Results for the year ended 31 December 2022
Strong resilient business, with growth in line with expectations, delivering significant cash generation
Gamma Communications plc (“Gamma” or “the Group”), a leading provider of Unified Communications as a Service (“UCaaS”) into the UK and European business markets, is pleased to announce its results for the year ended 31 December 2022.
| Year ended 31 December |
| ||
| 2022 | 2021 | Change (%) | |
| Revenue | £484.6m | £447.7m | +8% |
| Gross profit | £247.7m | £228.5m | +8% |
| Gross margin | 51% | 51% |
|
| Profit from operations** | £65.4m | £68.3m | -4% |
| Adjusted EBITDA* | £105.1m | £95.4m | +10% |
| Profit before tax (“PBT”)** | £64.9m | £67.2m | -3% |
| Adjusted PBT* | £87.8m | £77.2m | +14% |
| Earnings Per Share (“EPS”) (fully diluted)** | 50.6p | 55.2p | -8% |
| Adjusted EPS (fully diluted)* | 71.8p | 64.0p | +12% |
| Total dividend per share | 15.0p | 13.2p | +14% |
| Cash generated by operations | £99.1m | £89.8m | +10% |
| Cash generated by operations / adjusted EBITDA | 94% | 94% |
|
| Cash and Cash Equivalents less Borrowings (“net cash”)* | £92.5m | £49.5m | +87% |
*All adjusted measures set out above and throughout this document which are described as “adjusted” represent Alternative Performance Measures (“APMs”) and are separately presented within the statement of profit or loss or reconciled in the Financial review section or segment note and are applied consistently. Where reference is made to adjusted EPS this is stated on a fully diluted basis. Definitions of APMs are included in the Financial review. Our policy on the use of APMs is included in note 2.
** In 2022 Profit from operations, statutory EPS and the statutory PBT figures include exceptional items relating to impairment of the Spanish cash generating unit (CGU) and disposal of ComyMedia in Spain.
Key Highlights
Financial highlights
- The Group delivered a strong financial performance with good gross profit growth flowing through to Adjusted EBITDA and significant cash generation.
- Revenue and gross profit each grew by 8% to £484.6m and £247.7m respectively (2021: £447.7m and £228.5m), with gross margin being maintained at 51%. Recurring revenue (being revenue which is recognised “over time” as per note 3) remaining high at 89% (2021: 89%).
- UK Indirect Business continued to grow strongly with increased volumes. Revenue grew by 10% to £295.9m (2021: £270.2m) and gross profit increased by 9% to £155.6m (2021: £143.2m).
- UK Direct Business showed increased growth as a result of significant new customer wins with revenue growing by 10% to £115.5m (2021: £104.8m) and gross profit increasing 9% to £57.4m (2021: £52.6m).
- European Business delivered revenue growth of 1% to £73.2m (2021: £72.7m) despite challenging macroeconomic and associated market conditions.
- Group adjusted EBITDA grew by 10% to £105.1m (2021: £95.4m) ahead of 8% growth in revenue as a result of continued active cost control.
- Profit from operations reduced by 4% to £65.4m (2021: £68.3m) principally as a result of non-cash exceptional items of £12.5m relating to an impairment of goodwill in Spain and a small loss on disposal within the Spanish business (note 4).
Product highlights
There continued to be significant growth across the major product groups:
- The increased adoption of voice for Microsoft Teams has led to an increase in the number of SIP trunks:
| (‘000s) | 2022 | 2021 | Change (%) |
| Trunks supporting traditional hardware PBX | 1,053 | 1,010 | +4% |
| Trunks being used by a non Gamma Cloud PBX product | 367 | 298 | +23% |
| Trunks to voice enable users of Microsoft Teams | 356 | 124 | +187% |
| Total | 1,776 | 1,432 | +24% |
- In addition, the number of Cloud PBX seats has increased:
| (‘000s) | 2022 | 2021 | Change (%) |
| UK – (Horizon) | 751 | 676 | +11% |
| Europe | 164 | 128 | +28% |
| Total | 915 | 804 | +14% |
In the UK sales of the Collaborate bolt-on module grew faster than the core Horizon module, increasing 16% from 63,000 to 73,000 and supported a stable Average Revenue Per User (“ARPU”).
The growth in European cloud seats was mainly driven by Germany and was assisted by the acquisiton of NeoTel 2000 S.L.U (“NeoTel”), a leading developer of applications to manage cloud contact centres and enhance customer experience in the Spanish market.
- Gamma continued to invest in its Group wide product portfolio. It has invested through its own software development capability in the UK, including Phoneline+, core cloud PBX technology and bolt-ons. In addition products have started to expand from the UK into Europe such as Operator Connect and CircleLoop.
Andrew Belshaw, Chief Executive Officer, commented,
“I am pleased to be presenting the first set of annual results since I was appointed as Chief Executive. Gamma has had another strong year with double digit adjusted EBITDA growth and generated almost £100m of cash from operations. The popularity of voice enablement of Microsoft Teams has driven expansion of both our UK Direct and Indirect businesses – which each grew revenues by 10%. Our Cloud seat growth in the UK was pleasing as we added 75,000 seats and our European business also performed robustly, increasing the number of Cloud seats by 28% despite a difficult European market.”
“Gamma remains well placed to navigate any macro-economic headwinds that may occur. We have a product set that is business critical to customers and telephony services have typically been resilient during periods of economic stress. We have a high degree of recurring revenue and expect to continue to be strongly cash generative. We have a healthy balance sheet that will allow us to continue investing in the business as well as supporting organic growth with acquisitions.”
