Gamma Communications reports positive trading, agrees to acquire Starface
By Josh White
Date: Tuesday 14 Jan 2025
(Sharecast News) - Gamma Communications announced positive trading results for 2024 on Tuesday, as well as a strategic acquisition to bolster its presence in the German market.
The AIM-traded company said it anticipated reporting a 2024 financial performance in line with market consensus, with adjusted EBITDA within the expected range and adjusted earnings per share in the upper half.
It put its performance down to healthy year-on-year growth driven by organic expansion and recent acquisitions.
Gamma said its UK operations achieved milestones including surpassing one million cloud seats, and secured contracts with major clients such as Morrisons, Equiniti, and the Dorset NHS.
"I am pleased with the results we have achieved in 2024," said chief executive officer Andrew Belshaw.
"We have strengthened key relationships with our technology partners by helping them bring their products into our market, and with our channel partners, by providing them with an expanded range of products to sell to their SME customers."
The firm said its expansion strategy in Europe continued with the acquisition of SF Technologies Holding, trading as Starface, for €196m (£165m).
Starface, a leading provider of IP telephony solutions for German SMEs, would add 210,000 cloud PBX seats to Gamma's portfolio, bringing its total in Germany to over 500,000 seats.
The acquisition would build on Gamma's previous acquisitions in Germany, including HFO in 2020 and Placetel in 2024.
Starface, based in Karlsruhe, specialises in transitioning businesses from on-premise solutions to cloud-based communication systems, supported by a proprietary hardware PBX base of 360,000 seats.
Gamma said its extensive network of more than 2,000 channel partners would significantly enhance its distribution reach in Germany, Austria, and Switzerland.
The company said it was planning to fund the acquisition through £125m of its cash reserves and a £40m drawdown from a new £130m multicurrency revolving credit facility.
It said the facility, which has a three-year term with an optional extension, would also support Gamma's broader capital allocation strategy.
For 2024, Starface was expected to generate €44m in revenue and €15m in adjusted EBITDA, with 70% of its revenue stemming from recurring sources.
"This acquisition marks a significant milestone for Gamma as we further strengthen our position in Europe's cloud communications market," CEO Andrew Belshaw explained.
"By combining Starface's strong partner ecosystem and technical expertise with Gamma's established connectivity capabilities, we're delivering unmatched value to our customers and partners.
"Together, we're not only strengthening our position in the German market but also shaping the future of business communications for SMEs across Europe."
Gamma said it was aiming to increase near-term investments in Starface to accelerate its transition to a software-as-a-service (SaaS) model, with the acquisition projected to be accretive to adjusted earnings per share in 2025.
The company also reiterated its plans to move to the main market of the London Stock Exchange in the second quarter, with an update expected alongside its full-year results announcement on 25 March.
At 1322 GMT, shares in Gamma Communications were down 0.78% at 1,397.07p.
Reporting by Josh White for Sharecast.com.
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