A Communications Company Poised for A Giant Leap on The Back of Strong Demand

Telecom services had remained on the forefront keeping the world moving when all the businesses came to a halt due to Covid-19 and the resultant lockdown imposed across the globe to contain its spread. Here we are going to discuss a company which is one of the major technology-based providers of communications having its presence in markets of UK as well as different other parts of Europe. The company has been working aggressively on its European expansion strategy. The company has a strong cash balance and has been progressing assiduously on its product development and digital transformation programme.

Highlights

• During the first half of 2020, Gamma Communications Plc has delivered significant organic growth in its core business and has also made four acquisitions one each, in Germany, Spain, the UK and the Netherlands
• The management of the company had earlier forecast a full-year revenue expectation of £373.2 million, Adjusted EBITDA of £71.8 million and eps of 46.5 pence, respectively. However, given the surge in business, it has witnessed since the pandemic outbreak, it now expects to beat those expectations.
• The company continued to build on its product development and digital transformation programme through the first half of the year by launching its Microsoft Teams Direct Routing service, Dealer Hub platform and is on track to launch its multichannel cloud contact centre solution.

2020, Proving to Be A Special Year for The Company

Organic Growth

The advent of the coronavirus pandemic and the increasing prevalence of companies shifting more and more of their staff to work online has come as a boon for Gamma Communications Plc. The company which is one of the leading suppliers of Unified Communications as a Service (UCaaS) in the UK and Europe the 93 per cent of its revenues comes from recurring customers, a steady source and billed monthly. The company has also been able to secure several new multi-year contracts during the period across enterprises which include RNIB (for UCaaS), Sureserve (for cloud PBX), Toyota Financial Services ( for WAN) as well as from several public sector enterprises and SME’s.

Inorganic Growth

The company has made several acquisitions during the year, which it expects will give provide scale across Europe and also help accelerate its technological development.

In February, the company acquired Exactive the UK based Microsoft Teams specialist company. Since then the company has been able to add 6000 new direct routing seats with leading companies such as Northern Marine, Metro Bank, Fraser Nash, and Baillie Gifford.

On 17 July, the company also completed its acquisition of GnTel, a Cloud PBX provider in the Netherlands from which it expects to add about 100,000 Cloud PBX seats into the company’s fold across Europe.

Apart from the above, the company also made an acquisition of Voz Telecom in Spain in the month of April and HFO holdings in Germany on 1 July 2020.

The company continues to look for suitable acquisition targets in countries where it operates as well as the rest of Europe.

Gamma Communications PLC – (LON:GAMA) The company is a United Kingdom-based integrated communication services provider. The company, main product offerings, include Horizon collaborate, Cloud contact centres, Business phone systems, SIP trunking and call management, Microsoft teams direct routing, Gamma mobile, inbound call routing, Advanced network services, Wi-Fi, and network security. The company's solutions include Agile networks, Business Voice, carrier and service providers Connectivity, Managed Services, Mobility, Security and compliance, Unified Communications, and remote working. The company operates both in solo and business associate models, where it employs Channel partners, Wholesale partners, dealers’ partners and simplicity partners to distribute its services across its markets. Other than the UK, the company currently operates in the Netherlands, Germany, and Spain.

The Shares of the company were admitted to the AIM segment of the London Stock exchange on 10 October 2014, where they trade with the ticker name GAMA.

Resilient Financial Performance

Revenue growth rate vs net income growth rate over the past four years

Market capitalisation as on 14 August 2020

£1.621 billion

Free float shares/ Number of shares outstanding as on 14 August 2020

76.25 million/ 95.09 million

Dividend history

Dividend Growth rate

Stock market performance

Since the beginning of the year 2020, the shares of the company have been showing strong upswing on the London Stock Exchange except for a minor dip in months of March and April when there was a general downturn in the markets sentiments because of the lockdown.

(Source – Thomson Reuters)

Performance against industry peer Talk Talk Telecom Group Plc

The closest listed competitor of Gamma Communication Plc can be called Talk Talk Telecom Group Plc. This company offers broadband, fixed-line telephony, television, as well as mobile telephony services.

(Source – Thomson Reuters)

Since the beginning of the year, the shares of Gamma Communication Plc have almost coincidental with the shares of Talk Talk Telecom Group Plc. Since the mid of March, however, the shares of Gamma communications have entered a higher growth trajectory.

Performance against FTSE AIM Communications companies index

Gamma Communication Plc is a part of the FTSE AIM Communications Index.

(Source – Thomson Reuters)

The shares of the company have for the most part of the year outperformed the benchmark FTSE AIM communications index. Since the very beginning of July, the company's shares prices have hit a higher growth trajectory compared to the benchmark then the rest of the year.

(As of market close on 14 August 2020)

Outlook

The company's performance over the past few years has been exceedingly well. During the year, the company has been able to accelerate its organic as well as its non- organic growth efforts despite the challenging business environment. The company has a strong financial position and did not put any of its employees under the governments furloughing scheme and paid all of its taxes. The management of the company hopes that it will be able to continue with the upbeat performance level for the rest of the year as was witnessed in the first half.