Gamma Communications PLC Full year growth expectations remain unchanged (4498M)
12 January 2023 - 6:00PM
UK Regulatory
TIDMGAMA
RNS Number : 4498M
Gamma Communications PLC
12 January 2023
12 January 2023
Gamma Communications plc
Trading Update
Full year adj. EBITDA and adj. EPS growth expectations remain
unchanged*
Gamma Communications plc ("Gamma"), a leading provider of
Unified Communication as a Service ("UCaaS") products, announces a
trading update for the year ended 31 December 2022.
Trading
The UK business has continued to perform strongly throughout the
year in both the Indirect and Direct channels, with healthy demand
for our broadening UCaaS portfolio and products enabling Microsoft
Teams. The strength of our financial performance more than offset
the UK inflationary pressures, and the minor industry-wide hardware
supply delays in the Direct channel were actively managed and
resolved within the year.
In Europe, UCaaS product revenue growth continues to offset the
expected and continuing decline in lower margin traditional
revenues. The overall growth of our European UCaaS business
continues in line with the market but the individual performance
varies reflecting the different market conditions in each country.
Our largest European business, Germany, continues to perform well,
leading the UCaaS product growth across our European geographic
footprint. During the year, our German business won a number of
1000+ cloud seat regional customers which underpinned its
anticipated double-digit percentage UCaaS seat growth and overall
UCaaS revenue growth. The Netherlands business continues to make
steady progress within its more mature market. Our smaller Spanish
business has been impacted by the challenging local market economic
conditions. Therefore, following a recent and ongoing review, the
Board anticipates that the achievement of future business
performance targets may take longer than originally forecast. This,
combined with the increase in discount rates, will likely result in
the need to impair the goodwill carried in relation to the Spanish
2020 VozTelecom acquisition in the audited results for the year
ended 31 December 2022. This will be a non-cash adjusted item.
Cash
The closing net cash balance was GBP92.2m (2021: GBP49.5m),
demonstrating Gamma's continued high operating profit cash
conversion. The sizeable GBP42.7m net cash increase year on year
was achieved even after allowing for GBP13.3m paid to shareholders
in dividends (2021: GBP11.7m), a year-on-year increase of 13.7%.,
the Neotel Spanish bolt-on acquisition (GBP4.4m paid in period) and
a modest increase in group capex investment in product development
compared to 2021.
Financial Performance
Overall, we anticipate reporting a group financial performance
which will demonstrate significant year on year growth and an
adjusted EBITDA and adjusted EPS for the year ended 31 December
2022 in line with the Board's previous expectations*. Market
consensus has increased since the Half year report, published in
September, but we expect to report adjusted EBITDA in the upper
half of the updated range, and adjusted EPS within the range.**
Overview of the year
Some of the key highlights from the year include:
Growth in core Cloud PBX seats in UK in line with previous
years; attachment volumes for supplementary products continue to
grow and ARPUs have been maintained.
Significant contract wins, including the Department of Work and
Pensions and DEFRA for Microsoft Teams, The AA for mobility
services and Central Bedfordshire and Colchester Borough councils
for UCaaS and CCaaS.
Investment in our own products as well as enabling systems.
There were product launches of CircleLoop (digital cloud based
small business phone system) in both the Netherlands and Germany;
and of Operator Connect for Teams in the Netherlands. We have also
started programmes to update both our HR and Finance systems across
the Group.
The Board expects to announce results for the year ended 31
December 2022 on Tuesday 21 March 2023.
Note: Company compiled range is based on known sell-side analyst
estimates.
* At the H1 Trading update (2 August 2022) the Board reiterated
their expectation that adjusted EBITDA and adjusted EPS for the
year ending 31 December 2022 would be in the upper half of the
analysts' range: The range being adjusted EBITDA GBP102.3m -
GBP106.8m and adjusted EPS 67.1 pence - 74.6 pence. The Board's
expectations remain unchanged.
** The latest known sell-side analyst estimates for the full
year ended 31 December 2022 are adjusted EBITDA GBP102.7m -
GBP107.0m and adjusted EPS 70.1 pence - 74.8 pence.
Andrew Belshaw, Chief Executive, commented:
"Our staff and partners have delivered another set of strong
results for Gamma. The positive, UK driven, momentum in the first
half continued throughout the year, more than offsetting the cost
headwinds created by the increased inflationary environment.
Although market conditions remain challenging in Europe, Gamma,
led by its robustly performing German business, continues to grow
its UCaaS footprint. The recent bolt-on Neotel acquisition in Spain
helps deliver greater operational scale which we expect will lead
to improved performance in that market.
Demand for UCaaS products continues to grow across all our
markets and segments. Gamma is well positioned with its strong
relationships, evolving product set and resilient recurring revenue
model. This, alongside the high margins and cash generation the
group enjoys, will allow Gamma to continue to deliver and grow
through the testing macroeconomic environment in 2023."
END
Gamma Communications plc Tel: +44 (0) 333 014 0000
Andrew Belshaw, Chief Executive
Officer
Bill Castell, Chief Financial
Officer
Tulchan Communications LLP Tel: +44 (0) 207 353 4200
James Macey White / Matt Low
Investec Bank plc (NOMAD Tel: +44 (0) 207 597 5970
& Broker)
Patrick Robb / Virginia Bull
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END
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