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As presaged in Gamma’s July trading update, the first half of 2019 has been another strong period of trading for the Group. We are upgrading our revenue estimates by between 3% and 6% and adjusted EBITDA by between 11% and 19% across our three-year forecast horizon. The results show further good growth in the UK across both the direct and indirect businesses while the acquisitions in the Netherlands settled into Gamma ownership with a solid first half. With strong growth across the major product groups in what is proving to be an increasingly competitive market, we believe that the interims provide further evidence that Gamma is continuing to balance near-term delivery with the execution of the its longer-term strategy. Given another strong half year, the outlook comments in the announcement are, unsurprisingly, positive about the Group’s future performance.
Group revenue for the six months ended 30 June 2019 increased by £20.6m to £158.2m (H1 2018: £137.6m), up 15%. Organic revenue growth was 9.7%. Gross profit for H1 2019 increased by 25% to £78.1m, with the gross margin increasing to 49% (H1 2018: 45%) due to improved product mix. Group adjusted EBITDA increased by 39% to £30.4m (H1 2018: £21.8m). The Board has proposed an interim dividend of 3.5p (2018: 3.1p), an increase of 13%.
Cash generated by operations for the first half was £27.3m compared to £18.4m in H1 2018. This represents a cash to adjusted EBITDA conversion ratio in respect of H1 2019 of 90% - ahead of general guidance of 80% - 85%. Absent further acquisitions we expect strong cash generation to continue. Gamma ended the half year with cash of £44.8m and no debt.
Gamma continues to seek further acquisitions to drive expansion in Western Europe and anticipates concluding at least one deal during the next twelve months. The Group has good cash resources and also alludes to the willingness of lenders to support any capex or M&A activity.
Our numbers were at the lower end of consensus expectations before this results announcement and we increase our revenue estimates by 3%, 4% and 6% and adjusted EBITDA estimates by 11%, 16% and 19% for FY 2019E, FY 2020E and FY 2021E respectively.
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