Slide 1: Gamma Results 2017
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Slide 2: Gamma is a rapidly growing technology based provider of advanced communication services
Gamma is a rapidly growing technology based provider of advanced communication services to the UK business market A UK based business employing 901 staff across six sites We supply a broad range of simplified communications and software services to small, medium and large sized business customers, b
Slide 3: Strong financial performance continues
Strong financial performance continues: Revenue £238.4m (+11.7% against 2016); adjusted EBITDA £41.6m (+21.6%); adjusted EPS 24.6p (+16.6%) Excellent growth across the product range (Traditional excepted) Number of active Channel Partners grew by 119 (to 1,089) Significant new Direct wins included M
Slide 4: Product Unit Growth Comments
Product Unit Growth Comments (2016 – 2017) SIP Trunking 511k to 680k 17% Market Growth over period* (+33%) Margins remain similar Consolidated No 1 position in market – growth in market share SIP Trunk Call Manager successfully preserving margins/reducing churn Horizon 230k to 331k 19% Market Growth
Slide 5: Product Unit Growth Comments
Product Unit Growth Comments (2016 – 2017) Mobile H2 2017 ; 63Tbytes Market share <1% Thin MVNO with Vodafone ceased in March (H1 2017; 35Tbytes Direct pipeline strongest, channel growth slower to build Many incremental enhancements made FMC Product – “Connect” linked to Cloud PBX now launched Ether
Slide 6: SME focus remains but also larger partner wins
SME focus remains but also larger partner wins Partner Partner’s Customer Lead Product Unify Addison Lee Horizon 76% of Group revenue – £181.4m (2016: £169.0m) Sabio Homebase Resilient Inbound call management Active Channel Partners grew from 970 to 1,089 – Channel continues to attract new entrants
Slide 7: Focus on Enterprise and Public Sector
Example wins Company Sector Lead Product itsu Food retailer 70 site data network with Horizon Savills Plc Property High speed managed data 24% of Group Revenue – network £57.0m (2016: £44.5m) Stackhouse Poland Insurance Data, voice and mobile Care UK Health Horizon to 80+ sites Focus on Enterprise a
Slide 8: A discrete asset within Gamma
A discrete asset within Gamma 161km of fibre cable (increased 11k in 2017) Connects all major datacentres and media hubs – generally long-term contracts Dark fibre and high capacity bandwidth services 42 customers inc. NHS, TalkTalk, BBC, Equinix and Manchester Metropolitan University Named strategi
Slide 9: The Financials
The Financials © Copyright Gamma 2018
Slide 10: Strong organic growth – Revenue up 12% to £238.4m
Strong organic growth – Revenue up 12% to £238.4m Adjusted EBITDA up 22% to £41.6m Adjusted EPS up 17% to 24.6p Pre-tax operating cash flow up 24% to £38.8m Dividend up 12% to 8.4p 10 © Copyright Gamma 2018
Slide 11: Repeating revenues remain at over 90% – segmental analysis follows
Years ended 31 December (£m) 2015 2016 2017 Growth Revenue 191.8 213.5 238.4 11.7% Repeating revenues remain at over 90% – Cost of sales -109.5 -114.7 -125.4 segmental analysis follows Gross profit 82.3 98.8 113.0 14.4% Gross profit margin 42.9% 46.3% 47.4% Overheads increased by £6.8m – increases A
Slide 12: Channel revenue, gross margin and adjusted EBITDA
Revenue 200.0 150.0 100.0 Growth The anticipated reductions in traditional business were 50.0 Traditional more than offset by increasing sales of growth products 0.0 2015 2016 2017 Strong increases in SIP Trunking and Cloud PBX – underlying Gross margin £(m) growth and gross profit consistent with p
Slide 13: Direct business growing faster driven by Enterprise and Public Sector
Revenue 60.0 40.0 Growth 20.0 Traditional 0.0 Direct business growing faster driven by 2015 2016 2017 Enterprise and Public Sector Gross margin £(m) 30.0 Strong order book mentioned at year end now installed and billing 20.0 Growth 10.0 Traditional Margin increased slightly from 46.3% to 46.5% due 0
Slide 14: Remain debt free with significant cash reserves
Balance Sheet as at 31 December (£m) 2015 2016 2017 Non-current assets (incl. PPE) 35.8 45.3 55.8 Receivables and 37.5 42.9 53.8 inventories Cash 24.8 28.2 31.6 Remain debt free with significant cash reserves Current assets Total assets 62.3 71.1 85.4 98.1 116.4 141.2 Cash conversion at 93.3% – pre-
Slide 15: IFRS15 and IFRS16 changes
Changes are IFRS15 “Revenue from Contracts with Customers” and IFRS16 “Leases” In summary - IFRS15 (for 2017) - Guidance given at end of first half still holds - EPS would have increased slightly to 24.7p from 24.6p - EBITDA reduces from £41.6m to £38.8m – cost of CPE now included in cost of sales n
Slide 16: © Copyright Gamma 2018
16 © Copyright Gamma 2018
Slide 17: Progressive launch of Connect converged fixed/mobile service
Progressive launch of “Connect” converged fixed/mobile service to additional partners PCI Compliance service added to Cloud PBX and SIP Trunking products - (H2 2018) Adding further specific vertical market features and white label option on Cloud PBX - (H1 2018) Introduction of Unified Communication
Slide 18: Outlook: momentum in SIP Trunking expected to continue
The momentum in SIP Trunking expected to continue in the short-medium term with some consolidation amongst smaller operators Cloud PBX market still in high growth phase and new capabilities help fuel that growth Data volumes expanding rapidly, fuelled by fibre investments and Cloud “Connect” – fixed
Slide 19: © Copyright Gamma 2018
19 © Copyright Gamma 2018
Slide 20: Back in the day
“BACK IN THE DAY” : oP ARP : ri COMPANY XYZ ae : Branch Sites Laptops Phones Branch Sites INTERNET (Public and Private) J) Dedicated phone sytem Line Date Servers Connection
Slide 21: Driven by Voice over IP - two options emerged
“DRIVEN BY VOICE OVER IP - TWO OPTIONS EMERGED” Option 1: SIP Use data connection for both voice and data Branch Sites VOICE NETWORK INTERNET AND DATA NETWORK Data +SIP Increase flexibility Easier to manage Save money COMPANY XYZ Option 2: Hosted PBX Use cloud phone system Lower connectivity costs A
Slide 22: Current growth
Enabling Services Cloud CURRENT GROWTH PBX SIP Ethernet Broadband Connect Strategic Services Mobile Inbound New Service Cloud Compute MARGIN (%age) Traditional Calls & Services Lines 22 © Copyright Gamma 2018