Office telecoms services are in the midst of a shift. Demand for traditional landline and broadband connectivity is dwindling and, instead, businesses are signing up for cloud computing and voice over internet products (VOIP). Gamma Communications (GAMA) has positioned itself well in this evolving market. In the six months to June 2017, the group reported a 13 per cent increase in revenues from its data, mobile and cloud products to £62m, which more than offset a decline in demand for traditional services.
SIP Trunking and Cloud PBX were, once again, the two standout products. Trunk installations and PBX users increased by 18 per cent and 20 per cent, respectively, far outpacing the wider market growth for both of these types of products.
But bending to the demands of the modern office has forced Gamma to invest in its network. This caused a 26 per cent uptick in underlying capital expenditure to £8.6m, which increased operational gearing. Second-half capex is expected to be pushed higher with £5m-worth of upgrade investments to the group’s national fibre broadband network - although this will provide Gamma with its core infrastructure for the next 25 years.
Broker Peel Hunt has forecast pre-tax profits and EPS of £25.8m and 22.2p, respectively, in the year to December 2017 (from £24.5m and 21.1p in 2016).
| GAMMA COMMUNICATIONS (GAMA) | ||||
| ORD PRICE: | 655p | MARKET VALUE: | £610m | |
| TOUCH: | 655-662p | 12-MONTH HIGH / LOW: | 670p | 440p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 94p | NET CASH: | £28.7m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 105 | 10.6 | 9.5 | 2.5 |
| 2017 | 115 | 12.5 | 12.0 | 2.8 |
| % change | +10 | +18 | +26 | +12 |
| Ex-div: | 21 Sep | |||
| Payment: | 19 Oct |
