Gamma Communications ends year in strong position

(Sharecast News) - Unified communications-as-a-service (UCaaS) provider Gamma Communications said in an update on Tuesday that it expected to report robust year-on-year growth in both adjusted EBITDA and adjusted earnings per share for 2023, in line with the increased market consensus following its 2023 interim results in September. The AIM-traded firm said that in terms of trading performance, both Gamma Business - formerly Indirect - and Gamma Enterprise - formerly Direct - business units in the UK demonstrated strong financial performance throughout the year, supported by earlier price increases.

Those results helped to offset inflationary pressures in the UK, with both business units maintaining margin and volume trends in line with the 2023 interim results.

Gamma Business expanded its UCaaS offering through external partnerships, including a long-term partnership with Cisco and a UK partnership with Ericsson-LG, following the acquisition of EnableX Group in December.

Some intangible development costs related to in-house products could be adjusted due to these partnerships, the board said.

Gamma Enterprise meanwhile secured significant contract wins, including SD-WAN solutions for Redde Northgate and the Denholm Group, a Microsoft Teams implementation with a contact centre-as-a-service (CCaaS) overlay for Gloucester County Council, and wins for the AWS omnichannel contact centre.

In Europe, the company reported improved year-on-year financial performance, with the German and Dutch businesses now under a single leadership.

The Spanish business's financial growth was led by CCaaS, following the integration of the Neotel business acquired in 2022.

Gamma Communications conducted a restructuring exercise in late 2023, impacting about 5% of the group's workforce due to organisational changes related to the expanded UCaaS offering and the consolidation of the German and Dutch senior leadership teams.

That cost would be treated as an exceptional item.

The closing net cash balance for the year was £134.8m, reflecting Gamma's continued strong cash generation from operations, with a percentage of adjusted EBITDA remaining above 100%.

Gamma said its year-on-year net cash increase of £42.3m took into account cash outflows for two acquisitions - Satisnet and EnableX Group - and increased dividend payments to shareholders.

Capital expenditure remained within guidance.

"Our staff and partners have delivered another set of positive results for Gamma across all our business units in the UK and Europe," said chief executive officer Andrew Belshaw.

"We welcomed the Satisnet and EnableX teams to the group and I am excited about the partnerships with a number of the global tech giants which bring us enhanced access to leading edge UCaaS and CCaaS solutions, such as Cisco's Webex AI Portfolio.

"I am also pleased with the strong European 2023 financial performance, as well as the work done on a Gamma-wide HR system that will be operational in the second quarter of 2024 and the launch of the Finance ERP system project which will enhance our capabilities from 2025."

Belshaw added that Gamma was delivering high cash generation, allowing for the self-funding of bolt-on acquisitions while growing net cash by 45% to £135m.

"[The company] is well positioned to continue to grow in 2024 with strong relationships, our evolving in-house and third-party solution set and Gamma's resilient recurring revenue model."

Gamma said it would announce results for the year ended 31 December, including an update on its approach to capital allocation, on 25 March.

At 1219 GMT, shares in Gamma Communications were up 4.87% at 1,162p.

Reporting by Josh White for Sharecast.com.