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Gamma results justify momentum

The business telecoms company has had a fantastic six months as companies clamour for its data and connectivity products
September 3, 2018

Gamma Communications (GAMA) has revealed a 31 per cent increase in adjusted cash profits for the first six months of 2018, driven by an 18 per cent increase in revenue and improved gross margins. Not a bad start for Andrew Taylor, who took over as chief executive just five months ago. But considering the majority of this margin growth came from the group’s newer SIPP Trunking and Cloud PBX products – which are benefiting from the current shift in customer demand – the big question is whether that performance can be maintained.

IC TIP: Hold at 892p

Mr Taylor’s plan is "very much to maintain the pace of growth". The cloud computing market continues to be a great opportunity and, with less than a quarter of the current market, Gamma has plenty of room to expand. Revenue growth of 16 per cent was well ahead of the wider industry, suggesting Gamma continues to steal market share from rivals, too.

The group’s traditional data products, including its broadband and Ethernet services, also performed well, with revenue up 12 per cent and 16 per cent, respectively – well ahead of the broader market.

Broker Investec expects pre-tax profit and EPS of £33m and 29p, respectively, in the 2018 financial year, up from £27.9m and 24.8p in the prior year to December 2017.

GAMMA COMMUNICATIONS (GAMA)   
ORD PRICE:892pMARKET VALUE:£838m
TOUCH:888-914p12-MONTH HIGH:918pLOW:564p
DIVIDEND YIELD:1%PE RATIO:34
NET ASSET VALUE:111pNET CASH:£36.9m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201711612.111.62.8
201813815.513.63.1
% change+18+28+17+11
Ex-div:20 Sep   
Payment:18 Oct