Gamma Communications Reports Strong 2024 Results Despite Economic Headwinds
Why we think this is good
Gamma Communications has delivered a robust financial performance in 2024, demonstrating resilience in the face of economic challenges. The company reported significant growth in key financial metrics, including a 34% increase in profit before tax and an 11% rise in revenue. While there are some concerns about macro-economic conditions in key markets like the UK and Germany, Gamma's strategic acquisitions and strong market position in cloud communications suggest a positive outlook. The company's healthy cash position, improved net cash, and new credit facility provide financial stability. However, the decrease in cash generated by operations and adjusted cash conversion rate warrant attention. The company did not report any significant difference between H1 and H2 performance, suggesting consistent growth throughout the year. Additionally, there were no signs of customer concentration risk or reducing customer spend. Overall, the company's performance and strategic positioning outweigh the potential headwinds, supporting a positive sentiment.
Key Points
- Revenue increased 11% to £579.4m, with organic growth of 5% and consistent performance across H1 and H2
- Profit before tax grew 34% to £95.6m
- Adjusted EPS (fully diluted) rose 13% to 85.1p
- Net cash position improved to £153.7m from £134.8m
- Recurring revenue maintained at 89% of total revenue, with no signs of customer concentration or reducing spend
- Strategic acquisitions strengthening position in German market
- New £130m Revolving Credit Facility arranged
- Expecting satisfactory organic growth despite economic challenges
- Final dividend proposed at 13.0p, bringing total dividend to 19.5p (+14%)
- Share buyback programme of up to £50m announced for H1 2025
Summary
Gamma Communications plc delivered robust financial results for 2024, with revenue growing 11% to £579.4m and profit before tax increasing 34% to £95.6m. The company maintained a strong recurring revenue base at 89% of total revenue, with no significant difference reported between H1 and H2 performance. Gamma's strategic acquisitions, particularly in Germany, have strengthened its market position. The company reported a healthy net cash position of £153.7m, up from £134.8m in 2023. While facing macro-economic challenges in the UK and Germany, Gamma expects satisfactory organic growth and strong overall growth, supported by recent acquisitions. The company's focus on cloud communications and UCaaS solutions continues to drive growth, with increasing cloud PBX seats across markets and no signs of customer concentration risk or reducing spend. A new £130m Revolving Credit Facility provides additional financial flexibility. However, investors should note the decrease in cash generated by operations and adjusted cash conversion rate. Broker targets suggest continued confidence, with Deutsche Bank setting a price target of 2,300p, indicating potential upside.