Gamma trading towards upper-end of expectations after first half

Communications-as-a-service specialist Gamma Communications updated the market on its first half on Tuesday, reporting that it had continued to perform “well” through the first six months of the year.

The AIM-traded firm said growth in the first half had been in line with the rate associated with market expectations for the full year, despite the period being characterised by Covid-19 lockdowns in all of its territories once again, which restricted sales activities for both Gamma and its partners.

In both the UK and Europe, its financial model had continued to be “robust”, the board said, given that over 90% of revenue was recurring and billed monthly.

Cancellations of existing contracts continued to be at “very low levels”, and bad debt reportedly remained negligible.

In its UK indirect business, net additions across all unified communications-as-a-service (UCaaS) products were positive, and in line with the prior period.

The board said the performance of the UK direct business was slightly ahead of expectations, meanwhile, with growth closer to that of previous years, despite the lower order intake during the first lockdown in 2020.

It was awarded several new contracts during the period, including the Berkeley Group, RSM, and the Royal Berkshire NHS Trust.

In its overseas territories of the Netherlands, Spain and Germany, Gamma said that despite the markets being at a “relatively early” stage of development, each of them had continued to grow their cloud seat bases.

That was coupled with positive net growth of both SIP and mobile, and despite some “difficult” Covid-19-related market conditions, the overall performance of the overseas business had been in line with expectations.

On 3 March, the group acquired Mission Labs for £40.2m on a cash-free basis, with up to an additional £6.0m contingent deferred consideration payable over the next three years.

Integration of the business had gone “well”, the board said, and its early performance had been “slightly ahead” of expectations.

The firm said it was continuing to actively appraise acquisition targets in Europe, to gain scale and to strengthen capabilities.

Gamma said it still had a “very robust” balance sheet, with strong cash generation from its trading activities in line with previous levels.

Closing net cash at the half-year was approximately £25.4m, compared to £48m at the end of the previous year.

Gamma said the strong generation of cash from trading was offset by the acquisition of Mission Labs for £40.2m, and a further payment of £5.0m for its 2020 acquisition of HFO.

Looking ahead, Gamma said current management expectations for the full-year ending 31 December were that results would be in the “upper half” of market consensus estimates.

“Despite the ongoing Covid-19-related difficulties across the UK and Europe, I am encouraged by our performance in the first half of 2021,” said chief executive officer Andrew Taylor.

“All of our staff have continued to work incredibly hard to keep the business running remotely and our ongoing support of partners and customers has been excellent throughout the period.”

Taylor said he was “pleased” with the development of the company’s UCaaS strategy, both organically and through the acquisition of Mission Labs, and with the release of a range of new UCaaS products, including ‘Phone Line Plus’ and ‘Horizon Contact’.

“I am delighted to welcome all of our new colleagues from Mission Labs into the Gamma family, and I am pleased to see the continued growth of ‘Circle Loop’ and ‘Smart Agent’, being the new products we gained as part of the acquisition.”

Gamma Communications said it would announce results for the half-year ended 30 June on 8 September.

At 0937 BST, shares in Gamma Communications were up 5.46% at 2,010p.