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Gamma set to beat consensus

The communications group expects to beat consensus for adjusted cash profits and EPS for the full year
July 20, 2020

Gamma Communications (GAMA) expects adjusted cash profits to be ahead of the consensus forecast of £71.8m in 2020, as trading held steady in the past six months. The group, which has recurring revenue running at 93 per cent, said that cancellations of existing contracts were at normal, minimal levels and that it has not seen an increase in bad debt despite the impact of coronavirus. 

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In its UK Indirect business, Gamma continued to secure net additions for cloud telephony products ‘SIP Trunks’ and ‘Cloud PBX’, as well as unified communications as a service (UCaaS), although at a lower level than before the pandemic. Management offered a ‘hibernaiton’ option to its clients who are not trading, which expired at the end of June and has cost the group £1.2m - but new business enquiries have started to recover back towards regular levels seen before the disruption of commercial activity. 

Net cash at the half year was around £37.7m, falling from £53.9m at the end of last year - resulting from the acquisitions of Voz and Exactive, which to date have cost £17.9m and £4.1m respectively. Exactive, a UK Microsoft Teams specialist, has enabled the group to secure more than 6,000 new direct routing seats with clients such as Metro Bank and Baillie Gifford.

The purchases formed part of its European expansion strategy, also highlighted by the acquisition of HFO Holdings in Germany at the beginning of July, and the subsequent deal to buy GnTel, a Cloud PBX provider in the Netherlands, for a cash consideration of €8.1m (£7.3m). 

Management said that it continues to consider European acquisition targets to enter into new markets, and to expand its scale and capabilities in territories where it already operates.