Gamma Communications (LON:GAMA) executives struck an upbeat tone discussing the company’s 2025 results, pointing to double-digit growth in key profitability metrics, strong cash conversion, and what management described as expanding opportunities beyond its traditional U.K. small and medium-sized business (SME) base.
CEO Andrew Belshaw said the company was “super pleased” with performance in 2025, highlighting a 16% increase in gross profit and 13% growth in EBITDA. Belshaw also emphasized that Gamma intends to focus more on gross profit (GP) rather than revenue going forward, arguing GP better reflects underlying value creation even as ARPU can fluctuate on certain solutions.
Profitability, cash generation, and shareholder returns
On cash, Castell said cash conversion remained “well above” the company’s 90% guidance at 93%, generating £131.8 million. Net debt at year-end 2025 was £9.3 million, and Gamma had a £130 million revolving credit facility with £97 million undrawn at year-end. Castell also introduced return on capital employed as a metric Gamma is now disclosing, citing a ROCE of 27.8% for the period.
Shareholder returns were a recurring theme. Castell said Gamma completed a £45.1 million share buyback during 2025 alongside paying dividends. The company raised its dividend by 14% for 2025, with a final dividend of 14.8p and a full-year dividend of 22.2p. Management also reiterated a plan to execute £42.5 million buybacks in both 2026 and 2027 and to keep the dividend flat at the 2025 level, which Castell and Belshaw framed as returning more than £125 million to shareholders over two years.
Germany’s growing contribution and acquisition integration
Management repeatedly highlighted Germany as a major driver. Belshaw said Germany is “heading rapidly towards being a quarter” of group gross profit, while Castell reported German gross profit of £78.4 million in 2025 and a gross margin of 71.1%.
The company acquired Placetel in 2024 and STARFACE in February 2025, and Belshaw said integration of Placetel, STARFACE, and Gamma’s existing German operations “has gone really well.” Castell described Germany’s headline growth rates as elevated due to M&A, but said investors can “model double-digit growth” in the region and that Germany delivered organic double-digit growth excluding acquisitions.
In Q&A, Belshaw provided additional color, saying Placetel and STARFACE were growing roughly 13%–15% year-over-year, which he suggested implied market share gains given peers’ reported growth rates. He also explained that the pre-acquisition German business mix included a high-revenue, lower-EBITDA mobile component and that the SIP business had declined year-over-year before recovering in late 2025 and into Q1 2026 after a leadership change.
U.K. SME stability amid PSTN switch-off and macro pressure
Belshaw acknowledged the U.K. SME environment remains challenging and said Gamma faced a £4 million gross profit headwind from the national PSTN switch-off, as customers migrate from higher-margin copper solutions to lower-margin fiber-based services. He said Gamma entered 2025 expecting the £4 million impact and expects a similar headwind in 2026, with BT still targeting January 2027 for the full switch-off.
Castell said Gamma Business (which includes U.K. SME and the service provider unit) saw modest revenue growth, but gross profit was down 2% organically to £190.8 million. However, he added that excluding the PSTN headwind, Gamma Business was flat year over year.
During Q&A, Belshaw attempted to separate macro from underlying demand, suggesting the U.K. SME business “should probably be growing about 4–5%” in more normal conditions. He attributed current softness to price pressure and reduced customer spending on add-ons, along with lower gross additions and higher churn as fewer businesses start and more close or downsize.
Service provider expansion, enterprise pipeline, and AI initiatives
Gamma also introduced more disclosure around its “service provider” business, which wholesales Gamma’s telephony network capability to third parties that do not operate their own telecom infrastructure. Belshaw said the company now has the capability to operate this business in 30 countries, with sales teams in Australia targeting the APAC region. Castell reported service provider generated £44.3 million of gross profit in 2025 and grew 3% organically.
Belshaw described enterprise as improving through the year, with a difficult first half followed by a strong Q4. Castell said enterprise was flat on revenue and slightly down organically at the gross profit level, citing Ethernet pricing challenges, but both executives said momentum improved due to Q4 wins and an improving pipeline. Belshaw said some of the business won in late 2025 would be reflected in results in the second half of 2026, given typical deployment timelines. In Q&A, management said enterprise sales cycles can range from months for some deployments to 12 months or longer for large network transformations, with pan-European opportunities often taking longer.
Management also discussed AI as both an internal tool and a revenue opportunity. Belshaw said Gamma is using AI to improve network efficiency, security, and fraud detection, and is selling AI-based customer solutions such as an “AI Concierge” voice agent. He cited a German customer example using an AI voice agent to answer around 3,000 calls per month, and said monthly revenue from that customer increased fourfold. Belshaw added that Gamma’s AI voice agent in Germany had reached about €50,000 in monthly revenue and was growing about 30% month-on-month at the time of the call, while cautioning that growth rates would moderate.
Elsewhere, executives pointed to product and partnership developments, including Gamma joining the Zoom Provider Exchange program, which Belshaw said would allow Zoom customers to make and receive phone calls using phone numbers via Gamma’s network. Management also highlighted Webex in the U.K., calling it the company’s “best product launch” and saying it went from zero to more than 20,000 users in three to four months, with plans to take Webex to Spain.
Looking ahead, Castell said Gamma was comfortable with market expectations for 2026, referencing analyst ranges for adjusted EBITDA of £138 million to £144.6 million and adjusted EPS of 90p to 96.6p. Belshaw said the company is focused on five priorities for 2026, including migrating customers to modern platforms, growing the core business, expanding into adjacent markets, maintaining operational efficiency, and continuing to deliver high service quality.
The company also addressed leadership changes, with Belshaw thanking Castell for four years as CFO and announcing Damian Moultrie as his successor.
About Gamma Communications (LON:GAMA)
Gamma Communications plc, together with its subsidiaries, engages in the provision of technology-based communications and software services for small, medium, and large sized to businesses in Western Europe. The company offers Unified Communications as a Service products for enabling businesses to raise productivity, boost agility, and increase collaboration; Contact Centre as a Service, through a software platform that allows contact centres to operate over the internet for SMEs and Enterprise; and Direct Routing and Operator Connect services, designed to enable seamless and integrated calling between Teams and the local telephony infrastructure.
