBP40.8m was paid for the
acquisition of Mission Labs, GBP1.5m was paid in deferred
consideration for the acquisition of Exactive, GBP2.0m was paid to
acquire a SIP Trunk base from another carrier and GBP5.0m for the
exercise of options relating to HFO.
-- GBP5.9m was received from the issue of shares (2020:
GBP1.5m). This significant increase on the prior year was as a
result of the reinvestment in Gamma by former shareholders of
Mission Labs (GBP2.8m) and HFO (GBP0.7m). The other share issues
relate to exercise of options held by employees.
-- GBP11.7m was paid as dividends (2020: GBP10.4m).
Capital spend
Capital spend in 2021 was GBP16.8m (2020: GBP15.4m) as
follows:
-- GBP9.1m was the spend on maintaining and increasing capacity
on the core network as well as other minor items such as IT and
fixtures and fittings (2020: GBP9.5m).
-- GBP4.8m was the capitalisation of development costs incurred
during the period (2020: GBP2.7m) - the increase is due to
development of our own voice applications products (in part using
the capabilities acquired with Mission Labs).
-- GBP2.9m was spent with third-party software vendors for the
software which underpins our Cloud PBX products (2020:
GBP3.2m).
Adjusted EPS (FD) and Statutory EPS (FD)
Adjusted EPS (FD) increased from 51.3p to 64.0p (25%). The
growth in adjusted EPS (FD) has been driven by the continued growth
in a difficult market as well as the acquisitions. Adjusted EPS is
EPS as adjusted for exceptional items and other items as defined in
note 2 and a reconciliation to the statutory measure is shown in
the table above.
EPS (FD) decreased from 66.6p to 55.2p (-17%). The growth is
lower than the adjusted metric as a result of the exceptional
income item in the prior year relating to the disposal of The
Loop.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Strategic Report. In assessing going concern
management and the Board has considered:
-- The principal risks faced by the Group, discussed further in
the Annual Report for the year ended 31 December 2021.
-- The financial position of the Group as well as budgets and financial plans.
-- The strong cash position - at 31 December 2021 the Group had
cash and cash equivalents of GBP52.8m (2020: GBP53.9m). Net Cash
(being cash and cash equivalents less borrowings) was GBP49.5m
(2020: GBP48.0m). All borrowings were acquired with acquisitions
made in the prior year.
-- Future cashflows including liquidity and borrowings.
-- Sensitivity analysis, which has shown that EBITDA would need
to decrease by 94% for the Group to need additional borrowing
(assuming no mitigating actions had been taken). We consider this
to be highly unlikely.
-- The ongoing impact of COVID-19. Whilst this impacted new wins
in 2020 and slowed growth in 2021, the Group has continued to grow.
In the medium term, as a result of COVID-19, the adoption of cloud
services will accelerate and this reinforces our overall UCaaS
strategy.
The Directors are satisfied that the Group has adequate
financial resources to continue in operational existence for the
foreseeable future, a period of at least twelve months from the
date of this report. Accordingly, the going concern basis of
accounting continues to be used in the preparation of the Annual
Report for the year ended 31 December 2021.
Dividends
The Board has proposed a final dividend of 8.8p (2020: 7.8p).
This is an increase of 13% and is in line with our progressive
dividend policy.
Subject to shareholder approval, the final dividend is payable
on Thursday 23 June 2022 to shareholders on the register on Friday
3 June 2022.
Andrew Belshaw
Chief Financial Officer
Consolidated statement of profit or loss
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
Revenue 3 447.7 393.8
Cost of sales (219.2) (193.0)
-------- --------
Gross profit 228.5 200.8
Operating expenses (160.2) (125.1)
Earnings before depreciation, amortisation
and exceptional items 95.4 79.0
Exceptional items 4 - 19.6
-------- --------
Earnings before depreciation and amortisation 95.4 98.6
Depreciation and amortisation (excluding
business combinations) (17.6) (16.9)
Depreciation and amortisation arising
due to business combination (9.5) (6.0)
----------------------------------------------- ----- -------- --------
Profit from operations 68.3 75.7
Finance income 0.1 0.4
Finance expense (1.2) (1.1)
-------- --------
Profit before tax 67.2 75.0
Tax expense 5 (13.2) (10.6)
-------- --------
Profit after tax 54.0 64.4
-------- --------
Profit is attributable to:
Equity holders of Gamma Communications
plc 53.6 64.2
Non-controlling interests 0.4 0.2
-------- --------
54.0 64.4
-------- --------
Earnings per share attributable to the ordinary
equity holders of the company:
Basic per Ordinary Share (pence) 6 55.9 67.5
Diluted per Ordinary Share (pence) 6 55.2 66.6
-------- --------
Adjusted earnings per share is shown
in note 6
All income recognised during the year was generated from
continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
GBPm GBPm
Profit for the year 54.0 64.4
Other comprehensive profit/(loss)
Items that may be reclassified to profit
or loss (net of tax effect)
Exchange differences on translation of
foreign operations (3.5) (0.1)
------ ------
Total comprehensive income for the year 50.5 64.3
------ ------
Total comprehensive income for the year
attributable to:
Owners of Gamma Communications plc 50.1 64.1
Non-controlling interests 0.4 0.2
------ ------
50.5 64.3
------ ------
Consolidated statement of financial position
As at 31 December 2021
2021 2020
Note GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 8 36.8 36.3
Right of use assets 10.2 11.5
Intangible assets 9 129.3 95.3
Deferred tax asset 7.0 5.7
Trade and other receivables 14.3 14.8
------ -------
197.6 163.6
Current assets
Inventories 7.9 8.1
Trade and other receivables 98.4 93.7
Cash and cash equivalents 52.8 53.9
Current tax asset 5.1 2.6
------ -------
164.2 158.3
------ -------
Total assets 361.8 321.9
Liabilities
Non-current liabilities
Other payables 2.0 1.5
Borrowings 2.5 4.6
Lease liabilities 9.8 10.8
Provisions 1.1 1.9
Contract liabilities 10.0 8.3
Contingent consideration 3.7 1.2
Put option liability 2.3 5.6
Deferred tax 10.0 9.0
------ -------
41.4 42.9
Current liabilities
Trade and other payables 48.1 54.9
Borrowings 0.8 1.3
Lease liabilities 2.1 2.3
Provisions 0.9 0.6
Contract liabilities 7.4 7.6
Contingent consideration 2.6 1.8
Put option liability 3.4 5.6
Current tax 0.9 0.5
------ -------
66.2 74.6
------ -------
Total liabilities 107.6 117.5
------ -------
Net assets 254.2 204.4
====== =======
Equity
Share capital 11 0.2 0.2
Share premium reserve 14.9 9.0
Other reserves 4.5 6.1
Retained earnings 239.1 197.5
------ -------
Equity attributable to owners of Gamma
Communications plc 258.7 212.8
------ -------
Non-controlling interests 2.2 3.0
Written put options over non-controlling
interests (6.7) (11.4)
Total equity 254.2 204.4
====== =======
Consolidated statement of cash flows
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
Cash flows from operating activities
Profit for the year before tax 67.2 75.0
Adjustments for:
Depreciation of property, plant and equipment 8 8.3 9.7
Depreciation of right of use asset 2.7 2.2
Amortisation of intangible assets 9 16.1 11.0
Change in fair value of consideration - (0.1)
Share based payment expense 4.8 3.5
Interest income (0.1) (0.4)
Finance cost 1.2 1.1
Gain on disposal of subsidiary undertaking - (19.5)
------- -------
100.2 82.5
(Increase) in trade and other receivables (5.4) (6.1)
Decrease in inventories 0.2 0.3
(Decrease) in trade and other payables (6.2) (6.1)
Increase (Decrease) in contract liabilities 1.5 (1.2)
(Decrease)/Increase in provisions and
employee benefits (0.5) 0.9
------- -------
Cash generated by operations 89.8 70.3
Taxes paid (13.3) (14.1)
------- -------
Net cash flows from operating activities 76.5 56.2
------- -------
Investing activities
Gain on disposal of property, plant and 0.1 -
equipment
Purchase of property, plant and equipment 8 (9.1) (9.5)
Purchase of intangible assets 9 (7.7) (5.9)
Interest received 0.1 0.4
Acquisition of subsidiaries net of cash
acquired 10 (49.3) (47.7)
Disposal of subsidiary net of disposed
cash - 19.4
------- -------
Net cash used in investing activities (65.9) (43.3)
------- -------
Financing activities
Lease liability repayments (3.1) (2.1)
Repayment of borrowings (2.3) (1.6)
Interest paid (0.5) (0.3)
Share issues 5.9 1.5
Dividends (11.7) (10.4)
------- -------
Net cash used in financing activities (11.7) (12.9)
------- -------
Net increase in cash and cash equivalents (1.1) -
Cash and cash equivalents at beginning
of the year 53.9 53.9
------- -------
Cash and cash equivalents at end of the
year 52.8 53.9
======= =======
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share Share Other Retained Total Non-Controlling Written Total
capital premium reserves earnings interests put options equity
reserve over
non-controlling
interests
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
1 January 2020 0.2 6.6 4.8 140.9 152.5 - - 152.5
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Issue of shares - 2.4 (1.4) 1.3 2.3 - - 2.3
Recognition of
share-based
payment
expense - - 2.8 - 2.8 - - 2.8
Tax on share-based payment expense
- Current - - - 1.0 1.0 - - 1.0
- Deferred - - - 0.5 0.5 - - 0.5
Non-controlling
interests on
acquisition of
subsidiary - - - - - 2.8 - 2.8
Equity put rights - - - - - - (11.4) (11.4)
Dividends paid - - - (10.4) (10.4) - - (10.4)
Transactions
with owners - 2.4 1.4 (7.6) (3.8) 2.8 (11.4) (12.4)
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Profit for the
year - - - 64.2 64.2 0.2 - 64.4
Other
comprehensive
(expense)/income - - (0.1) - (0.1) - - (0.1)
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income - - (0.1) 64.2 64.1 0.2 - 64.3
31 December 2020 0.2 9.0 6.1 197.5 212.8 3.0 (11.4) 204.4
========= ========= ========= ========== ======= ================ ================ ========
1 January 2021 0.2 9.0 6.1 197.5 212.8 3.0 (11.4) 204.4
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Issue of shares - 5.9 (2.2) 2.2 5.9 - - 5.9
Recognition of
share-based
payment
expense - - 4.1 - 4.1 - - 4.1
Tax on share-based payment expense
- Current - - - 1.7 1.7 - - 1.7
- Deferred - - - (0.7) (0.7) - - (0.7)
Non-controlling
interests - - - 1.2 1.2 (1.2) - -
Equity put rights - - - (4.7) (4.7) - 4.7 -
Dividends paid - - - (11.7) (11.7) - - (11.7)
Transactions
with owners - 5.9 1.9 (12.0) (4.2) (1.2) 4.7 (0.7)
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Profit for the
year - - - 53.6 53.6 0.4 - 54.0
Other
comprehensive
(expense)/income - - (3.5) - (3.5) - - (3.5)
--------- --------- --------- ---------- ------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income - - (3.5) 53.6 50.1 0.4 - 50.5
31 December 2021 0.2 14.9 4.5 239.1 258.7 2.2 (6.7) 254.2
========= ========= ========= ========== ======= ================ ================ ========
Notes to the consolidated financial statements
For the year ended 31 December 2021
1. Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), issued by the
International Accounting Standards Board ('IASB') as adopted by the
United Kingdom ('adopted IFRS'). The financial statements are
presented in sterling and, unless otherwise stated, have been
rounded to the nearest 0.1 million (GBPm).
The financial statements have been prepared on a historical cost
basis.
The financial information contained in this statement does not
constitute statutory financial statements within the meaning of the
Companies Act 2006. They are an extract from the full accounts for
the year ended 31 December 2021 on which the auditor has expressed
an unqualified opinion and do not include any statement under
section 498 of the Companies Act 2006. The full accounts contain a
detailed statement of the accounting policies which have been used
to prepare this summary. The accounts are available at the Gamma
Communications plc website and will be posted to shareholders prior
to the AGM and subsequently filed at Companies House.
There are no additional standards or interpretations requiring
adoption that are applicable to the Group for the accounting period
commencing 1 January 2021.
A full set of the audited statutory accounts will be available
at:
www.gammacommunicationsplc.com/investors/financial-results-and-shareholder-communications/
2. Accounting policies, judgements and estimates
The accounting policies adopted are consistent with those
followed in the preparation of the audited statutory financial
statements for the year ended 31 December 2021.
Preparation of the consolidated financial statements requires
the Group to make certain estimations, assumptions and judgements
regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors,
including best estimates of future events. In the future, actual
experience may differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk of causing a
material adjustment within the next financial year are discussed
below.
Critical accounting judgements
Critical judgements, apart from those involving estimations,
applied in the preparation of the consolidated financial statements
are discussed below:
(a) Principal vs agent classification of channel partners
The Group receives payment for products and services from
channel partners who onwardly sell to end users. The Group has
considered whether channel partners are acting as a principal or an
agent under the criteria in IFRS 15.
Where a channel partner has the primary responsibility for
providing the products or services to the end user, carries the
inventory risk, is free to establish its own prices and bears the
credit risk for the amount receivable from the end user then the
channel partner is treated as the principal in that transaction.
The Group therefore recognises revenue earned in this way based on
the transactions with the channel partner and not the end user. For
more information on the Group's revenue please see note 3, Segment
information.
(b) Revenue recognition
Revenue recognition on contracts may involve providing services
over multiple years and involving a number of products. In such
instances, judgement is required to identify the date of
transaction of separable elements of the contract and the fair
values which are assigned to each element. The Group also regularly
assesses customer credit risk inherent in the carrying amounts of
receivables, contract costs and estimated earnings. For more
information on the Group's revenue recognition policy please see
note 1, Accounting policies.
Key accounting estimates
There are no key accounting estimates that will have a
significant risk of causing a material adjustment within the next
financial period.
Alternative Performance Measures
Adjustments to the income statement have been presented because
the Group believes that adjusted performance measures (APMs)
provide valuable additional information for users of the financial
statements in assessing the Group's performance, also represents
the underlying performance of the Group. These are also used by the
Board and management as key KPIs and one reason for this is to
understand how the business is performing. Moreover, they provide
information on the performance of the business that management is
more directly able to influence and on a basis comparable from year
to year.
The measures are adjusted for the following items:
(a) Depreciation and amortisation
Depreciation and amortisation relate to the assets which were
acquired by the Group. These are omitted from adjusted operating
expenses to allow users of the accounts to compare against other
external data sources.
(b) Depreciation and amortisation arising due to business
combinations
This adjustment is made to improve the comparability between
acquired and organically grown operations, as the latter cannot
recognise as wide a range of internally generated intangible
assets. Adjusting for amortisation provides a more consistent basis
for comparison between the two.
(c) Change in fair value of acquisitions
The change in fair value of deferred consideration and put
option liability is adjusted for to improve the comparability
between acquired and organically grown operations, providing a more
consistent basis for comparison between the two.
(d) Exceptional items
The Group treats certain items which are considered to be
one-off or not representative of the underlying trading of the
Group as exceptional in nature.
The Directors apply judgement in assessing the particular items,
which by virtue of their scale or nature should be classified as
exceptional items. The Directors consider that separate disclosure
of these items is relevant to an understanding of the Group's
financial performance. Any changes to items that are initially
identified as exceptional in one year will consistently be treated
as exceptional in subsequent periods.
Changes in deferred consideration, reduction of intangible
assets and goodwill, and profit upon disposal of a subsidiary are
considered to be exceptional where of a certain scale as they are
not representative of the primary activities of the Group.
(e) Adjusting tax items
Where movements to tax balances arise and these do not relate to
the underlying trading current year tax charge, these are adjusted
in determining certain APMs as they do not reflect the underlying
performance in that year.
The tables below reconcile the alternative performance measures
used in this document:
Measure Statutory Amortisation Change Adjusting Exceptional Adjusted
Basis of intangibles in fair tax items items ** basis
value of
acquisitions
2021
PBT (GBPm) 67.2 9.5 0.5 - - 77.2
PAT* (GBPm) 53.6 9.5 0.5 (1.5) - 62.1
EPS (FD) (p) 55.2 9.8 0.5 (1.5) - 64.0
-------------- ---------- ---------------- -------------- ----------- ------------ ---------
2020
PBT (GBPm) 75.0 6.0 0.3 - (19.6) 61.7
PAT* (GBPm) 64.2 6.0 0.3 (1.5) (19.6) 49.4
EPS (FD) (p) 66.6 6.2 0.3 (1.5) (20.3) 51.3
-------------- ---------- ---------------- -------------- ----------- ------------ ---------
*PAT is the amount attributable to the ordinary equity holders
of the Company.
** See note 4 for further details.
In addition to the above we add back the depreciation and
amortisation charged in the year to Profit from Operations (2021:
GBP68.3m; 2020: GBP75.7m) to calculate a figure for EBITDA (2021:
GBP95.4m; 2020: GBP98.6m) which is commonly quoted by our peer
group internationally and allows users of the accounts to compare
our performance with those of our peers. We further adjust EBITDA
for exceptional items as this gives a reader of the accounts a view
of the underlying trading picture which is comparable from year to
year (2021: GBP95.4m; 2020: GBP79.0m).
An adjustment to the cash has been presented because the Group
believes that adjusted performance measures (APMs) provide valuable
additional information for users of the financial statements in
assessing the Group's performance as Net Cash is a better measure
of liquidity.
2021 2020
GBPm GBPm
Cash and cash equivalents 52.8 53.9
Borrowings (3.3) (5.9)
--------------------------- ------ ------
Net Cash 49.5 48.0
--------------------------- ------ ------
3. Segment information
The Group's main operating segments are outlined below:
-- UK Indirect - This division sells Gamma's products to channel
partners and contributed 60% (2020: 63%) of the Group's external
revenue.
-- UK Direct - This division sells Gamma's products to end users
in the SME, Enterprise and Public sector together with an
associated service wrap. It contributed 24% (2020: 25%) of the
Group's external revenues.
-- European - This division consists of sales made in Europe by
Gamma Communications Benelux B.V. and its subsidiaries in the
Netherlands, by VozTelecom Oigaa360 S.A.U. and its subsidiaries in
Spain and by HFO Holding GmbH and its subsidiaries in Germany
contributing 16% (2020: 12%) of the Group's external revenues.
-- Central functions - This is not a revenue-generating segment
but is made up of the central management team and wider Group
costs.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that offer products and services into different markets. They are
managed separately because each business requires different
marketing strategies and are reported separately to the Board and
management team. Management are in the process of reviewing the go
to market segments.
Measurement of operating segment profit or loss, assets and
liabilities
The accounting policies of the reportable segments are the same
as those described in the summary of significant accounting
policies. The Group evaluates performance on the basis of profit or
loss from operations but excluding non-recurring losses, such as
goodwill impairment and exceptional items. Inter-segment sales are
priced in line with sales to external customers, with an
appropriate discount being applied to encourage use of Group
resources at a rate acceptable to local tax authorities. This
policy was applied consistently throughout the current and prior
year.
Central
UK Indirect UK Direct European functions Total
2021 GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ---------- --------- ----------- --------
Segment revenue 293.6 104.8 72.7 - 471.1
Inter-segment revenue (23.4) - - - (23.4)
Revenue from external
customers 270.2 104.8 72.7 - 447.7
------------ ---------- --------- ----------- --------
Timing of revenue recognition
At a point in time 17.5 2.7 27.4 - 47.6
Over time (recurring) 252.7 102.1 45.3 - 400.1
------------ ---------- --------- ----------- --------
270.2 104.8 72.7 - 447.7
Total gross profit 143.2 52.6 32.7 - 228.5
Operating expenses (90.3) (27.6) (34.3) (8.0) (160.2)
Earnings before depreciation,
amortisation and exceptional
items 66.7 27.3 9.4 (8.0) 95.4
Exceptional items - - - - -
------------ ---------- --------- ----------- --------
Earnings before depreciation
and amortisation 66.7 27.3 9.4 (8.0) 95.4
Depreciation and amortisation
(excluding business
combinations) (12.8) (0.9) (3.9) - (17.6)
Depreciation and amortisation
arising due to business
combinations (1.0) (1.4) (7.1) - (9.5)
------------------------------- ------------ ---------- --------- ----------- --------
Profit/(loss) from operations 52.9 25.0 (1.6) (8.0) 68.3
------------ ---------- --------- ----------- --------
External customer revenue has been derived principally in the
geographical area of the operating segment and no single customer
contributes more than 10% of revenue.
Central
UK Indirect UK Direct European functions Total
2021 GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ---------- --------- ----------- ------
Additions to non-current
assets 13.3 2.4 2.7 - 18.4
------------ ---------- --------- ----------- ------
Reportable segment assets 241.7 18.9 101.2 - 361.8
------------ ---------- --------- ----------- ------
Reportable segment liabilities 56.1 17.0 34.5 - 107.6
------------ ---------- --------- ----------- ------
Central
UK Indirect UK Direct European functions Total
2020 GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ---------- --------- ----------- --------
Segment revenue 268.5 98.1 48.5 - 415.1
Inter-segment revenue (21.3) - - - (21.3)
Revenue from external
customers 247.2 98.1 48.5 - 393.8
------------ ---------- --------- ----------- --------
Timing of revenue recognition
At a point in time 14.7 4.0 15.8 - 34.5
Over time (recurring) 232.5 94.1 32.7 - 359.3
------------ ---------- --------- ----------- --------
247.2 98.1 48.5 - 393.8
Total gross profit 132.2 46.3 22.3 - 200.8
Operating expenses (87.3) (4.2) (25.6) (8.0) (125.1)
Earnings before depreciation,
amortisation and exceptional
items 59.6 23.4 4.0 (8.0) 79.0
Exceptional items - 19.5 0.1 - 19.6
------------ ---------- --------- ----------- --------
Earnings before depreciation
and amortisation 59.6 42.9 4.1 (8.0) 98.6
Depreciation and amortisation
(excluding business
combinations) (13.6) (0.5) (2.8) - (16.9)
Depreciation and amortisation
arising due to business
combinations (1.1) (0.3) (4.6) - (6.0)
------------------------------- ------------ ---------- --------- ----------- --------
Profit/(loss) from operations 44.9 42.1 (3.3) (8.0) 75.7
------------ ---------- --------- ----------- --------
External customer revenue has been derived principally in the
geographical area of the reporting segment and no single customer
contributes more than 10% of revenue.
Central
UK Indirect UK Direct European functions Total
2020 GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ---------- --------- ----------- ------
Additions to non-current
assets 16.4 0.2 4.5 - 21.1
------------ ---------- --------- ----------- ------
Reportable segment assets 199.6 31.1 90.9 - 321.6
------------ ---------- --------- ----------- ------
Reportable segment liabilities 60.1 15.0 42.1 - 117.2
------------ ---------- --------- ----------- ------
4. Exceptional items
2021 2020
GBPm GBPm
Contingent consideration adjustment - Nimsys(1) - 0.1
Profit upon disposal of subsidiary(2) - 19.5
------------------------------------------------- ------ -----
Total exceptional items - 19.6
------------------------------------------------- ------ -----
(1) Contingent consideration due in respect of Nimsys was
decreased by GBP0.1m, this was credited to the statement of
comprehensive income.
(2) Relates to the sale of The Loop Manchester on 31 December
2020.
5. Taxation on profit on ordinary activities
2021 2020
GBPm GBPm
Current tax expense
Current tax on profits for the year 13.4 12.1
Adjustment in respect of prior year 0.6 0.1
Overseas tax 1.0 0.5
--------------------------------------------------- ------ ------
Total current tax 15.0 12.7
--------------------------------------------------- ------ ------
Deferred tax expense
Origination and reversal of temporary differences (1.7) (2.3)
Adjustment in respect of prior years (0.5) 0.1
Tax rate change 0.4 0.1
Total deferred tax (1.8) (2.1)
--------------------------------------------------- ------ ------
Total tax expense 13.2 10.6
====== ======
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
2021 2020
GBPm GBPm
Profit before income taxes 67.2 75.0
Expected tax charge based on the standard rate
of United Kingdom corporation tax at the domestic
rate of 19% (2020: 19%) 12.8 14.3
Effects of:
Tax-exempt income - (3.7)
Tax effect of expenses that are not deductible 0.2 -
in determining taxable profit
Effect of different tax rates of subsidiaries
operating in other jurisdictions (0.1) (0.2)
Tax rate change 0.4 -
Exceptional (tax credit on reduction of intangibles) (0.2) -
Adjustment in respect of prior years 0.1 0.2
------------------------------------------------------ ------ ------
Total tax expense 13.2 10.6
====== ======
6. Earnings per share
2021 2020
Earnings per Ordinary Share - basic (pence) 55.9 67.5
Earnings per Ordinary Share - diluted (pence) 55.2 66.6
The calculation of the basic and diluted earnings per share is
based on the following data:
2021 2020
GBPm GBPm
Earnings
Profit after tax attributable to the ordinary
equity holders of the company 53.6 64.2
===== =====
Shares Number Number
Basic weighted average number of Ordinary
Shares 95,894,913 95,058,880
Effect of dilution resulting from share options 1,166,725 1,273,867
----------- -----------
Diluted weighted average number of Ordinary
Shares 97,061,638 96,332,747
=========== ===========
In 2021, as part of Gamma's acquisitions certain vendors of
Mission Labs reinvested GBP2.8m (182,086 shares) and the vendors of
HFO reinvested GBP0.7m (37,294 shares). In June 2021 GBP0.3m of
Ordinary Shares (15,844 shares) were issued as part of the deferred
consideration for the acquisition of Exactive Holdings Limited.
Adjusted earnings per share is detailed below:
2021 2020
Adjusted earnings per Ordinary Share - basic
(pence) 64.8 51.9
Adjusted earnings per Ordinary Share - diluted
(pence) 64.0 51.3
Adjusted profit used in the calculation of adjusted earnings per
share is detailed below:
2021 2020
GBPm GBPm
Earnings
Profit attributable to the ordinary equity holders
of the company 53.6 64.2
Depreciation and amortisation arising on business
combinations 9.5 6.0
Movement on fair value of put option 0.5 0.3
Exceptional items (disposal of subsidiary) - (19.5)
Exceptional items (change in value of deferred
consideration) - (0.1)
Adjusting tax items (1.5) (1.5)
Adjusted profit after tax for the year 62.1 49.4
====== =======
7. Dividends
The following dividends were paid by the Group to its
shareholders:
2021 2020
GBPm GBPm
Final dividends for the year ended 31 December
2019 of 7.0p per ordinary share - 6.6
Interim dividend for the year ended 31 December
2020 of 3.9p per ordinary share - 3.8
Final dividends for the year ended 31 December 7.5 -
2020 of 7.8p per ordinary share
Interim dividend for the year ended 31 December 4.2 -
2021 of 4.4p per ordinary share
11.7 10.4
A final dividend of 8.8p will be proposed at the Annual General
Meeting but has not been recognised as it requires approval. The
total amount of dividends proposed is 13.2p. The payments of these
dividends do not have any tax consequences for the Group.
8. Property, plant and equipment
Land and Network Computer Fixtures Total
buildings assets equipment and fittings
GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2021 4.8 71.9 11.6 2.0 90.3
Additions - 7.5 1.1 0.5 9.1
Acquisition of
subsidiaries - - 0.1 - 0.1
Disposals - (0.6) (0.3) (0.1) (1.0)
Exchange differences (0.3) (0.1) (0.2) - (0.6)
At 31 December
2021 4.5 78.7 12.3 2.4 97.9
----------- -------- ----------- -------------- ------
Depreciation
At 1 January 2021 0.1 44.7 7.9 1.3 54.0
Charge for the
year 0.2 6.1 1.7 0.3 8.3
Disposals - (0.5) (0.3) (0.1) (0.9)
Exchange difference - - (0.3) - (0.3)
At 31 December
2021 0.3 50.3 9.0 1.5 61.1
----------- -------- ----------- -------------- ------
Net book value
At 1 January 2021 4.7 27.2 3.7 0.7 36.3
At 31 December
2021 4.2 28.4 3.3 0.9 36.8
----------- -------- ----------- -------------- ------
9. Intangible assets
Goodwill Customer Brand Development Software Total
contracts costs
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2021 55.0 48.6 2.4 17.6 16.6 140.2
Additions - - - 4.8 2.9 7.7
Acquisition of
subsidiaries 38.7 1.5 0.9 5.2 - 46.3
Transfer - - - 0.8 (0.8) -
Disposals - - (1.0) - - (1.0)
Exchange differences (1.9) (2.5) (0.1) (0.3) (0.2) (5.0)
At 31 December
2021 91.8 47.6 2.2 28.1 18.5 188.2
--------- ----------- ------ ------------ --------- ------
Amortisation
At 1 January 2021 8.8 13.5 0.7 10.1 11.8 44.9
Charge for the
year - 7.4 1.3 4.3 3.1 16.1
Transfer - - - 0.4 (0.4) -
Disposals - - (1.0) - - (1.0)
Exchange differences (0.1) (0.7) (0.1) - (0.2) (1.1)
At 31 December
2021 8.7 20.2 0.9 14.8 14.3 58.9
--------- ----------- ------ ------------ --------- ------
Net book value
At 1 January 2021 46.2 35.1 1.7 7.5 4.8 95.3
At 31 December
2021 83.1 27.4 1.3 13.3 4.2 129.3
--------- ----------- ------ ------------ --------- ------
Amortisation on intangible assets is charged to the consolidated
statement of profit or loss and included in operating expenses.
Given the recent acquisition date of Voz in April 2020, the
company is still in its early integration life cycle stage with the
Group; the headroom between the recoverable amount (determined
based on a value in use model) and the carrying value of the Spain
cash generating unit ("CGU") is modest at GBP12m (2020: GBP11m) at
the measurement date. We expect the headroom to increase in future
periods as the business delivers its UCaaS growth strategy. We have
considered reasonably possible changes in key assumptions that
could cause an impairment at 31 December 2021, and have identified
two key assumptions relating to the cash flows in years 1 to 5,
being:
1. The Group's value in use cash flows assumes a double-digit
revenue CAGR over the five-year period. A decrease in the forecast
revenue CAGR by 4% (2020: 3%) over this period, would see the
headroom reduced to nil.
2. To breakeven, the EBITDA margin percentage achieved in year 5
would need to reduce by 9% (2020: 5%).
10. Business combinations
Summary of acquisitions
On the 3 March 2021 the Group acquired 100% of Mission Labs
Limited and its subsidiaries. ("Mission Labs"). Mission Labs is a
leading developer of applications to manage cloud contact centres
and enhance customer experience.
The identifiable asset and liabilities acquired are as
follows:
Mission
Labs
GBPm
Tangible fixed assets 0.1
Right of use assets 0.1
Intangible - development costs 5.2
Intangible - customer contracts 1.5
Intangible - brand 0.9
Cash 2.4
Trade receivables 1.0
Other receivables 0.3
Trade payables (0.3)
Other payables (0.5)
Borrowings (0.2)
Deferred tax liability (1.3)
---------------------------------------- --------
Net identified assets acquired 9.2
Add: Goodwill 38.7
Net assets acquired 47.9
======================================== ========
Satisfied by:
Cash paid 43.2
Contingent consideration(1) 4.7
Fair value of purchase consideration 47.9
======================================== ========
(1) Contingent consideration is based on Mission Labs achieving
milestones in 2021,2022 and 2023. Consideration of up to GBP6.0m
may be payable. The fair value of GBP4.7m at acquisition is based
on a payout of GBP5.7m which takes into account the weighted
probability of success.
Net cash outflow on acquisitions:
Mission Other Total
Labs
GBPm GBPm GBPm
Cash consideration 43.2 - 43.2
Less: cash acquired (2.4) - (2.4)
---------------------------------------------- -------- ------ ------
Net outflow of cash for acquisitions
in the year 40.8 40.8
Contingent consideration payments during
the year - 3.5 3.5
Put option liability payment in the year - 5.0 5.0
Net outflow of cash - Investing activities 40.8 8.5 49.3
============================================== ======== ====== ======
Valuations of intangible assets
Customer contracts were valued under the Replacement Cost and
Distributor approach as appropriate. Technology was valued under
the multi-period excess earning model and Brand under the
Relief-from-royalty methodology.
Goodwill
The goodwill encapsulates the ability to grow through new
technology and attracting new customers as well as the synergies
gained through bringing Mission Labs into the Group. It is
attributable to the UK Indirect CGU and is not deductible for tax
purposes.
Acquired receivables
The fair value of acquired trade receivables for Mission Labs is
GBP1.0m. The gross contractual amount for trade receivables due is
GBP1.0m.
Revenue and Profit Contribution
From the date of acquisition, Mission Labs has contributed
GBP5.4m of revenue and GBP2.2m of loss after taxation attributable
to the equity holders of Gamma Communications plc.
If the acquisition occurred on 1 January 2021, Mission Labs
would have contributed GBP7.1m revenue and GBP2.3m loss after
taxation attributable to the equity holders of Gamma Communications
plc.
11. Share capital
At 31 December the share capital was as follows:
Number GBPm
1 January 2021
Ordinary Shares of GBP0.0025 each 95,402,437 0.2
----------- -----
Number
At 1 January 2021 95,402,437
Movement:
January 5,629 (a)
March 8,305 (a)
April 182,086 (b)
April 23,715 (a)
May 47,400 (a)
June 359,377 (a)
June 37,294 (c)
June 15,844 (d)
July 144,727 (a)
August 327 (a)
September 44,536 (a)
October 19,487 (a)
November 10,582 (a)
December 21,308 (a)
At 31 December 2021 96,323,054
===========
(a) Ordinary Shares were issued to satisfy options which had
been exercised.
(b) Ordinary shares were issued to certain vendors of Mission
Labs as a result of reinvestment in Gamma.
(c) Ordinary shares were issued to a certain vendor of HFO
Holding GmbH as a result of reinvestment in Gamma.
(d) Ordinary shares were issued as consideration to the
shareholders of Exactive Holdings Limited.
Number GBPm
31 December 2021
Ordinary Shares of GBP0.0025 each 96,323,054 0.2
----------- -----
12. Other Reserves
Merger Share option Foreign Own shares Total other
reserve reserve exchange reserves
reserve
GBPm GBPm GBPm GBPm GBPm
1 January 2020 2.3 3.8 (0.6) (0.7) 4.8
--------- ------------- ---------- ----------- ------------
Issue of shares - (1.4) - - (1.4)
Share-based payment
expense - 2.8 - - 2.8
Other comprehensive
income - - (0.1) - (0.1)
--------- ------------- ---------- ----------- ------------
31 December 2020 2.3 5.2 (0.7) (0.7) 6.1
========= ============= ========== =========== ============
1 January 2021 2.3 5.2 (0.7) (0.7) 6.1
--------- ------------- ---------- ----------- ------------
Issue of shares - (2.2) - - (2.2)
Share-based payment
expense - 4.1 - - 4.1
Other comprehensive
income - - (3.5) - (3.5)
--------- ------------- ---------- ----------- ------------
31 December 2021 2.3 7.1 (4.2) (0.7) 4.5
========= ============= ========== =========== ============
13. Events after the reporting date
There have been no significant events affecting the Group since
31 December 2021.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFETVSILFIF
(END) Dow Jones Newswires
March 22, 2022 03:00 ET (07:00 GMT)
Gamma Communications (LSE:GAMA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Gamma Communications (LSE:GAMA)
Historical Stock Chart
From Apr 2023 to Apr 2024