Trading Statement

10 July 2019

Gamma Communications plc

Pre-close trading update

Strong first half performance

Gamma Communications plc ("Gamma"), a leading technology-based provider of communications services primarily to the UK business markets, is pleased to announce a trading update for the six months ended 30 June 2019.

Group overview

We are pleased to report that Gamma has continued to perform well through the first six months of the year.  Based on the first half performance, management expects revenue to be within the range of market expectation and the EBITDA and EPS for the full year are expected to be slightly above the range of market expectations.

Some of the highlights from the period include:

·     The group launched Collaborate in March bringing additional features to the core Horizon product. The reception in the market has been positive.

·     Cloud PBX sales have performed well in the period with good sales momentum going into the second half of the year.  This market continues to attract new market entrants which - in the longer term - may increase competitiveness. 

·     The Indirect Channel business has signed commitment deals with several Channel Partners - Focus Group (for data), Daisy Group's retail business (for Cloud PBX) and Onecom (Cloud PBX).

·     Our Direct business has been awarded numerous new multi-year contracts across Enterprise including Hidden Hearing (WAN), Hogg Robinson Group (SIP) and Bourne Leisure (Mobile).  The Public Sector team has had wins with H.M. Land Registry (network services) and NHS Lanarkshire (SIP). 

·     We have implemented the first phase of our digital transformation program in our Direct business.  This provides our customers with an enhanced service and support experience.

·     Our Dutch business is now an established part of the group and has performed in line with management's expectations - sales of Cloud PBX seats increase and the traditional business (ISDN) has declined compared to the same period in the prior year.

·     The Board continues to appraise acquisition targets in Western Europe where such an acquisition would provide the group a channel to sell UCaaS products to a larger geographic market.

Cash

Gamma continues to have a very robust balance sheet, with strong cash generation from its trading activities.  Cash conversion from EBITDA is anticipated to be in line with previous levels and the closing cash balance for the half year is approximately £44.6m compared to £35.5m at the end of the previous year.  The Directors expect to propose an interim dividend in line with the stated progressive policy.

The Board expect to announce results for the half year ended 30 June 2019 on Tuesday 3 September 2019. 

Andrew Taylor, Chief Executive, commented on the results:

"I am delighted to announce that in the first half of 2019 we have continued to deliver strong revenue and gross profit growth across all business areas, representing a positive performance. I am very pleased with our continued focus on delivering against our near-term commitments, balanced against the execution of our longer-term strategy which was outlined at our capital markets day in January."