Once again, Gamma Communications’ (GAMA) results came in ahead of analyst expectations. The group's profits beat the consensus thanks largely to a higher-margin product mix. Most notably, the UK “indirect” business - which is implemented through partners, rather than by Gamma directly - saw growth in higher-margin areas related to cloud telephony such as SIP Trunking and Cloud PBX. These boosted the group’s gross margin by 400 basis points to 49 per cent, dampened slightly by the direct business, which earned lower margins on some new business channels.
At the start of this year, management outlined its strategy for growth, which included further European expansion and increased exposure to the unified-communication-as-a-service market - software that allows a range of communication services, including calls, video and conferencing, through the same platform.
Its European plans are predicated on acquisition. It has already acquired DX Groep and Nimsys in the Netherlands, and management said it aims to spend €20m-€40m (£18m-€36m) on further deals in Germany, Spain and France to further extend its footprint. To this end, the group has been building a war chest, pushing net cash up 26 per cent from the December year-end.
Broker Peel Hunt upped its adjusted pre-tax profit and EPS forecasts for 2019 by 16 per cent each, giving £48.1m and 41.8p, compared with £34.9m and 30.3p in 2018.
| GAMMA COMMUNICATIONS (GAMA) | ||||
| ORD PRICE: | 1,145p | MARKET VALUE: | £1.08bn | |
| TOUCH: | 1,145-1,160p | 12-MONTH HIGH: | 1,250p | LOW: 640p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 143p* | NET CASH: | £44.8m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 138 | 15.5 | 13.6 | 3.10 |
| 2019 | 158 | 21.7 | 19.7 | 3.50 |
| % change | +15 | +40 | +45 | +13 |
| Ex-div: | 26 Sep | |||
| Payment: | 24 Oct | |||
| *Includes intangible assets of £34.5m, or 36p a share | ||||
