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Gamma has delivered this morning another strong set of results for H1 to June. Despite the COVID-19 challenges, the business has grown organically, and the acquisition programme is delivering well on its promise of European expansion. The group is positioned well to build revenues on and around Microsoft Teams, which is clearly benefiting from the work-from-home trend. We raise our profit estimates for all three forecast years as a sign of confidence in ongoing growth and look forward to further strong performance (and potentially even further M&A) into H2 and beyond.
H1 financial performance Revenue was some £177m, up 12% from the prior year (of this 9% was organic and the balance acquisitions, almost entirely the expanding European platform). Adjusted EBITDA also grew strongly (up 19% to £36.1m) and the end-June cash position was £42.5m, down from £53.9m at December 2019, after payments of some £21.5m relating to acquisitions in this and prior periods.
Operational strength and European platform In the UK, the group now has 1.1m SIP Trunks in the UK (up 8%) with Cloud PBX Horizon users up 7% in the six months to 560k. The Overseas business (Europe) continues to evolve through acquisition, and now boasts a total of 65,000 Cloud PBX users.
COVID-19 The business appears to have weathered the COVID-19 pressures well; unsurprising given the installed base and the missioncritical nature of telephony and data. Nevertheless, it is pleasing to see both retention of existing customers and the ongoing winning of new business. The statement describes “net additions return[ing] to preCOVID levels” and notes no material change to churn or bad debt. The “hibernation” scheme cost the business some £1.2m in H1, and ended at the end of the period.
Forecast upgrades Given the upbeat commentary and the clear strength of H1 performance, we upgrade our estimates by 1.7% at the Adjusted EBITDA level for both 2020E and 2021E, with a slightly smaller upgrade for 2022E. See the table overleaf for further detail.
Overall this is a very strong performance from Gamma, demonstrating genuine resilience during COVID-19 and a strong degree of ongoing growth in both the UK and European markets, with plenty of potential remaining in both geographies.
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