REG - Gamma Communications - Final Results
25/03/2025 07:15
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RNS Number : 9708B Gamma Communications PLC 25 March 2025
25 March 2025
Gamma Communications plc
Results for the year ended 31 December 2024
Sustained strong financial performance, enhanced by acquisitions. Growth in
line with expectations, delivering healthy cash generation. Announcing a share
buyback of up to £50m in H1 2025.
Gamma Communications plc ("Gamma" or "the Group"), a leading provider of
technology-based communication services across Europe, is pleased to announce
its results for the year ended 31 December 2024.
Year ended 31 December
2024 2023 Change (%)
Revenue £579.4m £521.7m +11%
Gross profit £300.3m £267.2m +12%
Gross margin 52% 51%
Adjusted EBITDA* £125.5m £114.3m +10%
Profit before tax ("PBT") £95.6m £71.5m +34%
Adjusted PBT* £111.9m £97.9m +14%
Earnings Per Share ("EPS") (fully diluted) 72.0p 54.9p +31%
Adjusted EPS (fully diluted)* 85.1p 75.1p +13%
Total dividend per share 19.5p 17.1p +14%
Cash generated by operations £116.8m £123.5m -5%
Adjusted cash conversion* 96% 108%
Net cash* £153.7m £134.8m +14%
*The Group uses certain measures in addition to those reported under IFRS,
under which the Group reports. These measures are known as Alternative
Performance Measures ("APMs"). The Group does not consider these APMs to be a
substitute for, or superior to, the equivalent statutory measure. These APMs
are explained, defined and reconciled in the APM section, which follows the
notes to the condensed financial statements, and are applied consistently.
Key highlights
· Strong financial performance and cash position. Gross profit and Adjusted
EBITDA growth in all business units, driven by solid organic growth and
supported by acquisitions.
· Three acquisitions completed during 2024, each enhancing future organic
growth: Coolwave in February; BrightCloud in July: and Placetel in September.
· The Group acquired STARFACE in February 2025, a strategically significant
acquisition positioning Gamma as a leader in the German SME cloud
communications market when combined with our acquisition of Placetel. The
German market is both larger and has materially lower cloud penetration than
the UK. In Germany we now have over 500,000 Cloud Seats along with a range of
products to meet growing customer communication needs
· In Gamma Business the acquisition of Coolwave has allowed our Service Provider
business to expand its services to around 20 countries. The Service Provider
business provides carrier services, such as hosting telephone numbers and
connecting calls, for customers who wish to run a service but do not have
network capabilities.
· Gamma Enterprise continues to win new customers including WM Morrisons,
Edmundson Electrical and Equiniti. The acquisitions of BrightCloud and
Satisnet have enhanced our range of solutions providing additional customer
experience and cyber security capabilities.
· As previously announced, Gamma intends to move to the Main Market and all
workstreams are progressing as planned with admission expected on 2 May 2025.
· In line with the Board's capital allocation framework, today we are announcing
a share buyback programme of up to £50m in H1 2025.
· Adjusted cash conversion was in line with expectations at 96% (2023: 108%).
The reduction primarily reflects nonrepeatable working capital improvements in
the prior year.
Financial highlights
Group performance:
· Group revenue grew by 11% to £579.4m, gross profit grew by 12% to £300.3m
(2023: £521.7m and £267.2m), with Adjusted EBITDA growing by 10% to £125.5m
(2023: £114.3m). Acquisitions have positively contributed to the Group's
performance during the year. On an organic basis growth was solid as revenue
increased by 5%, gross profit by 6%, and Adjusted EBITDA by 6%. PBT grew by
34% to £95.6m (2023: £71.5m) principally as a result of the prior year
exceptional items. Adjusted PBT (which removes the impact of exceptional
items) grew by 14% to £111.9m (2023: £97.9m).
· Recurring revenue (being revenue which is recognised "over time" as per note
3) grew to £516.6m (2023: £462.8m), being 89% (2023: 89%) of revenue as
existing customers renewals and new customer agreements continue to deliver
contracted income.
· Adjusted EPS (fully diluted) increased by 13% to 85.1p (2023: 75.1p)
reflecting the impact of Adjusted EBITDA growth and increased interest income
with a 1% benefit from the share buyback in 2024.
Business unit performance:
· Gamma Business continued to grow strongly driven primarily by our UCaaS
portfolio and supported by recent acquisitions. Gross profit increased by 11%
to £194.7m (2023: £176.1m), 6% on an organic basis, with a stable gross
margin.
· Gamma Enterprise, benefitted by a number of significant contract wins, grew
gross profit by 14% to £60.2m (2023: £52.6m) with the Satisnet and
BrightCloud acquisitions contributing £4.4m (2023: £1.5m) on an inorganic
basis.
· European gross profit grew 18% to £45.4m (2023: £38.5m). Placetel
contributed £6.1m (2023: Nil) of gross profit which was supported by healthy
organic growth in Germany. There was a negative impact from movements in
foreign exchange rates.
Post period end
The Group acquired STARFACE in February 2025 for a cash outlay (excluding
transaction costs) of £168.7m (€201.6m). After taking account of net cash
and working capital, this equates to £164.0m (€196.0m) on a cash-free,
debt-free basis.
Outlook
Trading at the beginning of 2025 has begun with good progress in Europe, in
particular in Germany, as we continue to integrate our recent acquisitions. We
expect satisfactory Group organic growth supported by continued active cost
management throughout the year. We expect this to be further strengthened by
the recent German acquisitions, driving strong Group growth.
Andrew Belshaw, Chief Executive Officer, commented:
"Gamma has achieved another strong set of results, marked by robust revenue
growth, stable margins, and healthy cash generation despite general soft
macro-economic performance in our two main markets of the UK and Germany. Our
broadened product set is resonating well with both Channel Partners and end
users. As customers require more complex communications solutions, we continue
to see opportunities to grow our revenues further.
The strength of Gamma's balance sheet has enabled us to expand our
capabilities, through both product development and strategic acquisitions. I
am delighted to have welcomed the teams from Coolwave and BrightCloud to Gamma
- their contributions will be invaluable as we continue to expand our solution
set. I am also pleased to be able to say that Gamma is now a significant
player in the German market following the acquisitions of Placetel and
STARFACE; this gives us a fantastic opportunity to build a business in
Europe's largest market. We expect significant medium- and long-term growth in
this market as new technologies are adopted.
I believe our increased scale in Germany through acquisitions will drive more
significant returns, allowing Europe to contribute more meaningfully to group
growth in 2025 and beyond. Our resilient business model continues to help us
mitigate the current macro-economic uncertainties and I look forward with
confidence given the medium-term market opportunity."
Enquiries:
Gamma Communications plc Tel: +44 (0)333 006 5972
Andrew Belshaw, Chief Executive Officer CompanySecretary@gamma.co.uk (mailto:CompanySecretary@gamma.co.uk)
Bill Castell, Chief Financial Officer
Rachael Matzopoulos, Company Secretary
Peel Hunt (NOMAD & Broker) Tel: +44 (0)207 418 8900
Neil Patel / Benjamin Cryer / Kate Bannatyne
Deutsche Numis (Broker) Tel: +44 (0)207 260 1000
Simon Willis / Hugo Rubinstein / Spencer Clark
Teneo (PR Adviser) Tel: +44 (0)207 353 4200
James Macey White / Matt Low / Ffion Dash Gamma@teneo.com (mailto:Gamma@teneo.com)
Gamma Communications plc ("Gamma") is a leading provider of technology-based
communication solutions across Europe. With approximately 2,200 employees and
admitted to trading on AIM, Gamma helps organisations connect and collaborate
through solutions including Unified Communications, voice enablement,
connectivity, mobile and security.
Gamma's vision is a better-connected world - working smarter for the benefit
of businesses, people and the planet. Selling exclusively to businesses and
public sector organisations, Gamma's core markets are the UK and Germany, with
additional presence in Spain and the Benelux region.
In the UK, Gamma serves SMEs through an extensive network of over 1,500
channel partners (Gamma Business). For larger businesses and public sector
organisations, Gamma Enterprise engages directly to sell, deliver, and support
more complex, integrated communications solutions. In Germany, Gamma operates
through a combination of a self-service digital platform and a strong partner
network and is now one of the country's leading cloud communications providers
following strategic acquisitions.
For more information about Gamma and its full range of products and services,
visit gammagroup.co (//gammagroup.co)
Cautionary Statement
Certain statements in this Full Year results announcement are forward-looking.
Although Gamma believes that the expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
expectations will prove to have been correct. Because these statements contain
risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements. We undertake no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
Chief Executive Review
I am pleased to report another set of strong results for Gamma in 2024.
Despite general soft macro-economic performance in our two main markets of the
UK and Germany in the last quarter of the year, Group revenue increased by
£57.7m to £579.4m (2023: £521.7m), an increase of 11% on the prior year.
Adjusted EBITDA for the Group increased by £11.2m (10%) to £125.5m (2023:
£114.3m). Profit before tax for the year was £95.6m, an increase of 34% from
the prior year figure of £71.5m.
Cash generated by operations for the year was £116.8m compared to £123.5m in
2023 - the reduction attributable to nonrepeatable working capital
improvements in the prior year which are outlined in the Financial section.
The closing Net cash balance for the year was £153.7m (2023: £134.8m). The
cash balance has increased after investing £19.2m in capital items, paying
£15.4m in relation to acquisitions, and returning £44.6m to shareholders
through a share buyback programme (£27.3m) and dividends (£17.3m).
Our trading performance in 2024 was good. The acquisitions we have made have
been immediately accretive to our underlying organic growth in both gross
profit and EBITDA. Whilst we do not expect the macro-economic picture in the
UK or Germany to improve in 2025, we believe that our organic growth potential
and the acquisitions we have made will enable us to continue to perform well
into 2025 and beyond.
I would like to thank our staff for their hard work in 2024 which has driven
this performance. In particular we have asked a lot of the Gamma team given
the amount of integration activity we are undertaking, and I am proud of the
way that the whole Gamma team has embodied our value of "stepping up and
owning" the challenge of integrating our acquisitions without losing sight of
growing our existing business.
Our markets and performance
We had identified a number of market trends which are both driving Gamma's
growth today and which will continue to drive our growth for the
medium-term.
Customers are requiring more complex communications solutions
Both changing working patterns (e.g. hybrid and home working) and new
technologies (e.g. AI) mean that businesses are becoming more demanding in
what they require from their communications systems. This presents Gamma with
the opportunity to increase our Average Revenue Per User ("ARPU") by selling
more to existing customers to ensure that their communications solutions
continue to meet their needs.
By expanding our portfolio of solutions and ensuring that we incorporate all
of the latest technologies we are able to reach a broader cross-section of the
overall market. Our portfolio of communications solutions ranges from
PhoneLine+ which is designed to appeal to the micro-market (fewer than ten
users) through to the provision of Cisco Collaboration tools or voice
enablement of Microsoft Teams, solutions that can support tens of thousands of
users.
We have also expanded the solutions we can offer through two strategic
acquisitions in the year. Our acquisition of Coolwave and our subsequent
development of its offerings means that we can now offer voice enablement
(compliant with local regulations) in around 20 countries. Our acquisition of
BrightCloud gives us a rich portfolio of customer experience ("CX") solutions
enabling us to support our larger Enterprise customers to run their Contact
Centres.
We continue to develop our offering and look for opportunities to sell
additional services to our end user base. This may be through our own
development, partnering with a third party or through acquisition.
German Cloud market is still under-penetrated
We have consistently set out the case for there being a significantly bigger
market opportunity in Germany. First, it is the largest business
communications market in Europe. Second, the proportion of sales of
communications solutions which are based in the cloud is much lower than most
of Europe.
We have therefore been increasing our presence in Germany through a
combination of organic growth and acquisitions.
In 2020 we acquired HFO which is a SIP PBX provider. In the time we have owned
it, we have grown the German SIP PBX base by 36% to 199,000 trunks. Moreover,
under our ownership, we have built a successful Cloud Communication business
in Germany which had 42,000 seats at the end of 2024 (311,000 including
Placetel).
Alongside growing the business organically, we have been seeking out strategic
acquisitions to increase our scale and we have made two significant
acquisitions. In September we acquired Placetel from Cisco. Placetel is the
German market leader in selling Cloud Communications online. It allows Channel
Partners to easily provision sales online. Some of our existing Channel
Partners are now also partnering with Placetel. The business also allows very
small businesses to buy UCaaS services online; a growth area in Germany. Since
the acquisition we have increased the level of investment in marketing in the
business and we have seen the rate of growth of Cloud Seats increase.
The second acquisition in Germany, post period-end, was STARFACE. We have
admired the STARFACE business for a number of years and I was therefore
pleased to be able to announce in February 2025 that we had acquired it. It is
a strategically significant acquisition for Gamma. STARFACE is a market
leader in the provision of communication platforms to SME businesses in
Germany and operates via its nationwide Channel Partner network. STARFACE
filled a significant gap in our German operations because it brings solutions
which are tailored for the German marketplace and better geographic coverage
in the partner base.
At the time of acquisition, STARFACE had 225,000 Cloud Seats on its own
proprietary platform. In addition it had approximately 360,000 seats on its
hardware solution. The STARFACE solution allows customers who are
uncomfortable moving straight to the Cloud to take the hardware-based solution
which can be easily converted to a Cloud-based solution as and when the end
user is ready. This ability to switch is important in the German market where
some end users prefer not to consume IT and communications services in the
Cloud.
We intend to encourage end users in Germany to move to the Cloud more quickly.
We therefore anticipate a greater proportion of STARFACE sales being of its
Cloud solutions (as opposed to its hardware solutions) over the coming
years. Cloud solutions have a greater long-term value whereas hardware
solutions provide more short-term revenues. It is therefore possible that
revenues from STARFACE may fall in the short-term (as less hardware is sold
but more Cloud Seats are sold) but this is beneficial to Gamma for longer-term
growth and a move towards having a customer base on long-term recurring
revenue contracts. It is the right strategy to pursue to build long-term value
in the business.
On a pro-forma basis (i.e. had Gamma owned STARFACE at the end of 2024), Gamma
Germany had 536,000 Cloud Seats, with a large base of hardware seats which are
capable of being moved into the Cloud when the customer is ready to make that
journey.
We are excited at the prospects for growth in the German market and we expect
the German market to be a significant driver for growth in the medium-term and
longer-term. It should be noted that in the short-term market growth rates
are likely to be lower than we have seen in the UK due to the well-publicised
macro-economic issues in Germany. However, given the overall market is larger,
growth will likely last for many years to come.
As well as the organic growth potential, we continue to seek additional
acquisitions to improve our scale and market position in Germany. We would
like to expand both our connectivity offering in Germany as well as the
solutions we offer to Service Providers.
Hardware PBX to cloud migrations
Above we noted that, in Germany, we expect users to move from a hardware
solution to a Cloud solution over the coming years. In the UK we have been
seeing a similar trend for some time - roughly half of business users in the
UK have already migrated to the Cloud. However, this means that half have not,
and this represents a significant opportunity for UCaaS sales.
A trend is emerging where end users who have taken Gamma SIP to voice-enable a
hardware PBX are moving towards a full cloud communications solution. We are
starting to see a reduction in SIP PBX as users migrate away from hardware
solutions.
As Cloud PBX solutions become more feature rich, this trend is accelerating.
We believe we are well placed to increase ARPUs for customers who stay with
Gamma (i.e. they choose a migration path from Gamma SIP PBX to a Gamma
provided UCaaS solution). The wholesale ARPU from a single SIP end user is
typically around £1.25 per user per month. If these customers migrate to a
Microsoft Teams solution, that can almost double, and it can increase further
if end users migrate to one of Gamma's UCaaS offerings. To capitalise on this
trend it has been important for Gamma to increase the breadth of its UCaaS
portfolio. Cloud PBXs are not homogenous and have a variety of features.
Gamma's Cloud solutions are now able to meet the needs of most end users.
PSTN switch off in the UK
We had previously identified the PSTN switch off in the UK as being a growth
driver. However, given the ongoing delays in the switch off happening, it has
not driven growth as much as we would have hoped at this point.
Notwithstanding, we are encouraged by the growth of PhoneLine+ (which is the
solution we have built for micro-businesses who had relied on single lines)
and we now have 34,000 seats.
Strategic update
Develop a common pan-European solution set.
Gamma is in the strongest position we have held within our industry - we are
now a credible challenger communications business in both the UK and Germany.
Channel Partners across Europe want to work with us because of the quality of
our customer support and the variety of solutions we can offer their end
users, and the global technology companies (such as Cisco) want to work with
us because of the breadth of our distribution capability. We continue to work
with global solution providers to explore the possibility of adding other
relevant solutions into our portfolio.
We are currently converging on a focused portfolio of Cloud Communications
solutions, which will address different market segments:
· Lower end of SME
PhoneLine+ (and its digital variant CircleLoop) - this solution was developed
internally and provides a price-competitive solution to micro-businesses of up
to ten employees.
Placetel is our equivalent solution for the German market. It uses Cisco's
Collaboration Suite.
· SME
Horizon has been sold in the UK for many years as a Cloud solution. It can be
integrated with Microsoft Teams and Cisco Webex to provide a full unified
solution. We launched Webex integration in September 2024 and it has been one
of our most successful product launches (in terms of seat sales in the early
months).
iPECS is a feature-rich solution, acquired with Pragma (previously referred to
as EnableX in the 2023 Annual Report), designed to appeal to SMEs.
Following our acquisition of STARFACE, the STARFACE solution suite will be
sold to SMEs in Germany. As noted above, this can be sold as both a hardware
and UCaaS solution which is important as it gives us access to a much bigger
addressable market.
· Large SME and Enterprise
We offer the full Cisco Collaboration suite from basic voice calling through
to complex AI-powered Contact Centre solutions. We will launch Cisco's
Collaborate Suite in Spain in mid-2025. We also support Microsoft Teams and
Amazon CX solutions.
We have launched Operator Connect for Microsoft Teams in all countries in
which we operate and shortly, via our Coolwave acquisition, it will be
available in around 20 countries, with the footprint continuing to expand in
2025. This will appeal to Enterprises who operate across several countries.
We continue to keep our portfolio of solutions under review to ensure that we
have the most up to date and innovative solutions for our end users of all
sizes and in all countries.
Develop multiple routes to market in each country in which we operate.
Gamma has always been known for its high levels of customer service and a key
part of this is our ability to make communications solutions easy to provision
and to operate. Maintaining this level of service is complex because there are
multiple routes to market and it is hard to excel in every route - the fact
that we can do this is therefore a key differentiator for Gamma, and hard to
replicate.
In the UK we have focused on the indirect route to market through our valued
Channel Partners who sell mainly to SME customers. We sell to UK-based
Enterprise and Public Sector customers directly. In Europe we prioritise the
channel but there are a variety of sales models including wholesale, resale,
dealer and direct. Across all routes to market, customer portals are
important. Customers want to order solutions made up of multiple components -
not only do we need to provide third-party software and hardware, we need to
bundle this with our own voice enablement services at the point of
provisioning which, among other things, ensures that end users can continue to
use their existing telephone numbers.
During 2024 we commenced our project to rebuild our existing suite of portals.
Our goal is to deliver a seamless integration of existing portals across
Europe with new products - ensuring a best in class experience for our Channel
Partners.
As well as being a differentiator in the market, our future portal will
support all the routes to market which we use. We will be able to add
solutions quickly into the new portal which will mean that as new trends
appear we can bring solutions to market quickly and therefore begin to
generate revenues at pace. Through a combination of our portal and also the
fact that we have a telecoms network, we are able to turn "product" from
larger organisations who are not telecoms providers (such as Cisco and
Microsoft) into "solutions" which can be consumed easily by both Channel
Partners and end users.
Become a trusted partner to Enterprises across Europe, transforming their
communications estates.
Gamma has long been known as a key supplier to SME customers across Europe and
this market continues to be a driver of growth for us. One of our strategic
aims was to become equally well-known in the Enterprise and Public Sector
spaces, and this is now the case in the UK, with many notable contract
wins. We aspire to take our Enterprise business into Europe.
In addition to our organic growth, we have invested in this business through
the acquisition of new capabilities.
· In 2021 we acquired Mission Labs that gave us the SmartAgent solution that
enhances the AWS Connect platform. Sales have grown considerably with over
16,000 customer service agents using SmartAgent in the UK and Europe.
· Our acquisition of Satisnet in August 2023 has enhanced our capability as a
managed security services provider. Savills, the global property agents,
upgraded their network from a traditional Gamma MPLS network to a new secure
SD-WAN platform which incorporates a Secure Access Edge provided by the
integration of Satisnet. We see further upsell and cross-sell opportunities
across our client base.
· In July 2024 we acquired BrightCloud to enhance our CX practice and quickly
set about integrating this into our portfolio. To this end, we have secured a
multi-year agreement with the City and County of Swansea for an integrated CX
and UCaaS solution.
We continue to look for acquisitions which will bring additional capability to
our Enterprise offering.
As well as working with Amazon and Cisco, we have invested organically in the
Microsoft Operator Connect solution which enables any organisation to
voice-enable Microsoft Teams (although this tends to be used by larger end
users). We deployed Operator Connect across all our businesses and have
secured several European and pan-European contracts.
We have also brought the IoT solution from our German Epsilon business into
the UK. For our long-standing customer, The AA, we enhanced their patrol
connectivity by successfully deploying Fusion IoT, our multi-network data SIM,
into their entire fleet improving their connectivity. In addition, our IoT
offering will enable us to provide solutions for "non-voice" users of single
phones lines which will no longer be available as the PSTN is switched off
(for example, lift lines or alarm systems which are monitored remotely).
Create an organisation that engages all our people with a common set of
values and goals.
We have continued to prioritise employee engagement as a core element of our
people strategy, and embed the Group Values launched in 2023. To support the
integration of newly acquired companies to the Group, we conducted culture and
values sessions, aligning new teams with the Company's values and ways of
working. These also provided a platform for employees to share feedback and
suggestions, which have been incorporated into future initiatives.
We continued to support the Group-wide equality, diversity and inclusion
("EDI") programme, "You Belong", which, at present, comprises four employee
community groups - Wellbeing, Women, Early Careers and Multicultural. The
programme aligns with Gamma's business and people goals and demonstrates our
commitment to fostering a diverse workforce.
We expanded our apprenticeship scheme in critical skills areas including
customer service, project management, cyber security, sustainability, IT and
AI. Our current cohort of 69 apprentices is constituted from a blend of new
entrant apprentices and existing employees continuing their professional
development through the apprenticeship model across a breadth of business
units and locations.
Our progress in Apprenticeship and Graduate development in the UK has been
recognised by a prestigious "5% Club" Silver Award. The 5% Club was set up to
help members enable 5% of their workforce to be in "earn and learn positions"
(including apprentices, sponsored students and graduates on formalised
training schemes) within five years of joining.
Business unit Performance
Gamma Business
Gamma Business is our business unit which sells to SMEs in the UK, mainly via
Channel Partners. Revenue - supported by the acquisitions of Pragma and
Coolwave - grew from £332.2m to £368.9m. This is an increase of 11%.
Sales of PhoneLine+ accelerated and the Horizon and iPECS bases continue to
grow in line with historical performance. The cross-selling of additional
modules for Horizon (such as call recording or collaboration) has been
pleasing and our penetration rates continue to increase, which is important as
this offsets any ARPU reductions on the sales of the core Horizon product.
Within Gamma Business sits our Service Provider business. This supports many
of the world's leading Cloud Communication solution providers - 60% of
Gartner's Magic Quadrant for UCaaS, CPaaS and CCaaS - by providing scalable
and reliable voice communication services. In 2024 we carried in excess of 12
billion minutes of traffic for these providers.
Gamma Enterprise
Gamma Enterprise had a strong 2024, and revenues - supported by the
acquisitions of Satisnet in August 2023 and BrightCloud in July 2024 - grew
from £110.1m to £126.5m in 2024, an overall increase of 15%.
In the Enterprise space, for example, WM Morrisons awarded Gamma a five-year
agreement to design, deploy and manage their entire estate of local and wide
network infrastructure. Edmundson Electrical awarded us a multiyear contract
to deploy a UCaaS solution across over 400 locations, and global share
registrar Equiniti awarded Gamma, in partnership with AWS, a CX contract for
their 1,400 worldwide agents. We were also awarded material contracts with
AXA, Quilter, One Stop, Southern Water and Infinis.
In the Public Sector, Derbyshire County Council awarded Gamma a three-year
agreement for the supply of a managed Microsoft Teams UCaaS solution for their
8,000 staff members, and the Isle of Wight Council also chose us for their
Microsoft Teams voice enablement as did Framework Housing, The Royal Borough
of Windsor and Maidenhead, University of Staffordshire and East Hampshire
District Council.
Acquisitions made over the last two years also bring additional product
capability and expertise to our Enterprise business unit and enabled cross-
and up-sell as described above.
We have also recently acquired Allnet Solutions - a small acquisition which
gives us a logistics capability. This means that we can now hold more spares
in stock and quickly configure hardware ourselves, providing our Enterprise
customers a better quality of service.
Europe
Europe continues to be a mixed picture with strong competition for Cloud PBX
in Spain and the Netherlands, and macro-economic challenges in Germany. Our
German business has fared better with both the Placetel acquisition and
healthy organic growth. European revenue grew by 9% and gross profit growth
was 21% on a constant currency basis.
As noted, market conditions in the Netherlands and Spain continue to be
difficult. The Dutch market is already well-penetrated for Cloud PBX and in
Spain the market is dominated by the MNOs (particularly Telefonica).
Nonetheless, we see voice enablement (and particularly voice enablement of
Microsoft Teams) as being a growth driver in the Netherlands and Spain over
the medium-term. The market for Microsoft Teams is evolving and the existing
players do not have a strong foothold.
In Spain we are also seeing interest from Channel Partners around the upcoming
launch of the Cisco Collaboration Suite. We have had enquiries from a number
of new partners with whom we do not currently work.
During 2024 we added 5,000 voice-enabled Microsoft Teams users across Europe,
an increase of 56%. Whilst Microsoft Teams usage in Europe lags behind that of
the UK, we are building a base of Operator Connect customers and we are now
the leading supplier of Operator Connect in the Netherlands - albeit the
market is very immature. We are starting to see traction in both Germany and
Spain for the voice enablement of Microsoft Teams.
Our acquisitions of Placetel and STARFACE demonstrate that we are continuing
to invest in Europe. We have a commitment to building a market leading
European business with a particular focus on Germany where we believe that
over time we can build a business of the same size and scale of our business
in the UK.
Main Market listing
As previously communicated, the Board intends to move the Company onto the
Main Market. Our plans for this move are progressing well. We expect to
complete the move with admission to the Equity Shares (Commercial Companies)
segment of the Official List and to trading on the Main Market of the London
Stock Exchange ("Admission") on 2 May 2025 at which time the Group's listing
on AIM is expected to be cancelled. Accordingly, the Group hereby gives notice
of the intended cancellation of trading of its ordinary shares on AIM in
accordance with Rule 41 of the AIM Rules for Companies.
Admission is subject to the approval by the FCA of a prospectus and the
ordinary shares being admitted by the FCA to the Official List and by the
London Stock Exchange to trading on the Main Market. Admission is not
conditional upon shareholder approval. Shareholders should note that the
Group's shares will no longer be traded on AIM with effect from Admission and
should consult their own professional advisers regarding the consequences of
Admission.
ESG
In early 2024, Gamma had its net-zero targets validated by the SBTi, a
significant milestone in our ESG journey. To drive further carbon reduction in
support of our targets, we have ensured that sustainability programmes have
senior management sponsorship, including office consolidation, the removal of
gas boilers and transition to an electric fleet - whereby we have recently
completed a trial of an electric vehicle in our field engineering team. We are
currently ahead of our original plan (set in 2020) to reduce our Scope 1 and 2
emissions by 90% by 2030.
We are delighted to share that we now have four students benefiting from our
university scholarship scheme, studying STEM degrees at the University of
Salford and Glasgow Caledonian University. We look forward to reporting on
their success and the extension of the scheme in 2025 to further prospective
students.
Outlook
Our experience was that the macro-economic picture for most of 2024 was
slightly stronger than it had been in 2023 in the UK. We saw this weaken in
the final quarter and we believe that 2025 may be weaker than 2024. If this is
the case, as in previous periods of economic softness, we still expect
satisfactory organic growth due to the strong growth drivers in our markets.
In Germany, with our increased scale and capability following the recent
acquisitions of STARFACE and Placetel, we expect significant medium- and
long-term growth given we are well placed in this market as new technologies
are adopted.
Notwithstanding the broader economic outlook, we believe that our enhanced
product set will continue to drive growth as businesses across Europe look for
more complex communication solutions to deal with recent trends in working
patterns.
The communications market in Europe continues to grow and evolve. We have
identified growth opportunities in both the UK and Europe, and in both SME and
Enterprise (using both our own solutions and those of third parties).
We have a robust business model based on recurring revenue from solutions that
are critical to the businesses which use them. Our continued profitability,
strength in cash generation and the availability of liquidity leave us well
placed to maximise the opportunity even in challenging macro-economic times.
I look forward to working with our customers, partners and colleagues for the
benefit of all our stakeholders as we continue to grow the business over the
coming years.
Andrew Belshaw
Chief Executive Officer
Supplementary information on product volumes
The table below shows the number of Cloud PBX seats in UK and Europe
Cloud PBX seats - UK & Europe December December Change
(000's) 2024 2023 (%)
UK 1,040 954 +9%
Europe 434 161 +170%
-- Of which is Germany 311 34 +815%
-- Of which is Rest of Europe 123 127 (3)%
The table below shows the increase in the number of SIP Trunks which provide
voice enablement to various hardware PBXs and voice applications:
Voice Enablement - UK & Europe December December Change
(000's) 2024 2023 (%)
SIP Trunks enabling traditional hardware PBX
- UK 932 1,019 (9)%
- Europe 206 198 +4%
-- Of which is Germany 199 191 +4%
-- Of which is Rest of Europe 7 7 -
SIP Trunks enabling a non-Gamma Cloud PBX
- UK 481 398 +21%
- Europe - - -
Voice enabled Microsoft Teams users (either Operator Connect or Microsoft
Teams Direct Routing)
- UK 467 429 +9%
- Europe 14 9 +56%
The table below shows the number of CCaaS seats:
CCaaS seats - UK & Europe December December Change
(000's) 2024 2023 (%)
UK* 45 30 +50%
Europe 5 4 +25%
*CCaaS seats for Horizon Contact users also take a "Base Horizon" seat
(therefore 29,000 seats are separately disclosed within Cloud PBX seats).
Financial Review
Overview
Gamma's financial performance has been strong, increasing revenue by 11% to
£579.4m (2023: £521.7m) and gross profit by 12% to £300.3m (2023:
£267.2m). Group Adjusted EBITDA increased by 10% to £125.5m (2023:
£114.3m), profit before tax increased by 34% to £95.6m (2023: £71.5m) and
Adjusted PBT increased by 14% to £111.9m (2023: £97.9m). EPS (fully diluted)
increased to 72.0p (2023: 54.9p) whilst Adjusted EPS (fully diluted) increased
by 13% (2023: 5%) to 85.1p (2023: 75.1p). Acquisitions have positively
contributed to the Group's performance during the period. On an organic
constant currency basis, revenue increased by 5%, gross profit by 6%, and
Adjusted EBITDA by 6%.
In the reporting of financial information in this Financial review, the Group
uses certain measures in addition to those reported under IFRS, under which
the Group reports. These measures are known as Alternative Performance
Measures ("APMs"). The Group believes that these additional measures, which
are used internally, are useful to users of the financial information in
helping them understand business performance. The Group does not consider
these APMs to be a substitute for, or superior to, the equivalent measures
calculated and presented in accordance with IFRS. These APMs are explained,
defined and reconciled from the most comparable IFRS metric and used
consistently period on period, other than the inclusion of Organic growth as a
new APM in the current year. This has been included as a result of an
increased number of acquisitions during 2023 and 2024 and the increased
contribution of the European business to the Group.
Revenue and gross profit
Gamma Business
2024 2023 Increase
£m £m
Revenue 368.9 332.2 +11%
-- Of which Service Provider 76.3 67.1 +14%
Gross Profit 194.7 176.1 +11%
-- Of which Service Provider 36.3 32.8 +11%
Gross Margin 52.8% 53.0%
Gamma Business' performance has remained strong. The acquisitions of Pragma
and Coolwave have contributed £19.1m of revenue and £7.9m of gross profit on
an inorganic basis in the year. Organic growth was 5% for revenue and 6% for
gross profit. This has been driven by a combination of targeted price rises on
legacy products and growth in our UCaaS portfolio, with increasing penetration
rates of additional modules to our Horizon Cloud PBX solution, as well as
increasing net additions on our internally developed PhoneLine+ solution.
Service Provider, which is reported within Gamma Business and includes the
Coolwave acquisition, contributed 21% of revenue (£76.3m) and 19% of gross
profit (£36.3m) in Gamma Business. The Service Provider business provides
carrier services such as hosting telephone numbers and connecting calls. Our
customers are carriers who wish to run a service but do not have network
capabilities. It saw strong growth in SIP trunks supporting non-Gamma Cloud
PBX solutions, where our network capability supports the growth of large
customers, including hyperscalers. Gross margin has remained broadly stable,
which is in line with expectations. There was a slight decline
as connectivity products migrate from higher-margin copper to lower-margin
fibre solutions.
Gamma Enterprise
2024 2023 Increase
£m £m
Revenue 126.5 110.1 +15%
Gross Profit 60.2 52.6 +14%
Gross Margin 47.6% 47.8%
Overall the growth in Gamma Enterprise has been very strong, driven by
acquisitions coupled with solid underlying organic growth. The acquisitions of
Satisnet, adding cyber product capabilities completed in August 2023, and CX
company BrightCloud completed in July 2024, have contributed £9.7m (2023:
£4.6m) of inorganic revenue and £4.4m (2023: £1.5m) of inorganic gross
profit. On an organic basis, growth was 6% for revenue and 6% for gross
profit, despite a degree of price pressure in the lower end of the Public
Sector, which is a relatively small part of our overall Public Sector
business. On an organic basis Public Sector is approximately 30% of Gamma
Enterprise's revenue and gross profit. Growth has been driven by several
significant contract wins, including an SD-WAN, LAN, WiFi and security
infrastructure for WM Morrison and a Fusion IoT solution for The AA, together
with growth from existing customers and continued project rollouts. Other
notable wins in the year include Quilter Cloud UCX, AXA UK SIP services and
Edmundson Electrical UCaaS rollout in the Enterprise sector with Dorset NHS
and Westminster City Council in the Public Sector. Additionally, there have
been several large wins for our CX platform, SmartAgent, with Equiniti, and
additional sales to JD Sports Fashion in the USA and Bourne Leisure in the UK.
Europe
2024 2023 Increase
£m £m
Revenue 84.0 79.4 +6%
-- Of which Germany 54.3 47.4 +15%
Gross Profit 45.4 38.5 +18%
-- Of which Germany 26.4 19.3 +37%
Gross Margin 54.0% 48.5%
Europe's gross profit increased significantly, with healthy organic growth in
Germany also enhanced by the acquisition of Placetel. The acquisition of
Placetel, completed in September 2024, has contributed £7.4m of revenue and
£6.0m of gross profit. European results were impacted by negative foreign
exchange movements, with Pound Sterling having strengthened against the Euro
compared to the prior year. On an organic constant currency basis, revenue was
down 1%, with gross profit growth of 5%. European organic revenue has
benefitted from growth in Cloud PBX and CCaaS, more than offset by declines in
the traditional products (Broadband, Hardware and the mobile Epsilon
business). Conditions in the Netherlands continue to be challenging where
revenue has declined, with organic constant currency growth in Spain and
Germany. Germany has seen continued organic growth in SIP and UCaaS seats.
European gross margin was enhanced by the acquisition of Placetel and the
improvement also reflects the renegotiation of Spanish network costs, where we
have benefitted from Group purchasing power, and the product mix.
Operating expenses
Operating expenses grew from £200.2m in 2023 to £210.0m. We break these down
as follows:
2024 2023 Increase/ (Decrease)
£m £m
Operating expenses excluding research and development costs, depreciation, 156.5 135.6 +15%
amortisation and exceptional items
Research and development costs 19.7 17.3 +14%
Depreciation & amortisation (excluding business combinations) 20.4 21.3 (4)%
Amortisation arising due to business combinations 13.4 10.0 +34%
Exceptional items - 16.0 nm
Total operating expenses 210.0 200.2 +5%
Operating expenses excluding research and development costs, depreciation,
amortisation and exceptional items increased by 15%, comprising the following:
· The UK businesses' operating expenses grew by 14% (compared to gross profit
growth of 11%). On an organic basis operating expenses grew by 5% (compared to
gross profit growth of 6%). This was primarily due to inflation and the
incremental costs relating to the ongoing implementation of the new Finance
ERP system and completion of the implementation of the Group-wide HR system,
without which operating expenses grew by 4%.
· The increase in European operating expenses was 19% (compared to gross profit
growth of 18%). On an organic basis operating expenses in Europe fell by 1% in
Pounds Sterling, with a 2% increase on a constant currency basis (compared to
gross profit growth of 5%).
· Central costs increased 21% (£2.1m) mainly due to professional fees related
to acquisitions, including those not pursued, of £2.8m (2023: £0.9m). A net
contingent consideration release of £1.3m (2023: £nil) related to the
Satisnet and Pragma acquisitions reduced central costs, though this was partly
offset by the recognition of foreign exchange losses on the Placetel deferred
consideration of £0.8m (2023: £nil).
The decision to stop ongoing development of some of our own collaboration
software temporarily lowered development spend capitalisation earlier in the
year before we then moved resources onto new development projects which
commenced later, such as the ongoing development of our new Channel Partner
portal. As a result, research and development expense increased by 14% with a
greater portion of developer time spent on non-capitalisable activity.
Depreciation and amortisation on tangible and intangible assets (excluding
business combinations) decreased to £20.4m (2023: £21.3m) due to lower
technology amortisation in 2024.
Amortisation arising due to business combinations increased to £13.4m (2023:
£10.0m). This reflected an increased level of intangible assets following the
acquisitions of Coolwave, BrightCloud and Placetel in the year, as well as the
impact of a full year of amortisation on the Satisnet and Pragma intangible
assets in 2024.
Exceptional items
There were no exceptional items in the year (2023: two).
The exceptional items in 2023 were the impairment of development cost
intangible assets of £12.7m and restructuring costs of £3.3m.
Adjusted EBITDA
Adjusted EBITDA grew from £114.3m to £125.5m (10%) driven primarily by the
revenue and gross profit growth across the Group. There were also a few items
that together increased costs by £2.5m in 2024 which impacted Adjusted
EBITDA. These comprised a £1.9m increase in professional fees on
acquisitions, a £0.8m foreign exchange loss on Placetel deferred
consideration and a reduced benefit from R&D tax credits of £1.1m; these
were partly offset by a £1.3m net benefit from contingent consideration
releases.
We incurred £1.4m of incremental costs relating to the ongoing implementation
of the new Finance ERP system and completion of the implementation of the
Group-wide HR system which are treated as other adjusting items for measuring
Adjusted EBITDA. These implementation costs are recorded as other adjusting
items as the anticipated total cost of c.£3.0m for the implementation across
2024 and 2025 is considered significant.
Profit before tax and Adjusted PBT
Profit before tax grew from £71.5m to £95.6m (34%) and Adjusted PBT grew
from £97.9m to £111.9m (14%). This was driven primarily by the revenue and
gross profit growth across the Group and profit before tax benefitted by the
one-off impact of £16.0m of exceptional costs incurred in 2023. Both profit
before tax and Adjusted PBT were similarly impacted by the items which
impacted Adjusted EBITDA above, other than the system implementation costs
which only impacts profit before tax.
Taxation
The effective tax rate for 2024 was 27% (2023: 25%). This increase follows the
statutory UK rate rising from 19% to 25% in April 2023 which meant the UK
statutory rate increased from 23.5% for the calendar year 2023, to 25% for the
calendar year 2024. The effective tax rate in 2024 applied to trading profits
was above the 25% statutory UK average rate due primarily to the professional
fees related to acquisitions that were not deductible in determining taxable
profit.
Net cash and cash flows
The Group had Net cash of £153.7m (2023: £134.8m). The Group had no
borrowings at 31 December 2024 (2023: £1.7m), following a final repayment of
the German mortgage of £1.5m (2023: £0.5m) during the year. Since year end
the Group has agreed a £130m multicurrency Revolving Credit Facility to
facilitate the STARFACE acquisition and to support the H1 2025 share buyback.
Cash generated by operations was £116.8m (2023: £123.5m). Adjusted cash
generated by operations was £120.4m (2023: £123.7m), which reflects the cash
impact of 2023 exceptional items on 2024 (£2.7m in respect of restructuring)
and other adjusting items in 2024 (£0.9m in respect of system
implementations). Adjusted cash conversion was 96% (2023: 108%).
The impact of working capital on the year has been negative primarily due to
nonrepeatable working capital improvements in the prior year, with a
year-on-year relative working capital outflow totalling £18.5m. This is
primarily due to:
· A year-on-year outflow of £8.4m in relation to trade and other receivables
and contract assets. In particular 2023 benefitted from the cash effect of
unwinding some prepayments that year, relative to 2024.
· A year-on-year outflow of £6.9m in relation to trade and other payables. This
outflow is mainly the result of the timing of VAT and payroll tax payments
including an increase in quarterly payments in advance in the year.
· A year-on-year outflow of £6.0m in relation to provisions as amounts provided
for the 2023 restructuring exercise, which occurred in late 2023, were paid
out during 2024. As noted previously, Adjusted cash conversion is not impacted
by this working capital outflow as the restructuring was treated as
exceptional and is thus excluded.
Tax paid increased to £23.9m (2023: £15.3m). This reflects the increase in
the UK average tax rate to 25% (2023: 23.5%) which is also applied to higher
2024 profits.
The primary cash items which are not directly related to trading were:
· £27.3m of treasury shares were purchased and paid in cash as part of the
share buyback programme announced in March 2024 and which expired in September
2024 (2023: £nil).
· Capital spend was £19.2m, which is a decrease from £23.0m in 2023. This is
discussed below.
· £17.3m was paid as dividends (2023: £15.2m).
· £15.4m was the total payment for acquisitions net of cash acquired (2023:
£30.5m): £6.3m for the acquisition of Coolwave (net of cash acquired),
£8.7m for the acquisition of BrightCloud (net of cash acquired), £1.7m of
contingent consideration based on milestones achieved in 2023 as a final
payment in relation to Mission Labs, £0.5m deferred consideration for NeoTel,
£0.5m deferred consideration for Coolwave and £0.3m deferred consideration
for Placetel, partly offset by a net cash receipt of £2.6m on the acquisition
of Placetel.
· £7.1m (2023: £4.9m) of interest was received on cash and cash equivalents,
increased during the year due to higher cash holdings.
· £1.8m was received from the issue of shares (2023: £1.9m) on the exercise of
share options.
Gamma's Group treasury policy is governed by the Audit & Risk Committee.
Gamma manages cash centrally and seeks to maximise value and return whilst
balancing associated risks. The policy manages concentration risk by setting
an appropriate limit on the amount that can be placed with any one
institution, and manages credit risk by setting a minimum requirement around
the credit rating of the financial Institution. Given 86% of Group revenue is
generated from our UK business, all deposit balances are held with large
established UK financial institutions. Cash in Europe is primarily held for
working capital purposes and follows the credit rating requirements as set out
above.
Capital spend
Capital spend in 2024 was £19.2m (2023: £23.0m) broken down as follows:
· £12.5m on the capitalisation of development costs incurred during the period
(2023: £14.4m). The decrease followed our decision to stop ongoing
development of some of our own collaboration software. This temporarily
lowered development spend capitalisation, whilst increasing research and
development expense, as we moved resources onto new development projects which
commenced later in the year, such as the ongoing development of our new
Channel Partner portal. In addition, the restructuring during 2023 reduced
total research and development spend.
· £4.9m on the core network, including increasing capacity as well as computer
equipment and fixtures and fittings (2023: £5.6m).
· £1.8m with third-party software vendors for the software which underpins our
Cloud PBX products (2023: £3.0m).
Adjusted EPS (fully diluted) and EPS (fully diluted)
Adjusted EPS (fully diluted) increased from 75.1p to 85.1p (13%), which
compares to a 5% increase in 2023. The increase reflects the impact of strong
Adjusted EBITDA growth and increased interest income. The increase in
statutory UK corporation tax rate to 25% in April 2023 had a continued
negative growth impact in 2024 of 2% since the increased tax rate was
effective for the whole of the year. The share buyback had a positive impact
of 1%.
EPS (fully diluted) increased from 54.9p to 72.0p (31%). The growth is higher
than the adjusted metric due to the impact in the prior year of the
exceptional cost of the capitalised development impairment and restructuring.
Acquisitions
The acquisitions of Coolwave in February 2024, BrightCloud in July 2024 and
Placetel in September 2024, along with completion of the fair value accounting
for Pragma, were the primary drivers behind the £34.6m increase in intangible
assets from £154.7m to £189.3m.
These acquisitions together created intangible asset additions of £40.9m
which comprises £23.7m customer contracts intangibles, £3.8m brand
intangibles, £6.0m of technology intangibles, £3.7m goodwill and £3.7m of
capitalised development intangibles. The acquisition of Placetel also led to
the recognition of an additional £16.0m of deferred consideration in the year
which will be paid over five years.
Share buyback
In total 1,910,596 ordinary shares were acquired by the Company for an
aggregate £27.3m over the course of the share buyback and held as treasury
shares. This represented approximately 2% of the Company's ordinary share
capital at commencement of the buyback. This resulted in a charge being
recorded in Other Reserves of £27.3m which was partially offset by £3.3m in
respect of 186,946 treasury shares, which were subsequently used to settle
exercised share options. This was the primary reason Other Reserves reduced by
£25.1m from £6.9m to (£18.2m).
Financing
In January 2025, the Group agreed the acquisition of SF Technologies Holdings
GmbH ("STARFACE"), with the acquisition completing on 19 February 2025. To
facilitate this acquisition in January 2025 the Group agreed a new three-year
£130m multicurrency Revolving Credit Facility. £30m was drawn down in
February 2025 to fund the acquisition of STARFACE.
Capital allocation policy
Gamma has a strong balance sheet and continues to generate significant
operating cash flow with liquidity maintained through its £130m
multicurrency Revolving Credit Facility. The Board's main priorities when it
comes to our cash is to enhance the growth of the business, both organically
and through acquisition, and to reward shareholders through growth in earnings
alongside our progressive dividend policy whilst retaining a robust capital
base.
After applying the Board's capital allocation framework we are announcing a
share buyback programme of up to £50m commencing today until the end of June
2025, subject to reapproval of the relevant share purchase authorities at the
2025 AGM.
The Board will continue to keep its capital allocation policy and potential
further distributions to shareholders, including share buybacks, under review,
balancing opportunities for investment in organic and inorganic growth and
liquidity.
Dividends
The Board is proposing a final dividend of 13.0p (2023: 11.4p). This is an
increase of 14% and is in line with our progressive dividend policy.
Subject to shareholder approval, the final dividend is payable on 19 June 2025
to shareholders on the register on 30 May 2025.
Going concern
In assessing going concern, management and the Board have considered:
· The principal risks faced by the Group.
· The financial position of the Group following the €201.6m (£168.7m)
acquisition of STARFACE in February 2025 and the arrangement of a £130m
three-year multicurrency Revolving Credit Facility in January 2025. As at 28
February 2025 the Group had cash balances of £47.2m and borrowings of £30.0m
with the remaining £100.0m of the Revolving Credit Facility undrawn providing
total liquidity of £147.2m.
· Budgets, financial plans and associated future cash flows which incorporate
the acquisition of STARFACE, and the share buyback programme of up to £50m to
be executed in H1 2025 including liquidity, borrowings and covenants.
· Sensitivity analysis assessing the impact of severe but plausible scenarios on
the going concern assessment period. This analysis confirmed that the existing
projected cash flows and current borrowing arrangements provide the Group with
significant liquidity over the going concern period.
The Directors are satisfied that the Group and Company have adequate financial
resources to continue in operational existence for the foreseeable future,
being a period of at least 12 months from the date of this report.
Accordingly, the going concern basis of accounting continues to be used in the
preparation of the Annual Report for the year ended 31 December 2024.
Bill Castell
Chief Financial Officer
Condensed consolidated statement of profit or loss
For the year ended 31 December 2024
Note 2024 2023
£m
£m
Revenue 3 579.4 521.7
Cost of sales (279.1) (254.5)
Gross profit 300.3 267.2
Operating expenses (210.0) (200.2)
Of which exceptional items 4 - (16.0)
Profit from operations 90.3 67.0
Finance income 7.1 5.4
Finance expense (1.8) (0.9)
Profit before tax 95.6 71.5
Tax expense 5 (25.8) (17.8)
Profit after tax 69.8 53.7
Profit attributable to:
Equity holders of Gamma Communications plc 69.8 53.6
Non-controlling interests - 0.1
69.8 53.7
Earnings per share attributable to the ordinary equity holders of the Company:
Basic per Ordinary Share (pence) 6 72.3 55.2
Diluted per Ordinary Share (pence) 6 72.0 54.9
Adjusted earnings per share is shown in note 6.
All income recognised during the period was generated from continuing
operations.
Condensed consolidated statement of comprehensive income
For the year ended 31 December 2024
2024 2023
£m
£m
Profit after tax for the period 69.8 53.7
Other comprehensive income/(expense)
Items that may be reclassified subsequently to the statement of profit or
loss:
Exchange differences on translation of foreign operations before tax (1.9) (0.9)
Tax effect of exchange differences on translation of foreign 0.6 0.3
operations
Total comprehensive income 68.5 5.1
Total comprehensive income for the period attributable to:
Equity holders of Gamma Communications plc 68.5 53.0
Non-controlling interests - 0.1
68.5 53.1
Condensed consolidated statement of financial position
As at 31 December 2024
Note 2024 2023*
£m £m
Assets
Non-current assets
Property, plant and equipment 8 33.6 38.4
Intangible assets 9 189.3 154.7
Deferred tax asset 8.6 6.5
Trade and other receivables 8.7 11.8
Contract assets 6.7 2.9
246.9 214.3
Current assets
Inventories 10.0 11.8
Trade and other receivables 80.4 76.1
Contract assets 35.0 32.5
Cash and cash equivalents 153.7 136.5
Current tax asset 2.0 3.6
281.1 260.5
Total assets 528.0 474.8
Liabilities
Non-current liabilities
Other payables 0.1 0.1
Financial liabilities 5.9 8.4
Provisions 1.4 1.7
Contract liabilities 13.3 12.1
Acquisition-related liabilities 10 22.0 8.8
Deferred tax liability 17.6 10.4
60.3 41.5
Current liabilities
Trade and other payables 68.4 65.5
Financial liabilities 2.0 3.3
Provisions 0.9 3.4
Contract liabilities 18.5 14.1
Acquisition-related liabilities 10 4.5 2.7
Current tax liability 0.7 0.1
95.0 89.1
Total liabilities 155.3 130.6
Net assets 372.7 344.2
Equity
Share capital 11 0.2 0.2
Share premium reserve 23.3 22.9
Other reserves 12 (18.2) 6.9
Retained earnings 368.3 315.1
Equity attributable to owners of Gamma Communications plc 373.6 345.1
Non-controlling interests 0.2 0.2
Written put options over non-controlling interests (1.1) (1.1)
Total equity 372.7 344.2
* For re-presentation of comparatives refer to note 1, section Consolidated
statement of financial position.
Condensed consolidated statement of cash flows
For the year ended 31 December 2024
Note 2024 2023
£m £m
Cash flows from operating activities
Profit for the period before tax 95.6 71.5
Adjustments for:
Depreciation of property, plant and equipment 8 9.3 9.3
Depreciation of right-of-use assets 2.4 2.3
Amortisation of intangible assets 9 22.1 19.7
Impairment of intangible assets - 12.7
Other change in fair value of contingent consideration/put option liability (1.3) -
Share-based payment expense 2.7 2.7
Interest income (7.1) (5.4)
Finance expense 1.8 0.9
125.5 113.7
(Increase)/decrease in trade and other receivables and contract assets (1.7) 6.7
(Increase) in inventories (1.7) (1.0)
(Decrease)/increase in trade and other payables (4.8) 2.1
Increase/(decrease) in contract liabilities 2.0 (1.5)
(Decrease)/increase in provisions (2.5) 3.5
Cash generated by operations 116.8 123.5
Taxes paid (23.9) (15.3)
Net cash flows from operating activities 92.9 108.2
Investing activities
Purchase of property, plant and equipment 8 (4.9) (5.6)
Purchase of intangible assets 9 (14.3) (17.4)
Interest received 7.1 4.9
Acquisition of subsidiaries net of cash acquired 13 (15.4) (22.8)
Net cash used in investing activities (27.5) (40.9)
Financing activities
Lease liability repayments (3.3) (2.3)
Put option liability payment - (1.3)
Repayment of borrowings (1.5) (0.5)
Repayment of borrowings acquired with acquisitions - (7.7)
Interest paid - (0.1)
Share issues 1.8 1.9
Purchase of treasury shares (27.3) -
Dividends (17.3) (15.2)
Net cash used in financing activities (47.6) (25.2)
Net increase in cash and cash equivalents 17.8 42.1
Cash and cash equivalents at beginning of period 136.5 94.6
Effects of exchange rate changes on cash and cash equivalents (0.6) (0.2)
Cash and cash equivalents at end of period 153.7 136.5
Condensed consolidated statement of changes in equity
For the year ended 31 December 2024
Share capital Share premium reserve Other Retained earnings Total Non-controlling interests Written put options over non-controlling interests
reserves Total equity
£m £m £m £m £m £m £m £m
1 January 2023 0.2 18.0 9.0 273.9 301.1 0.8 (2.2) 299.7
Issue of shares - 4.9 (4.2) 4.2 4.9 - - 4.9
Share-based payment expense - - 2.7 - 2.7 - - 2.7
Tax on share-based payment expense:
Deferred tax - - - (0.1) (0.1) - - (0.1)
Non-controlling interests on acquisition of subsidiary - - - 0.9 0.9 (0.7) - 0.2
Equity put rights - - - (2.2) (2.2) - 1.1 (1.1)
Dividend paid - - - (15.2) (15.2) - - (15.2)
Transactions with owners - 4.9 (1.5) (12.4) (9.0) (0.7) 1.1 (8.6)
Profit for the year - - - 53.6 53.6 0.1 - 53.7
Other comprehensive (expense) - - (0.6) - (0.6) - - (0.6)
Total comprehensive (expense)/income - - (0.6) 53.6 53.0 0.1 - 53.1
1 January 2024 0.2 22.9 6.9 315.1 345.1 0.2 (1.1) 344.2
Issue or reissue of shares - 0.4 (2.0) 2.0 0.4 - - 0.4
Share-based payment expense - - 2.2 - 2.2 - - 2.2
Tax on share-based payment expense:
Deferred tax - - - 0.9 0.9 - - 0.9
Share buyback(1) - - (27.3) - (27.3) - - (27.3)
Treasury share allocations(2) - - 3.3 (2.2) 1.1 - - 1.1
Dividend paid - - - (17.3) (17.3) - - (17.3)
Transactions with owners - 0.4 (23.8) (16.6) (40.0) - - (40.0)
Profit for the period - - - 69.8 69.8 - - 69.8
Other comprehensive expense - - (1.3) - (1.3) - - (1.3)
Total comprehensive income/(expense) - - (1.3) 69.8 68.5 - - 68.5
31 December 2024 0.2 23.3 (18.2) 368.3 373.6 0.2 (1.1) 372.7
(1) Represents the shares purchased under the share buyback programme which
completed in September 2024.
(2) Treasury share allocations relates to treasury shares which have been used
to satisfy share options and other employee share plans.
Notes to the interim financial information
For the year ended 31 December 2024
1. Basis of preparation
The preliminary results for the year ended 31 December 2024 are an abridged
statement of the full Annual Report which was approved by the Board of
Directors on 24 March 2025. The consolidated financial statements in the full
Annual Report are prepared in accordance with UK-adopted International
Financial Reporting Standards ("IFRS"), with IFRS as issued by the
International Accounting Standards Board ("IASB") and with the requirements of
the Companies Act 2006. The financial statements are prepared on a going
concern basis and have been prepared on a historical cost basis, except
for certain financial instruments which have been measured at fair value.
The financial information contained in this statement does not constitute
statutory financial statements within the meaning of the Companies Act 2006.
They are an extract from the full accounts for the year ended 31 December 2024
on which the auditor has expressed an unqualified opinion and do not include
any statement under section 498 of the Companies Act 2006. The Group's
statutory consolidated financial statements for the year ended 31 December
2024 will be available on the Gamma Communications plc website in due course,
will be posted to shareholders prior to the AGM, and subsequently filed at
Companies House.
The financial information included in this preliminary announcement does not
itself contain sufficient information to comply with IFRS. The annual report
and audited financial statements for the year ended 31 December 2024 will be
made available on the Group's website in April 2025.
The financial statements are presented in Pounds Sterling and, unless
otherwise stated, have been rounded to the nearest 0.1 million (£m). The
consolidated financial statements have been prepared on a going concern basis
under the historical cost convention, except for certain financial instruments
which have been measured at fair value.
The accounting policies adopted are consistent with those followed in the
preparation of the audited statutory consolidated financial statements for the
year ended 31 December 2024.
A full set of the audited statutory accounts will be available in due course
at: www.gammagroup.co/company/investors/results-presentations/
(http://www.gammagroup.co/company/investors/results-presentations/)
The new standards, amendments and interpretations applied for the first time
are shown below. There were no new standards, amendments or interpretations
applied for the first time which had a material impact on the condensed
consolidated financial statements.
· Amendment to IAS 1- Classification of Liabilities as Current or Non-current
· Amendment to IAS 7 and IFRS 7 - Supplier Finance Arrangements
· Amendments to IFRS 16 Leases - Lease Liability in a Sale and Leaseback.
Consolidated statement of financial position
The Group has revised the presentation of the Consolidated statement of
financial position to combine line items presented separately in previous
years. As previously disclosed in our unaudited results for the six months
ended 30 June 2024, property, plant and equipment now comprises property,
plant and equipment and right-of-use assets previously presented separately,
and financial liabilities now comprises borrowings and lease liabilities
previously presented separately. In addition, the Group has presented a new
combined liability called acquisition-related liabilities following recent
acquisitions and the similar nature of the line items. This comprises
contingent consideration and put option liability, previously presented
separately, and deferred consideration, previously included within trade and
other payables. The revised presentations are considered to be simpler to the
users of the accounts. The comparatives have been re-presented to be
consistent with the revised presentation format. The revisions have no impact
on the Consolidated statement of profit or loss or cash flows or total
liabilities, assets or net assets.
2. Accounting policies, judgements and estimates
Accounting policies
The accounting policies adopted are consistent with those followed in the
preparation of the audited statutory financial statements for the year ended
31 December 2023 other than for the new amendments applied for the first time
as outlined in note 1 and which did not have a material impact on the
condensed consolidated financial statements. As a result of the share buyback
which commenced in this period and the acquisition of certain technology
rights as part of the Coolwave acquisition in the period, the Group has now
additionally disclosed its Treasury shares and Intangible Technology assets
accounting policies below.
Treasury shares
Treasury shares represent shares repurchased and available for specific and
limited purposes. The cost of treasury shares subsequently used to satisfy
share options, sold or reissued is calculated on a weighted-average basis.
Consideration, if any, received for the sale of such shares is also recognised
in equity. No gain or loss is recognised in the Consolidated statement of
profit or loss on the purchase, sale, reissue, or cancellation of treasury
shares. Shares repurchased which are immediately cancelled are not shown as
treasury shares within the share reserve but are shown as a deduction from
equity within retained earnings.
Intangible Technology assets
Technology comprises licences purchased from third parties, which are
recognised at cost, and rights over network interface identifications either
purchased from third parties, which are recognised at cost, or acquired
through business combinations, which are recognised at fair value at the
acquisition date.
Amortisation is provided over the useful economic life assigned, up to seven
years. Amortisation is charged to the Consolidated statement of profit or loss
through operating expenses on a straight-line basis over the useful life from
the date the asset is available for use. The useful lives are reviewed
annually and amended, as required, on a prospective basis.
Critical accounting estimates and judgements
Preparation of the consolidated financial statements requires the Group to
make certain estimations, assumptions and judgements regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including best estimates of future events. In
the future, actual experience may differ from these estimates and assumptions.
The following are considered to be the critical accounting judgements and key
sources of estimation uncertainty.
Critical accounting judgements
Critical judgements, apart from those involving estimations, applied in the
preparation of the consolidated financial statements are discussed below:
Revenue recognition
Revenue recognition on contracts may involve providing services over multiple
years and involving a number of products. In such instances, judgement is
required to identify the date of transaction of separable elements of the
contract and the fair values which are assigned to each element. For more
information on the Group's revenue recognition policy please see note 1,
Accounting policies.
Placetel deferred consideration
In September 2024, the Group acquired Placetel from Cisco. Concurrently with
this acquisition, the Group also agreed a five-year $51.5m (£38.8m at the
acquisition date) minimum purchase agreement for Webex cloud licences with
Cisco. These transactions were therefore considered linked. Judgement is
required to determine what amount of the $51.5m payable to Cisco should be
deemed deferred consideration and not part of the minimum purchase commitment.
Detail regarding the determination of the fair value of the Placetel deferred
consideration is provided in note 13, Business combinations.
Key accounting estimates
There are no key accounting estimates that could have a significant risk of
causing a material adjustment within the next financial year.
3. Segment information
The Group's main operating segments are outlined below:
· Gamma Business - This division sells Gamma's products to smaller businesses in
the UK, typically with fewer than 250 employees. This division sells through
different routes including the channel, direct, digital and other carriers who
sell to smaller businesses in the UK. It contributed 64% (2023: 64%) of the
Group's external revenue.
· Gamma Enterprise - This division sells Gamma's products to larger businesses
in the UK, typically to those with more than 250 employees. Larger
organisations have more complex needs, so this division sells Gamma's and
other suppliers' products to Enterprise and Public Sector customers, together
with an associated managed service wrap and ordinarily sells directly. It
contributed 22% (2023: 21%) of the Group's external revenue.
· Europe - This division consists of sales made in Europe through Gamma's
German, Spanish and Dutch businesses. It contributed 14% (2023: 15%) of the
Group's external revenue.
· Central functions - This comprises the central management team and wider Group
costs.
Measurement of operating segment profit or loss, assets and liabilities
The accounting policies of the reportable segments are the same as those
described in the summary of material accounting policies. The Board and
Executive Committee evaluate performance on the basis of Adjusted EBITDA (see
APM section). Inter-segment sales are priced in line with sales to external
customers, with an appropriate discount being applied to encourage use of
Group resources. This policy was applied consistently throughout the current
and prior year.
Gamma Business Gamma Enterprise European Central functions Total
2024 £m £m £m £m £m
Segment revenue 394.2 127.6 84.3 - 606.1
Inter-segment revenue (25.3) (1.1) (0.3) - (26.7)
Revenue from external customers 368.9 126.5 84.0 - 579.4
Timing of revenue recognition
At a point in time 22.9 12.5 27.4 - 62.8
Over time 346.0 114.0 56.6 - 516.6
368.9 126.5 84.0 - 579.4
Total gross profit 194.7 60.2 45.4 - 300.3
Adjusted EBITDA 95.0 31.4 11.8 (12.7) 125.5
Exceptional items - - - - -
Other adjusting items (1.4) - - - (1.4)
EBITDA 93.6 31.4 11.8 (12.7) 124.1
External customer revenue has been derived principally in the geographical
area of the operating segment and no single customer contributes more than 10%
of revenue.
Gamma Business Gamma Enterprise European Central functions Total
2023 £m £m £m £m £m
Segment revenue 353.9 110.6 79.5 - 544.0
Inter-segment revenue (21.7) (0.5) (0.1) - (22.3)
Revenue from external customers 332.2 110.1 79.4 - 521.7
Timing of revenue recognition
At a point in time 19.3 9.2 30.4 - 58.9
Over time 312.9 100.9 49.0 - 462.8
332.2 110.1 79.4 - 521.7
Total gross profit 176.1 52.6 38.5 - 267.2
Adjusted EBITDA 85.0 29.6 10.2 (10.5) 114.3
Exceptional items (14.7) (0.2) (1.0) (0.1) (16.0)
Other adjusting items - - - - -
EBITDA 70.3 29.4 9.2 (10.6) 98.3
A reconciliation of Adjusted EBITDA, the Group's measure of Segment profit, to
the Group's profit before tax for the period is shown in the APM section.
Geographic segmentation
The UK is the Group and Company's country of domicile and is where most
revenue is generated, which is from external UK customers. The geographic
analysis of revenue presented below is based on the country in which the
customer is invoiced.
The Group's revenue from external customers by geographical location is
detailed below:
2024 2023
£m £m
UK 458.9 413.8
Europe 114.0 107.9
Rest of world(1) 6.5 -
Total 579.4 521.7
(1) Amounts for the rest of the world were immaterial in the prior year and
included in Europe.
The geographic analysis of non-current assets, which excludes deferred tax
assets and financial instruments, is based on the location of the assets, are
detailed below:
2024 2023
£m £m
UK 141.3 131.8
Europe 92.8 76.0
Total 234.1 207.8
Product segmentation
2024 2023
£m £m
Revenue recognised over time (recurring revenue)
Voice and data traffic 109.2 101.5
Subscriptions and rentals 403.2 357.4
Installation fees and other 4.2 3.9
Total recognised over time (recurring revenue) 516.6 462.8
Revenue recognised at a point in time
Equipment sales 31.1 24.3
Commissions 25.7 26.3
Installation fees and other (at a point in time) 6.0 8.3
Total recognised at a point in time 62.8 58.9
Total revenue 579.4 521.7
4. Exceptional items
2024 2023
£m £m
Impairment of intangible development costs - 12.7
Restructuring costs - 3.3
Total exceptional items - 16.0
Tax effect of exceptional items - (3.9)
No exceptional costs have been recorded in the current year. In the prior year
an impairment of intangible development costs totalling £12.7m was recorded
related the ceasing of ongoing development of certain collaboration software.
In addition, the prior year included restructuring costs related to severance
of £3.3m, following non-recurring organisational changes related to the
expanded UCaaS offering and the combining of the German and Dutch senior
leadership team.
The total cash cost of exceptional items in the year was £2.7m (2023: £0.2m)
and related to the exceptional items expensed in 2023.
5. Taxation on profit on ordinary activities
2024 2023
£m £m
Current tax expense
Current tax on UK profits for the year 26.4 18.9
Overseas current tax charge 1.5 1.1
Adjustment in respect of prior year 1.0 1.7
Total current tax 28.9 21.7
Deferred tax expense
Origination and reversal of temporary differences (2.1) (2.3)
Adjustment in respect of prior years (1.0) (1.6)
Total deferred tax (3.1) (3.9)
Total tax expense 25.8 17.8
The tax charge for 2024 is higher (2023: higher) than the standard rate of
corporation tax in the United Kingdom of 25% (2023: 23.5%). The differences
are explained below:
2024 2023
£m £m
Profit before tax 95.6 71.5
Expected tax charge based on the standard blended rate of United Kingdom 23.9 16.8
corporation tax at the domestic rate of 25% (2023: 23.5%)
Effects of:
Tax effect of expenses that are not deductible in determining taxable profit 2.2 0.8
Effect of different tax rates of subsidiaries operating in other jurisdictions - (0.1)
Other tax items (0.3) 0.2
Adjustment in respect of prior years - 0.1
Total tax expense 25.8 17.8
6. Earnings per share
2024 2023
Earnings per Ordinary Share - basic (pence) 72.3 55.2
Earnings per Ordinary Share - diluted (pence) 72.0 54.9
The calculation of the basic and diluted earnings per share is based on the
following data:
2024 2023
£m £m
Profit after tax attributable to equity holders of the Company 69.8 53.6
Shares No. No.
Basic weighted average number of Ordinary Shares 96,573,811 97,088,798
Effect of dilution resulting from share options 408,717 606,553
Diluted weighted average number of Ordinary Shares 96,982,528 97,695,351
Adjusted earnings per share is detailed below:
2024 2023
Adjusted earnings per Ordinary Share - diluted (pence) 85.1 75.1
7. Dividends
2024 2023
£m £m
Final dividend for the year ended 31 December 2022 of 10.0p per ordinary share - 9.7
Interim dividend for the year ended 31 December 2023 of 5.7p per ordinary - 5.5
share
Final dividend for the year ended 31 December 2023 of 11.4p per ordinary share 11.1 -
Interim dividend for the year ended 31 December 2024 of 6.5p per ordinary 6.2 -
share
17.3 15.2
A final dividend of 13.0p will be proposed at the 2025 Annual General Meeting
but has not been recognised as it requires shareholder approval. The total
amount of dividends proposed for the year ended 31 December 2024 is 19.5p. The
payments of these dividends do not have any tax consequences for the Group.
8. Property, plant and equipment
2024 2023
£m
£m*
Owned property, plant and equipment 27.0 30.5
Leased right-of-use assets 6.6 7.9
Total Property, plant and equipment 33.6 38.4
* See note 1, section Consolidated statement of financial position.
Owned property, plant and equipment is broken down as follows:
Land and building Network assets Computer equipment Fixtures and fittings Total
£m £m £m £m £m
2024
Cost
At 1 January 2024 4.6 68.4 14.4 2.9 90.3
Additions - 2.5 1.4 1.0 4.9
Acquisition of subsidiaries - 0.1 1.0 - 1.1
Disposals - (0.2) (0.2) - (0.4)
Exchange differences (0.2) (0.1) (0.1) - (0.4)
At 31 December 2024 4.4 70.7 16.5 3.9 95.5
Depreciation
At 1 January 2024 0.6 45.6 11.7 1.9 59.8
Charge for the period 0.2 6.9 1.8 0.4 9.3
Disposals - (0.2) (0.2) - (0.4)
Exchange differences - (0.1) (0.1) - (0.2)
At 31 December 2024 0.8 52.2 13.2 2.3 68.5
Net book value
At 1 January 2024 4.0 22.8 2.7 1.0 30.5
At 31 December 2024 3.6 18.5 3.3 1.6 27.0
Land and building Network assets Computer equipment Fixtures and fittings Total
£m £m £m £m £m
2023
Cost
At 1 January 2023 4.7 67.4 13.5 2.8 88.4
Additions - 3.9 1.6 0.1 5.6
Acquisition of subsidiaries - - - 0.1 0.1
Disposals - (3.1) (0.8) (0.2) (4.1)
Exchange differences (0.1) 0.2 0.1 0.1 0.3
At 31 December 2023 4.6 68.4 14.4 2.9 90.3
Depreciation
At 1 January 2023 0.3 41.8 10.7 1.8 54.6
Charge for the period 0.2 6.9 1.8 0.4 9.3
Disposals - (3.1) (0.8) (0.2) (4.1)
Exchange differences 0.1 - - (0.1) -
At 31 December 2023 0.6 45.6 11.7 1.9 59.8
Net book value
At 1 January 2023 4.4 25.6 2.8 1.0 33.8
At 31 December 2023 4.0 22.8 2.7 1.0 30.5
9. Intangible assets
Goodwill Customer contracts Brand Development costs Technology(2) Total
£m £m £m £m £m £m
2024
Cost
At 1 January 2024 133.2 56.7 2.2 52.3 24.4 268.8
Additions - - - 12.5 1.8 14.3
Acquisition of subsidiaries 15.1 10.0 2.0 3.7 6.0 36.8
Reclassifications(1) (11.4) 13.7 1.8 - 3.5 7.6
Disposals - - - (0.2) - (0.2)
Exchange differences (1.9) (1.8) (0.1) (0.5) (0.2) (4.5)
At 31 December 2024 135.0 78.6 5.9 67.8 35.5 322.8
Amortisation
At 1 January 2024 20.5 37.4 1.1 33.2 21.9 114.1
Charge for the period - 10.2 0.7 8.3 2.9 22.1
Disposals - - - (0.2) - (0.2)
Exchange Differences (0.7) (1.3) - (0.4) (0.1) (2.5)
At 31 December 2024 19.8 46.3 1.8 40.9 24.7 133.5
Net book value
At 1 January 2024 112.7 19.3 1.1 19.1 2.5 154.7
At 31 December 2024 115.2 32.3 4.1 26.9 10.8 189.3
(1) In 2024 we reclassified the balances between goodwill, customer contracts
and brand as a result of the finalisation of the fair value accounting for the
Pragma acquisition, refer to note 13. The other reclassification amount of
£3.5m in 2024 relates to technology intangible assets as they now better
align with other similar transactions. In 2023, £3.5m of these assets were
included within inventory. Inventory movements within the consolidated
statement of cash flows related to the technology intangible assets during
2023 have not been represented as they are immaterial.
(2) The acquisition of Coolwave and the reclassification noted above mean
that the Group now holds non-software type technology assets. We have chosen
to combine these with the previously presented category of Software
intangibles in a new category called Technology, due to the similar nature of
the underlying rights.
Goodwill Customer contracts Brand Development costs Technology(1) Total
£m £m £m £m £m £m
2023
Cost
At 1 January 2023 97.5 50.9 1.4 40.4 19.3 209.5
Additions - - - 14.4 3.0 17.4
Acquisition of subsidiaries 36.6 6.6 0.8 - 2.1 46.1
Disposals - - - (2.4) - (2.4)
Exchange (0.9) (0.8) - (0.1) - (1.8)
differences
At 31 December 2023 133.2 56.7 2.2 52.3 24.4 268.8
Amortisation
At 1 January 2023 20.8 29.1 0.7 18.0 16.6 85.2
Charge for the - 8.8 0.4 5.2 5.3 19.7
period
Impairment charge - - - 12.7 - 12.7
Disposals - - - (2.4) - (2.4)
Exchange (0.3) (0.5) - (0.3) - (1.1)
Differences
At 31 December 2023 20.5 37.4 1.1 33.2 21.9 114.1
Net book value
At 1 January 2023 76.7 21.8 0.7 22.4 2.7 124.3
At 31 December 2023 112.7 19.3 1.1 19.1 2.5 154.7
(1) Previously referred to as Software.
When considering the recoverable amount, the break-even point for the
assumptions is calculated to understand the sensitivity of the assumptions.
Given the challenging market conditions in the Netherlands, the headroom
between the recoverable amount (determined based on a value in use model) and
the carrying value of the Dutch business is modest at £2.5m (2023: £12.2m)
at the measurement date. We expect headroom to increase in future periods
noting even if challenging market conditions continue, the carrying value of
the Netherlands CGU at the measurement test date included £3.4m of customer
relationship assets and this will have reduced in value by £2.4m to £1.0m
due to amortisation by the next test date.
Key assumptions for the Netherlands value-in-use ("VIU") on which the
impairment test is based is the revenue growth over the five-year revenue
period, which assumes low double-digit growth. The long-term growth rates used
were 2% (2023: 2%). This is based on long-term GDP growth forecasts for the
Netherlands CGU. This growth rate does not exceed the relevant long-term
average growth rate based on OECD long-term baseline projections No.114.
We have considered reasonably possible changes in key assumptions that could
cause an impairment and have identified two key assumptions relating to the
cash flows in years 1 to 5. Being:
1) The Netherlands CGU VIU cash flow assumes low double-digit revenue
growth over the five-year period. A decrease in the forecast revenue growth by
54% over this period, would see the headroom reduce to nil.
2) An increase in the pre-tax discount rate of 1.7% to 12.8% from 11.1%
would reduce this headroom to nil.
The reduction required to the long-term growth rate to reduce the headroom to
nil is not considered reasonably possible.
10. Financial Instruments
The tables below set out the measurement categories and carrying values of
financial assets and liabilities with fair value inputs where relevant.
Measurement category Carrying value 2024 £m Fair value 2024 Fair value hierarchy 2024/2023 Carrying value 2023 £m
Financial assets
Non-current
Contract assets Amortised cost 6.7 - - 2.9
Other receivables Amortised cost 0.7 - - 0.6
Current
Cash and cash equivalents Amortised cost 153.7 - - 136.5
Trade receivables - net Amortised cost 55.7 - - 50.6
Contract assets Amortised cost 35.0 - - 32.5
Other receivables Amortised cost 3.5 - - 2.7
255.3 225.8
Financial liabilities
Non-current
Other payables Amortised cost 0.1 - - 0.1
Borrowings Amortised cost - - - 1.4
Lease liabilities Amortised cost 5.9 - - 7.0
Acquisition-related liabilities:
Deferred consideration(1) Amortised cost 13.0 - - -
Contingent consideration Fair value through P&L 7.7 Fair value weighted expected returns methodology Level 3 7.7
Put option liability Fair value through P&L 1.3 Fair value weighted expected returns methodology Level 3 1.1
Current
Trade and other payables(1) Amortised cost 64.8 - - 56.7
Borrowings Amortised cost - - - 0.3
Lease liabilities Amortised cost 2.0 - - 3.0
Acquisition-related liabilities:
Deferred consideration(1) Amortised cost 4.4 - - 1.0
Contingent consideration Fair value through P&L 0.1 Fair value weighted expected returns methodology Level 3 1.7
99.3 80.0
For trade and other receivables, cash and cash equivalents, provisions, trade
and other payables, and share buyback fair values approximate to book values
due to the short maturity periods of these financial instruments.
Deferred consideration
2024 2023
£m £m
Current 4.4 1.0
Non-current 13.0 -
17.4 1.0
Deferred consideration relates to fixed amounts payable with regard to
acquisitions. The reconciliation of the carrying amounts is as follows:
Coolwave NeoTel Satisnet BrightCloud Placetel(1) £m Total
£m £m £m £m £m
1 January 2024 - 0.5 0.5 - - 1.0
Acquisition of subsidiary 0.5 - - 0.2 16.0 16.7
Deferred consideration settled (0.5) (0.5) - - (0.3) (1.3)
Unwinding of discount - - - - 0.2 0.2
Foreign exchange movements - - - - 0.8 0.8
31 December 2024 - - 0.5 0.2 16.7 17.4
(1) Refer to note 13 Business combinations for further details.
Maturity analysis
The following table sets out the contractual maturities (representing
undiscounted contractual cash flows) of financial liabilities at amortised
cost (excluding lease liabilities):
Less than 1 year Between Between Over
£m 1 and 2 2 and 5 5 years
years years £m
£m £m
2024 70.0 4.2 10.2 -
2023 58.0 0.1 0.7 0.7
Fair value of financial instruments
The financial instruments included on the Consolidated statement of financial
position are measured at fair value or amortised cost. The measurement of this
fair value can in some cases be subjective and can depend on the inputs used
in the calculations. The different valuation methods are called "hierarchies"
and are described below:
Level 1: Fair values measured using quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2: Fair values measured using inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability either directly
or indirectly.
Level 3: Fair values measured using inputs for the asset or liability that are
not based on observable market data.
All liabilities measured at fair value are classified as Level 3 and there
were no transfers to or from other hierarchies during the year. The Group's
policy is to recognise transfers into and out of fair value hierarchy levels
as at the end of the reporting period.
The fair value of Level 3 instruments is illustrated in the table below:
Financial liabilities 2024 2023
£m £m
Contingent consideration 7.8 9.4
Put option liability 1.3 1.1
Total 9.1 10.5
As at 31 December, the potential undiscounted amount of future payments that
could be required under the contingent consideration and the put option
liability range from £0.1m to £18.1m and £nil to £2.9m respectively (31
December 2023: £nil to £16.5m and £nil to £2.9m).
Contingent consideration
2024 2023
£m £m
Current 0.1 1.7
Non-current 7.7 7.7
7.8 9.4
The reconciliation of the carrying amounts of contingent consideration is as
follows:
Mission Labs Satisnet Pragma(1) BrightCloud £m Total
£m £m £m £m
1 January 2024 1.7 4.1 3.6 - 9.4
Acquisition of subsidiary - - - 0.3 0.3
Contingent consideration settled (1.7) - - - (1.7)
Change in fair value of contingent consideration:
Unwinding of discount - 0.5 0.6 - 1.1
Other change in fair value - (1.8) 0.5 - (1.3)
31 December 2024 - 2.8 4.7 0.3 7.8
(1) Refers to Pragma Group ("Pragma"), previously referred to as EnableX in
the 2023 Annual Report.
The final contingent consideration related to Mission Labs was paid during the
period with the amount paid in line with the payable recognised at 31 December
2023.
Contingent consideration for Satisnet is based on the on managed service
revenues for the financial year ending 31 December 2025, and gross profit
split between the periods from 1 July 2023 to 31 December 2024 and the
financial year ending 31 December 2025. Consideration of up to £4.3m may be
payable. The fair value of £2.8m at 31 December 2024, which takes into
account the weighted probability of payout, is split between £0.1m current
and £2.7m non-current and based on a payout of £3.2m (31 December 2023:
£4.1m) therefore, after the impact of the unwinding of the discount, a
decrease of £1.8m was required which has been recorded within operating
expenses.
Contingent consideration for Pragma is based on the EBITDA performance for the
financial year ending 31 December 2026. Consideration of up to £9.8m may be
payable. The fair value of £4.7m at 31 December 2024, which takes into
account the weighted probability of payout, is non-current and based on a
payout of £6.4m (31 December 2023: £5.8m) therefore, after the impact of the
unwinding of the discount, an increase of £0.5m was required which has been
recorded within operating expenses.
Contingent consideration for BrightCloud is based on the revenue performance
for any consecutive twelve-calendar month-period from acquisition to 31
December 2025. Consideration of up to £4.0m may be payable. The fair value of
£0.3m at 31 December 2024, which takes into account the weighted probability
of payout, is non-current and based on a payout of £0.4m.
The total changes in fair value of consideration of £1.3m have been credited
to operating expense in 2024. In 2024 acquisition related costs of due
diligence have totalled £2.8m which have been debited to operating expense.
Put option liability
2024 2023
£m £m
Non-current 1.3 1.1
1.3 1.1
As a result of the acquisition of Pragma in 2023 there is an option for the
previous owners to sell or for the Group to acquire the remaining 5% of the
shares in Pragma (which are held by management) in 2027 (where the
consideration will be based on the results of the preceding financial year).
The amount payable in cash will in aggregate be between £nil and £2.9m. The
upper end of the option price will only be achieved if Pragma achieves certain
EBITDA targets. The fair value of £1.3m at 31 December 2024 (2023: £1.1m) is
based on a payout of £1.8m (2023: £1.7m) which takes into account the
weighted probability of payout.
In the prior year the Group acquired the remaining 3.95% of the shares in
Gamma Holding GmbH, formerly HFO Holding GmbH. The final consideration was
€1.5m paid in cash.
Fair value measurement
The Group's finance team performs valuations of financial items for financial
reporting purposes and in consultation with third-party valuation specialists
for complex valuations. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of maximising
the use of market-based information. The finance team reports directly to
the CFO.
The valuation technique used for instruments categorised in Level 3
(contingent consideration and put option liability) was a probability weighted
expected returns methodology, using a risk-adjusted discount rate appropriate
to the individual characteristics of the transaction. Movements in the fair
value are charged through the Consolidated statement of profit or loss within
operating expenses.
The fair value of Level 3 instruments is £9.1m (contingent consideration
£7.8m and put option liability £1.3m). Both types of obligations are
dependent on the future financial performance of the entity. It is assumed
that future profits are in line with management estimates which are derived
from internal business plans together with financial due diligence performed
in connection with the acquisition.
The following analysis is provided to illustrate the sensitivity of the
year-end balance to a change in an individual input, within reasonable
expected ranges, whilst all other variables remain constant. This is not
intended to imply the likelihood of change or that possible changes in value
would be restricted to this range.
Input Year-end Change Change in
discounted estimate in input fair value
£m
Discount rate 13.8-14.3% +1% absolute (0.2)
-1% absolute 0.2
Financial forecasts Forecast revenue performance +10% 0.2
-10% (2.1)
Forecast gross profit performance +10% 0.6
-10% (0.2)
Forecast EBITDA performance +10% 0.7
-10% (0.7)
The following table sets out the contractual maturities (representing
undiscounted contractual cash flows) of financial liabilities at fair value,
based on expected payout:
Less than 1 year Between Between Over
£m 1 and 2 2 and 5 5 years
years years £m
£m £m
2024 0.1 3.5 8.2 -
2023 1.7 1.1 11.2 -
11. Share capital
Number £m
1 January 2024
Ordinary shares of £0.0025 each 97,462,226 0.2
Movement:
January* 12,370
February* 19
March* 3,468
April* 22,306
30 June 2024
Ordinary Shares of £0.0025 each 97,500,389 0.2
* Ordinary shares were issued to satisfy options which have been exercised.
In the year 1,910,596 ordinary shares of 0.25 pence each (2023: nil) were
acquired by the Company and held in treasury, of which 186,946 (2023: nil)
were transferred from treasury to settle exercised share options.
At 31 December 2024, 1,723,650 shares were held in treasury (2023: nil),
representing 1.8% (2023: nil) of issued share capital. The shares held in
treasury do not have voting rights. The number of ordinary shares with voting
rights was 95,776,739 (2023: 97,462,226), therefore the total issued share
capital at 31 December 2024 was 97,500,389 ordinary shares (2023: 97,462,226
ordinary shares).
12. Other reserves
Merger reserve Share option reserve Foreign exchange reserve Share reserve Total other reserves
£m £m £m £m £m
1 January 2023 2.3 8.7 (1.3) (0.7) 9.0
Issue of shares - (4.2) - - (4.2)
Share-based payments - 2.7 - - 2.7
Other comprehensive income - - (0.6) - (0.6)
31 December 2023 2.3 7.2 (1.9) (0.7) 6.9
1 January 2024 2.3 7.2 (1.9) (0.7) 6.9
Issue of shares - (2.0) - - (2.0)
Share-based payments - 2.2 - - 2.2
Share buyback(1) - - - (27.3) (27.3)
Treasury share allocations(2) - - - 3.3 3.3
Other comprehensive income - - (1.3) - (1.3)
31 December 2024 2.3 7.4 (3.2) (24.7) (18.2)
(1) Represents the shares purchased under the share buyback programme which
completed in September 2024.
(2) Treasury shares allocations are treasury shares which have been used to
satisfy share options and other employee share plans.
13. Business combinations
Summary of acquisitions 2024
During 2024, the Group completed a total of three acquisitions, all of which
are 100% owned by the Group.
Acquisition Acquired Principal activity
Coolwave Communications Limited ("Coolwave") 1 February 2024 Coolwave is a prominent International voice service provider. Coolwave was
acquired in order to increase the Group's total addressable market for voice
enablement products (including Microsoft Teams) and provide new opportunities
for our Service Provider business.
BrightCloud Group Limited ("BrightCloud") 24 July 2024 BrightCloud is a leading managed service provider (MSP) specialising in
Cloud-based contact centre solutions across Europe. BrightCloud is Cisco's
leading European Enterprise partner for CCaaS renowned for customer experience
transformation. BrightCloud was acquired to expand the Group's contact centre
and customer experience expertise and drive enterprise growth across Europe.
BroadSoft Germany GmbH (known as "Placetel") 20 September 2024 Placetel is a German market leader in the Cloud PBX space, enabling German
companies to buy Cisco Collaboration solutions both digitally and through
local partners. Placetel was acquired to further strengthen Gamma's presence
in Germany and deepen its partnership with Cisco.
The fair values of identifiable assets acquired and liabilities assumed is as
follows:
Coolwave BrightCloud Placetel Total
£m £m £m £m
Tangible fixed assets 0.1 - 1.0 1.1
Intangible assets - technology 6.0 - - 6.0
Intangible assets - customer contracts 1.5 4.9 3.6 10.0
Intangible assets - brand - 0.5 1.5 2.0
Intangible assets - development costs - 0.2 3.5 3.7
Cash 0.7 1.3 10.5 12.5
Trade and other receivables 1.4 3.3 1.3 6.0
Trade and other payables (1.3) (1.5) (2.8) (5.6)
Contract liabilities - (3.6) - (3.6)
Deferred tax liability(1) (0.9) (1.4) (2.9) (5.2)
Total identifiable assets/(liabilities) 7.5 3.7 15.7 26.9
Less: Non-controlling interests - - - -
Add: Goodwill - 6.9 8.2 15.1
Net assets acquired 7.5 10.6 23.9 42.0
(1 ) Deferred tax liability arising on customer contract and brand
intangible assets.
The fair values of identifiable assets acquired and liabilities assumed are
final for Coolwave and BrightCloud. The fair values of identifiable assets
acquired and liabilities assumed are provisional for Placetel pending
finalisation of current tax liabilities. The exercise to finalise these
balances is ongoing and will be completed by 30 June 2025.
The value of the goodwill represents the prospective future economic benefits
that are expected to accrue from enhancing the portfolio of products available
to the Group's existing customers and access to new customers.
Coolwave BrightCloud Placetel Total
£m £m £m £m
Satisfied by:
Cash paid 7.0 10.0 7.9 24.9
Deferred consideration(1) 0.5 0.3 16.0 16.8
Contingent consideration(2) - 0.3 - 0.3
Total 7.5 10.6 23.9 42.0
(1) Deferred consideration relates to fixed amounts payable with regard to
acquisitions.
(2) Contingent consideration is payable dependent on future performance of
the businesses acquired.
Placetel consideration
The Group acquired Placetel from Cisco in September 2024 for cash
consideration of £7.9m, gross of £10.5m of cash acquired, equivalent to a
net cash receipt of £2.6m. Concurrently with this acquisition, the Group also
agreed a five-year $51.5m (£38.8m at the acquisition date) minimum purchase
agreement for Webex cloud licences with Cisco. The Group determined that the
minimum purchase commitment comprised two elements: 1) deferred consideration
for the acquisition of Placetel of £18.7m, which was recognised at a present
value of £16.0m; and 2) expected future cloud licence purchases in the normal
course of business of £20.1m. As such, the total consideration for Placetel
was determined to be £23.9m.
Deferred consideration of £18.7m has been determined using a fair value
methodology. This incorporated a discounted cash flow analysis of the Placetel
business, which was based on the Board approved five-year forecast, which was
extended to reflect the continued strong growth otherwise expected at the end
of the five-year period, before a terminal value is applied.
The deferred consideration is payable monthly over five years and was
recognised at a present value of £16.0m at acquisition. At 31 December 2024
the deferred consideration is carried at £16.7m following the payment of
£0.3m (recorded within investing activities), unwinding of discounting of
£0.2m (recognised within finance expense) and a movement in foreign currency
rates of £0.8m (recognised within operating expenses).
The key assumptions included in the fair value assessment are the revenue
growth rates, long-term growth rates applied in perpetuity and the discount
rate. The short-term revenue growth rate assumes a mid single-figure CAGR. The
long-term growth rate used is 2% consistent with the VIU calculation used in
the annual goodwill impairment test and does not exceed the German long-term
average growth rate based on OECD long-term baseline projections No.114. A
risk-adjusted discount rate appropriate to the individual characteristics of
the transaction of 12.6% is based on a Euro, 10-year government bond. This
rate is adjusted for a risk premium to reflect the increased risk of investing
in equities. This risk premium is derived by observing an equity market risk
premium (that is the required return over and above a risk-free rate by an
investor who is investing in the market as a whole) based on external sources
and adjusting this with reference to a beta and a size risk premium to reflect
the risk of Placetel relative to the market as a whole to provide a cost of
equity. Cost of debt is based on an external corporate bond yield. Cost of
equity and debt are then weighted based on market participant leverage.
Net cash outflow on acquisitions:
Coolwave BrightCloud Placetel Other Total
£m £m £m £m £m
Cash consideration 7.0 10.0 7.9 - 24.9
Less: cash acquired (0.7) (1.3) (10.5) - (12.5)
6.3 8.7 (2.6) - 12.4
Contingent consideration payments during the year - - - 1.7 1.7
Deferred consideration payments during the period(1) 0.5 - 0.3 0.5 1.3
Net outflow of cash - investing activities 6.8 8.7 (2.3) 2.2 15.4
(1) Deferred consideration relates to fixed amounts payable with regard to
acquisitions. Other relates to the final NeoTel acquisition payment.
Valuations of intangible assets
Customer contracts were valued under the Income Method and the brand and
technology under the Relief from Royalty methodology.
Goodwill
The goodwill is attributable to the acquired entity. The goodwill is not
deductible for tax purposes.
Revenue and profit contribution
From the date of acquisition, the acquired businesses have contributed £14.8m
of revenue and £0.8m of profit after taxation attributable to the equity
holders of Gamma Communications plc:
Revenue Profit before tax £m Profit after tax
£m £m
Coolwave 4.1 0.6 0.4
BrightCloud 3.3 0.3 0.2
Placetel 7.4 0.3 0.2
Total 14.8 1.2 0.8
If these acquisitions had occurred on 1 January 2024, the acquired businesses
would have contributed estimated revenue and profit after taxation
attributable to the equity holders of Gamma Communications plc as outlined in
the table below. The amounts below are unaudited.
Revenue Profit before tax £m Profit after tax
£m £m
Coolwave 4.6 0.6 0.5
BrightCloud 7.5 0.5 0.4
Placetel 25.8 0.9 0.6
Total 37.9 2.0 1.5
Summary of acquisitions 2023
During 2023 the Group acquired Satisnet Limited ("Satisnet") and the Pragma
Group ("Pragma"), previously referred to as EnableX in the 2023 Annual Report.
The fair value accounting for Satisnet was completed and disclosed in 2023.
The fair value accounting for Pragma was provisional at 31 December 2023.
During 2024 the fair value accounting of the identified assets and liabilities
assumed was completed. As a result Goodwill has reduced by £11.4m and other
intangible assets has increased by £15.5m (customer contacts £13.7m and
brand £1.8m), with a £3.9m deferred tax liability recognised relating to
these intangible balances and a £0.2m current tax liability.
The fair value of the identifiable assets and liabilities assumed is as
follows:
Pragma £m
Tangible fixed assets 0.2
Intangible assets - technology 2.1
Intangible assets - customer contracts 13.7
Intangible assets - brand 1.8
Cash 0.6
Inventories 0.6
Trade and other receivables 5.1
Trade and other payables (5.0)
Bank loans(1) (7.7)
Contract liabilities (4.5)
Deferred tax liability(2) (3.9)
Total identifiable assets 3.0
Less: Non-controlling interests (0.2)
Add: Goodwill 12.6
Net assets acquired 15.4
(1) Bank loans of £7.7m were repaid at the time of acquisition.
(2) Deferred tax liability arising on customer contract and brand intangible
assets.
14. Events after the reporting date
Acquisition of STARFACE
On 19 February 2025, the Group completed the acquisition of 100% of the equity
of SF Technologies Holdings GmbH ("STARFACE"). The cash outlay for the
acquisition (excluding transaction costs) was €201.6m (£168.7m). After
taking account of net cash and working capital, this equates to €196m
(£164m) on a cash-free, debt-free basis. £30m has been funded through the
new Revolving Credit Facility, see below, and the remainder covered by Gamma's
existing cash resources.
Germany holds strategic importance for Gamma, as it represents the largest,
and growing, cloud PBX market in Europe, with significantly lower cloud
penetration in a larger SME market than the UK. The acquisition of STARFACE
delivers on our strategy to establish a new anchor in the European business,
alongside our well-established UK business. STARFACE is a market leader in the
provision of proprietary business communication and collaboration software
solutions, tailored to fit the needs of the German market. The company
predominantly serves SME businesses in Germany, as well as enterprises and the
public sector via its nationwide Channel Partner network, which also covers
Austria and Switzerland. The acquisition positions Gamma as a leader in the
German SME cloud communications market when combined with our acquisition of
Placetel. It will provide an additional c.210,000 Cloud PBX seats which
increases Gamma's number of Cloud Seats sold in Germany to over 500,000.
Given the timing of the closure of the transaction, the Group expects to
disclose the provisional accounting for the acquisition in the 2025 interim
results.
Share buyback
In March 2025, the Group appointed Peel Hunt LLP to manage a share buyback
programme to purchase ordinary shares of 0.25p each in Gamma Communications
plc for an aggregate purchase price of up to £50m within certain pre-set
parameters (the "Programme"). The Company has authorised the Programme to
continue whilst it retains the authority from shareholders to repurchase such
ordinary shares until the earlier of: (i) the maximum aggregate consideration
payable by the Company has been reached or (ii) Monday 30 June 2025, subject
to reapproval of the relevant share purchase authorities at the 2025 AGM. The
Programme will be conducted by the Company in accordance with and under the
terms of the general authority granted to the Board by the Company's
shareholders. The purpose of the Buyback Programme is to reduce the Company's
share capital (any Shares repurchased for this purpose will be cancelled) and
to enable the Company to meet obligations arising from share option programmes
(any Shares repurchased for this purpose will be held in treasury).
Revolving Credit Facility
In January 2025 the Group agreed a new three-year £130m multicurrency
Revolving Credit Facility, which has an option to extend for an additional 12
months. £30m was drawn down in February to fund the acquisition of STARFACE.
The Revolving Credit Facility incurs interest on drawn balances at between
1.5% and 2.5% above SONIA, and between 0.5% and 0.9% on undrawn balances.
Allnet
In February 2025, the Group acquired Allnet Solutions Limited (known as
"Allnet") for £1.6m (on a debt-free cash-free basis) and a cash payment or
receipt subject to finalisation of the acquired closing balance sheet and
working capital adjustments.
Alternative Performance Measures
The Group uses certain measures to assess the financial performance of its
business. These measures are called Alternative Performance Measures ("APMs")
because they exclude amounts that are included in, or include amounts that are
excluded from, the most directly comparable measure calculated and presented
in accordance with IFRS, or are calculated using financial measures that are
not calculated in accordance with IFRS.
These APMs are used to measure operating performance and liquidity in
presentations to the Board and as a basis for strategic planning and
forecasting. The Group believes that APMs provide additional useful
information for users of the financial statements to assess the Group's
performance, including the Group's core operational performance. These and
similar measures are used widely by certain investors, analysts and other
interested parties as supplemental measures of performance and liquidity.
The APMs may not be comparable to similarly named measures used by other
companies and have limitations as analytical tools. They should not be
considered in isolation or as a substitute for analysis of the Group's results
reported under IFRS.
An explanation of the relevance of each of the APMs, a reconciliation of the
APM to the most directly comparable measure calculated and presented in
accordance with IFRS, and a discussion of the limitations are set out below.
The Group does not consider these APMs to be a substitute for, or superior to,
the equivalent measures calculated and presented in accordance with IFRS.
As noted in the Financial guidance in the full-year results on 25 March 2024,
the Group has amended the definition of Adjusted EBITDA and Adjusted earnings
per share (fully diluted) to exclude other adjusting items which in the period
comprise the incremental costs related to the implementation of new
cloud-based Finance and HR systems, in order to show the Group's core
performance. We have adjusted for these as the anticipated total cost of the
implementation to the end of 2025 is considered significant. This change also
impacts the calculation of Adjusted profit before tax and Adjusted cash
conversion. This amendment has no impact on the APMs previously reported in
2023 under the definition at that time as these other adjusting items then
totalled £nil.
The Group has also updated the definition of "Changes in fair value of
contingent consideration and put option liability" with regards Adjusted
profit before tax and Adjusted earnings per share (fully diluted), to clarify
that it should be more specifically, "Unwinding of discounting on put option
liability, contingent and deferred consideration". This update in definition
has no impact on the APMs previously reported in 2023 under the definition at
that time.
The Group has also included Organic growth, as defined below, as a new APM in
the current year. This has been included as a result of an increased number of
acquisitions during 2023 and 2024 and the increased contribution of the
European business to the Group. Whilst organic growth is not intended to be a
substitute for reported growth, nor is it superior to reported growth, it
facilitates additional comparability of the current year's performance to that
of prior years by excluding the effect of factors which were not present in
both periods.
EBITDA and Adjusted EBITDA
EBITDA is presented because it is widely used by securities analysts,
investors and our peer group internationally to evaluate the profitability of
companies. EBITDA is defined as profit before tax excluding finance expense,
finance income, depreciation of property, plant and equipment, right-of
use-asset depreciation and amortisation of intangible assets. EBITDA
eliminates potential differences in core financial performance that can be
caused by variations in capital structures (affecting net finance costs), tax
positions (such as the availability of brought forward losses against which
taxable profits can be relieved), the cost and age of property, plant and
equipment and right-of-use assets (affecting relative depreciation expense),
and the extent to which intangible assets are identifiable (affecting relative
amortisation expense).
Adjusted EBITDA is a primary profit measure used internally by the Board to
assess financial performance of the Group and its segments. It is defined as
EBITDA (as defined above) adding back exceptional items and other adjusting
items (which comprise the incremental costs related to the implementation of
new cloud-based Finance and HR systems). It excludes exceptional items (by
virtue of their size, nature or incidence) and other adjusting items (which
comprise the incremental costs of implementing the new cloud-based Finance and
HR systems as the anticipated total cost of the implementation to the end of
2025 is considered significant), in order to show the Group's core
performance.
The following table is a reconciliation from statutory profit before tax for
the six months to June to EBITDA and Adjusted EBITDA:
2024 2023
£m £m
Profit before tax 95.6 71.5
Finance income (7.1) (5.4)
Finance expense 1.8 0.9
Profit from operations 90.3 67.0
Depreciation of property, plant and equipment and right-of-use assets 11.7 11.6
Amortisation from intangible assets excluding business combinations 8.7 9.7
Amortisation from intangible assets arising due to business combinations 13.4 10.0
EBITDA 124.1 98.3
Exceptional items - 16.0
Other adjusting items 1.4 -
Adjusted EBITDA 125.5 114.3
In the year, the cash cost of exceptional and other adjusting items was £3.6m
(2023: £0.2m).
Adjusted profit before tax
Adjusted profit before tax is defined as profit before tax excluding the
effects of exceptional items, other adjusting items (which comprise the
incremental costs related to the implementation of new cloud-based Finance and
HR systems), amortisation arising from business combinations and changes in
fair value of contingent consideration and put option liability from the
unwinding of discounting. These items are individually material items and/or
are not considered to be representative of the trading performance of the
Group:
Exceptional items are excluded by virtue of their size, nature or incidence in
order to show the core performance of the Group.
Other adjusting items (which comprise the incremental costs related to the
implementation of new cloud-based Finance and HR systems) are excluded as the
anticipated total cost of the implementation to the end of 2025 is considered
significant.
Amortisation of intangibles arising due to business combinations is excluded
because this charge is a non-cash accounting item based on judgements about
the assets' value and economic life. Its exclusion is consistent with industry
peers and how certain external stakeholders monitor the performance of the
business.
Unwinding of discounting on put option liability, contingent and deferred
consideration are excluded because the amounts are non-cash accounting items
and bear no relation to the Group's trading performance in the period. This
adjustment improves comparability between acquired and organically grown
operations.
Adjusted profit before tax is the primary profit measure used internally to
reward employees.
The following table is a reconciliation from statutory Profit before tax for
the year to Adjusted profit before tax:
2024 2023
£m £m
Profit before tax 95.6 71.5
Exceptional items - 16.0
Other adjusting items 1.4 -
Amortisation of intangibles arising due to business combinations 13.4 10.0
Unwinding of discounting on put option liability, contingent and deferred 1.5 0.4
consideration
Adjusting items 16.3 26.4
Adjusted profit before tax 111.9 97.9
In the year, the cash cost of exceptional and other adjusting items was £3.6m
(2023: £0.2m).
Organic growth
Organic growth is presented as management believe it is important to
understand performance on a comparable basis. Organic growth is defined as
total reported growth excluding the contribution of acquisitions for the first
12 months of ownership ("Inorganic growth") and excludes the contribution of
disposals for the last 12 months of ownership ("disposals"), and the impact of
foreign exchange movements on the consolidation of our international
operations (calculated by taking the current year local currency results
translated into Pounds Sterling at the preceding year's foreign exchange rate
(1.183:1 Euros to Pound Sterling) and defined as "constant currency"). Organic
growth is used for internal performance analysis because it allows for
comparisons of the current year to that of prior years without the effect of
factors which were not present in both periods. Organic growth is calculated
at a business unit and Group level for revenue and gross profit. It is also
calculated for Adjusted EBITDA at a Group level.
Current year
Year ended 31 December 2023 Components of growth Total reported growth Year ended 31 December 2024
Organic growth Inorganic growth Constant currency
Revenue £m £m £m £m £m £m
Gamma Business 332.2 17.6 19.1 - 36.7 368.9
Gamma Enterprise 110.1 6.7 9.7 - 16.4 126.5
Europe 79.4 (0.7) 7.6 (2.3) 4.6 84.0
Group Revenue 521.7 23.6 36.4 (2.3) 57.7 579.4
Gamma Business % 5% 6% - 11%
Gamma Enterprise % 6% 9% - 15%
Europe % (1%) 10% (3%) 6%
Group Revenue % 5% 7% 0% 11%
Prior year
Year ended 31 December 2022 Components of growth Total reported growth Year ended 31 December 2023
Disposals Organic growth Inorganic growth Constant currency
Revenue £m £m £m £m £m £m £m
Gamma Business 309.4 - 22.8 - - 22.8 332.2
Gamma Enterprise 102.0 - 3.5 4.6 - 8.1 110.1
Europe 73.2 (1.4) 4.3 1.7 1.6 6.2 79.4
Group Revenue 484.6 (1.4) 30.6 6.3 1.6 37.1 521.7
Gamma Business % - 7% - - 7%
Gamma Enterprise % - 3% 5% - 8%
Europe % (2%) 6% 2% 2% 8%
Group Revenue % 0% 6% 1% 0% 8%
Gamma disposed of ComyMedia in 2022 therefore the revenue included in the year
ended 2022 for ComyMedia is shown as disposals.
Group revenue growth in constant currency was 5% (2023: 6%) on an organic
basis and 7% (2023: 1%) on an inorganic basis. European revenue growth in
constant currency was (1%) (2023: 6%).
Current year
Year ended 31 December 2023 Components of growth Total reported growth Year ended 31 December 2024
Organic growth Inorganic growth Constant currency
Gross profit £m £m £m £m £m £m
Gamma Business 176.1 10.7 7.9 - 18.6 194.7
Gamma Enterprise 52.6 3.2 4.4 - 7.6 60.2
Europe 38.5 2.0 6.1 (1.2) 6.9 45.4
Group gross profit 267.2 15.9 18.4 (1.2) 33.1 300.3
Gamma Business % 6% 4% - 11%
Gamma Enterprise % 6% 8% - 14%
Europe % 5% 16% (3%) 18%
Group gross profit % 6% 7% 0% 12%
Prior year
Year ended 31 December 2022 Components of growth Total reported growth Year ended 31 December 2023
Disposals Organic growth Inorganic growth Constant currency
Gross profit £m £m £m £m £m £m £m
Gamma Business 163.7 - 12.4 - - 12.4 176.1
Gamma Enterprise 49.3 - 1.8 1.5 - 3.3 52.6
Europe 34.7 (0.6) 2.3 1.3 0.8 3.8 38.5
Group gross profit 247.7 (0.6) 16.5 2.8 0.8 19.5 267.2
Gamma Business % - 8% - - 8%
Gamma Enterprise % - 4% 3% - 7%
Europe % (2%) 7% 4% 2% 11%
Group gross profit % 0% 7% 1% 0% 8%
Gamma disposed of ComymMedia in 2022 therefore the gross profit included in
the year ended 2022 for ComyMedia is shown as disposals.
Group gross profit growth in constant currency was 6% (2023: 6%) on an organic
basis and 7% (2023: 1%) on an inorganic basis. European gross profit growth in
constant currency was 5% (2023: 7%).
Current year
Year ended 31 December 2023 Components of growth Total reported growth Year ended 31 December 2024
Organic growth Inorganic growth Constant currency
£m £m £m £m £m £m
Group Adjusted EBITDA 114.3 7.3 4.3 (0.4) 11.2 125.5
Group Adjusted EBITDA % 6% 4% 0% 10%
Prior year
Year ended 31 December 2022 Components of growth Total reported growth Year ended 31 December 2023
Organic growth Inorganic growth Constant currency
£m £m £m £m £m £m
Group Adjusted EBITDA 105.1 8.2 1.0 - 9.2 114.3
Group Adjusted EBITDA % 8% 1% 0% 9%
ComyMedia contributed no Adjusted EBITDA in 2022 therefore no disposal is
shown.
Group Adjusted EBITDA growth in constant currency was 6% (2023: 8%) on an
organic basis and 4% on an inorganic basis (2023: 1%).
Adjusted earnings per share (fully diluted)
Adjusted earnings per share ("EPS") fully diluted is presented as management
believes it is important for understanding the changes in the Group's fully
diluted EPS, including improving comparability between acquired and
organically grown operations. Adjusted EPS fully diluted is defined as Diluted
EPS where the earnings attributable to ordinary shareholders are adjusted by
excluding the effects of exceptional items, other adjusting items (which
comprise the incremental costs related to the implementation of new
cloud-based Finance and HR systems), amortisation arising due to business
combinations and unwinding of discounting on put option liability, contingent
and deferred consideration (for the same reasons outlined previously in
relation to Adjusted profit before tax), as well as the tax on these items,
because they are individually or collectively material items that are not
considered to be representative of the trading performance of the Group. To
exclude the tax impact of these items would give an incomplete picture.
2024 2023
Earnings per Ordinary Share - diluted (pence) 72.0 54.9
Adjusted earnings per Ordinary Share - fully diluted (pence) 85.1 75.1
2024 2023
£m £m
Profit after tax attributable to the ordinary equity holders of the Company 69.8 53.6
Adjusting items:
Exceptional items - 16.0
Other adjusting items 1.4 -
Amortisation of intangibles arising due to business combinations 13.4 10.0
Unwinding of discounting on put option liability, contingent and deferred 1.5 0.4
consideration
Adjusting items 16.3 26.4
Tax relating to adjusting items (3.6) (6.6)
Adjusted profit after tax attributable to the ordinary equity holders of the 82.5 73.4
Company
2024 2023
No: No:
Diluted weighted average number of Ordinary Shares 96,982,528 97,695,351
Net cash
Net cash is presented as it is an important liquidity measure used by
management and the Board. Net cash is defined as cash and cash equivalents
less borrowings. IFRS 16 lease liabilities and contingent consideration are
not considered as debt for the purpose of quoting Net cash.
2024 2023
£m £m
Cash and cash equivalents 153.7 136.5
Borrowings - (1.7)
Net cash 153.7 134.8
The following table is a reconciliation of the movements in Net cash from
previously reported periods:
Cash and cash equivalents Borrowings Net cash
£m £m £m
At 1 January 2023 94.6 (2.1) 92.5
Repayments - 0.5 0.5
Borrowings acquired with acquisitions - (7.7) (7.7)
Repayment of borrowings acquired with acquisitions - 7.7 7.7
Net increase in cash and cash equivalents 42.1 - 42.1
Effects of foreign exchange rate changes (0.2) (0.1) (0.3)
At 31 December 2023 136.5 (1.7) 134.8
Repayments - 1.5 1.5
Net increase in cash and cash equivalents 17.8 - 17.8
Effects of foreign exchange rate changes (0.6) 0.2 (0.4)
At 31 December 2024 153.7 - 153.7
Adjusted cash conversion
Adjusted cash conversion is presented as management believe it is important to
understand the Group's conversion of Adjusted EBITDA (as defined previously)
to cash. The Group's Adjusted cash conversion is defined as Cash generated by
operations excluding the cash impact of exceptional items and other adjusting
items (which comprise the incremental costs related to the implementation of
new cloud-based Finance and HR systems), divided by Adjusted EBITDA, so as to
exclude the impact of significant or one-off transactions outside the normal
course of trading. Adjusted cash conversion is used to track and measure
timing differences between profitability and cash generation through working
capital management, including seasonality or one-offs.
2024 2023
£m £m
Cash generated by operations 116.8 123.5
Cash impact of exceptional items (2023 restructuring) 2.7 0.2
Cash impact of other adjusting items (2024 systems implementation) 0.9 -
Adjusted Cash generated by operations 120.4 123.7
Adjusted EBITDA 125.5 114.3
Adjusted cash conversion 96% 108%
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