Gamma Communications plc
Annual Report and 
Accounts 2014
Communicate
Innovate Gamma is an AIM listed 
communications company. 
We are a leading supplier  
of business communications 
services to the UK market.
Welcome to our 2014 
maiden Annual Report. Leeds
Manchester
Birmingham
Milton Keynes
London Bristol
Local 
connection
Customer’s 
site(s)
Portal
National 
network
Fixed connection
Mobile connection
Gamma Core 
Network
– Services 
– Applications 
– Interconnects
What we do for our customers
The way people work, communicate  
and collaborate is undergoing profound 
change. And it is all in the quest  
for increased business productivity  
and efficiency while at the same time 
reducing operational and IT costs.
 
We supply a broad range of 
communications to small, medium  
and large-sized business customers,  
the public sector and not-for-profit 
organisations, both through our large 
network of channel partners and  
directly. Our products include fixed 
telephony, IP telephony, Cloud PBX 
solutions, broadband and data 
connections, mobile services, and  
unified communications solutions.
What makes us different
 → Outstanding customer service
 → Excellent network coverage and resilience
 → Complete solutions from just one supplier
 → Commercial strength and stability
 → Strong balance sheet and consistent market strategy
Who we are and… …what we do
Our business at a glance
Gamma creates simplified 
communications and 
software services for 
business. With a broad  
range of voice, mobile and 
data services, we lead on 
network strength, products 
that are both easy to use 
and provision, and quality 
through automation. 
Gamma is a rapidly growing, 
technology-based provider 
of advanced communications 
services to the UK business 
market. 
Network
We operate a 2000 km optical 
fibre network formed in a 
resilient ‘figure of eight’ 
architecture around the UK.
Our core network centres  
are spread across six main 
locations and our key product 
platforms are located in at 
least two of these locations, 
with the ability for each  
node to act independently 
should one fail. As a result  
we typically achieve an 
availability of 99.997%  
or better for these resilient 
platforms.
Key
  National network
  Service centre
A history  
of Gamma
2001–02 2007–08 2003–04 2009–10 2005–06 2011–14
 → Initially formed through 
selective acquisition of  
UK national network  
assets and relevant staff 
from the administrators  
of Atlantic Telecom.
 → Invested £10m into the 
core network to position 
the business for next 
generation services.
 → Acquired the IPR on billing 
and support systems, and 
specialist software skills  
in Budapest.
 → Agreement with Telia to 
enable its channel partners 
to transfer their UK voice 
services to Gamma.
 → Won major supply contracts 
with Tiscali, AOL and Pipex.
 → Acquired a direct sales 
channel through the 
acquisition of Uniworld 
Communications Limited 
for £10.4m.
 → First phase SIP Trunking 
launched.
 → Full carbon offset, 
becoming first  
carbon-neutral carrier.
 → Launched inbound  
call control services.
 → Expanded to 350  
channel partners.
 → Broadened the portfolio 
substantially to include  
data services, Cloud  
PBX (branded Horizon)  
and Mobile.
 → Acquisition of Varidion  
Limited, a small systems 
integrator and wide area 
data specialist, thereby 
strengthening the 
Company’s capability  
with large enterprise and 
public sector customers.
 → Launch of “The Loop”  
in Manchester to exploit 
the extensive fibre and 
ducting assets the Group 
has in the City.
Who and where we are
As of December 2014, Gamma has  
559 staff based across five main sites  
in the UK with a small development 
centre in Budapest. Some 20% of our 
people are actively engaged in either 
developing or enhancing our services.
Gamma Communications plc
Annual Report and Accounts 2014 3 2
Strategic  
report
Corporate 
governance
Financial  
statements
Strategic report  2
Our business at a glance 2
Market overview 4
Chairman’s statement 6
Business model 8
Chief Executive Officer’s review 10
Strategy for growth 14
Key performance indicators 16
Performance metrics 17
Principal risks and uncertainties 18
Business Unit review 20
Indirect Channel Business Unit 22
Direct Channel Business Unit 24
Financial review 26
Corporate social responsibility 28
Corporate governance 30
Governance introduction 30
Board of Directors 32
Senior management 34
Corporate governance report 36
Audit Committee report 38
Remuneration Committee report 40
Directors’ report 46
Statement of Directors’ responsibilities 48
Financial statements  49
Independent auditor’s report  49
Consolidated statement  
of comprehensive income  50
Consolidated statement of  
financial position 51
Consolidated statement of cash flows 52
Consolidated statement of changes  
in equity 53
Notes forming part of the  
financial statements 54
Company balance sheet 81
Notes forming part of the  
Company financial statements 82
Supplementary information 84
Glossary of terms 84
Company information IBC
Contents
Financial 
highlights
£67.6m
Gross profit improved from £53.9m  
to £67 .6m (up 25%) 
£17.9m
Unadjusted EBITDA grew by 10% 
from £16.3m to £17 .9m 
£16.4m
Net cash inflow from operating 
activities was £16.4m up 17%  
from £14.0m in 2013
£23.1m
Adjusted EBITDA grew by 34%  
from £17 .2m to £23.1m 
£173.2m
Overall revenue grew from £148.7m 
in 2013 to £173.2m (up 16%) 
Page 2
Our business at a glance Local 
connection
Customer’s 
site(s)
Portal
National 
network
Fixed connection
Mobile connection
Gamma Core 
Network
– Services 
– Applications 
– Interconnects
What we do for our customers
The way people work, communicate  
and collaborate is undergoing profound 
change. And it is all in the quest  
for increased business productivity  
and efficiency while at the same time 
reducing operational and IT costs.
 
We supply a broad range of 
communications to small, medium  
and large-sized business customers,  
the public sector and not-for-profit 
organisations, both through our large 
network of channel partners and  
directly. Our products include fixed 
telephony, IP telephony, Cloud PBX 
solutions, broadband and data 
connections, mobile services, and  
unified communications solutions.
What makes us different
 → Outstanding customer service
 → Excellent network coverage and resilience
 → Complete solutions from just one supplier
 → Commercial strength and stability
 → Strong balance sheet and consistent market strategy
Who we are and…
Our business at a glance
Gamma is a rapidly growing, 
technology-based provider 
of advanced communications 
services to the UK business 
market. 
A history  
of Gamma
2001–02 2003–04 2005–06
 → Initially formed through 
selective acquisition of  
UK national network  
assets and relevant staff 
from the administrators  
of Atlantic Telecom.
 → Invested £10m into the 
core network to position 
the business for next 
generation services.
 → Acquired the IPR on billing 
and support systems, and 
specialist software skills  
in Budapest.
 → Agreement with Telia to 
enable its channel partners 
to transfer their UK voice 
services to Gamma.
 → Won major supply contracts 
with Tiscali, AOL and Pipex.
 → Acquired a direct sales 
channel through the 
acquisition of Uniworld 
Communications Limited 
for £10.4m.
Who and where we are
As of December 2014, Gamma has  
559 staff based across five main sites  
in the UK with a small development 
centre in Budapest. Some 20% of our 
people are actively engaged in either 
developing or enhancing our services.
2 Leeds
Manchester
Birmingham
Milton Keynes
London
Bristol
…what we do
Gamma creates simplified 
communications and 
software services for 
business. With a broad  
range of voice, mobile and 
data services, we lead on 
network strength, products 
that are both easy to use 
and provision, and quality 
through automation. 
Network
We operate a 2000 km optical 
fibre network formed in a 
resilient ‘figure of eight’ 
architecture around the UK.
Our core network centres  
are spread across six main 
locations and our key product 
platforms are located in at 
least two of these locations, 
with the ability for each  
node to act independently 
should one fail. As a result  
we typically achieve an 
availability of 99.997%  
or better for these resilient 
platforms.
Key
  National network
  Service centre
2007–08 2009–10 2011–14
 → First phase SIP Trunking 
launched.
 → Full carbon offset, 
becoming first  
carbon-neutral carrier.
 → L a u nc he d i n b ou nd  
call control services.
 → Expanded to 350  
channel partners.
 → Broadened the portfolio 
substantially to include  
data services, Cloud  
PBX (branded Horizon)  
and Mobile.
 → Acquisition of Varidion  
Limited, a small systems 
integrator and wide area 
data specialist, thereby 
strengthening the 
Company’s capability  
with large enterprise and 
public sector customers.
 → Launch of “The Loop”  
in Manchester to exploit 
the extensive fibre and 
ducting assets the Group 
has in the City.
Gamma Communications plc
Annual Report and Accounts 2014 3
Strategic  
report
Corporate 
governance
Financial  
statements Understanding and 
responding in a vibrant 
communications market
Market overview
Our services are designed  
to meet the needs of the  
UK business market, from  
small businesses to national 
enterprises. We do not compete 
in either the residential market, 
or the market for multinational 
corporations. Our focus is on 
software based services that 
we can supply from the core  
of our network (i.e. cloud- 
based) and we minimise our 
involvement with equipment  
on the customer’s premises. 
Major trends impacting  
growth in our market are  
the shift of hardware to the 
Cloud, the availability of optical  
fibre access for businesses,  
the growth in smartphones,  
and the growing convergence  
of communications and IT .
SIP Trunking: Business Grade VoIP
SIP T runking is increasingly being used by 
business customers to replace traditional 
ISDN lines. At the end of 2014 there  
were estimated to be 1.5m SIP Trunking 
channels deployed in the UK, of which 
Gamma has a 16% share and is the 
market leader. The broader directly 
relevant market, however, is the 3.2m 
business ISDN channels for which SIP 
Trunking offers a modern, more cost-
effective alternative. Gamma’s growth 
rate in sales of SIP Trunking services  
in 2014 was 45%.
Cloud PBX: A phone system  
in the Cloud
The total UK business PBX market 
(including on-premise and hosted) is 
approximately 17 .6m seats, of which 
close to 1.65m are hosted PBX seats. 
Cloud PBX services are increasingly 
replacing traditional, on-premise  
PBX infrastructure with seat volumes  
growing at circa 22% per annum  
including private Cloud PBXs.  
In 2014 Gamma’s growth rate  
in Cloud PBX seats was 86%.
75%
Research predicted that by the  
start of 2014 more than 75% of  
UK businesses would be using  
at least one type of Cloud service
4 Inbound
The market for Inbound Call Control 
Services ranges from large enterprises  
to small organisations for whom 
professionally managing inbound calls 
(such as for sales and customer services)  
is important as it enables them to queue, 
record and route calls effectively.
Ethernet
Ethernet is becoming the dominant  
Wide Area Network transmission 
technology because it can transport  
large amounts of any type of data in  
a fast, assured and economic manner. 
Ethernet connectivity between Local 
Area Networks enables multiple services 
and applications to operate seamlessly 
across different geographical locations. 
Gamma is a relatively late entrant  
to this market and views Ethernet  
as an enabling technology for its more 
strategic services such as SIP Trunking.
Broadband
Gamma offers a quality business-grade 
broadband service and does not 
compete for the residential market. 
Connections grew by 45% in 2014. 
Mobile services
Gamma acts as a virtual operator,  
either under its own brand or that of  
its channel partner. In 2014 Gamma’s 
market share of the UK business market 
stood at just 0.6%, leaving plenty of 
opportunity for further growth. 
Routes to market
Gamma sells all of its products through 
both the indirect channels (via 725 
channel partners) which generates 79% 
of its revenue, as well as selling to end 
users through the direct channel.
Efficiency case study:
Knight Frank  
estate agent
The challenge – to meet a growing demand  
for real time audio, video and imaging on the 
desktop, Knight Frank wanted to move away 
from computing in the server room and put 
processing power back on users’ desks.
At the same time the firm wanted to  
improve its communications infrastructure  
to better support a mobile and increasingly 
global workforce, and to deliver a seamless, 
multimedia and more collaborative experience 
for all users.
Firstly we brought the Knight Frank branch 
network up to date by replacing some  
600 legacy telephone lines and broadband 
links with an Ethernet wide area network, 
delivering a 40 times increase in capacity  
and generating new opportunities for video 
and voice. 
Building on the new Ethernet infrastructure, 
we implemented SIP telephony across the 
organisation, creating an environment for 
Microsoft® Lync® and leveraging our Lync® 
2013 accreditation. We brought Knight 
Frank’s extensive and disparate population  
of mobile devices under the Gamma umbrella, 
bringing opportunities for fixed/mobile 
convergence and BYOD.
“The main benefits we’ve seen (by working 
with Gamma) have been a rock solid 
architecture across the organisation that 
we’ve really been able to build on. As it has 
developed it has allowed us to do additional 
things that have delivered some pretty 
incredible cost savings.”
Owen Williams
Partner and Group Head of IT, Knight Frank
1,000
Since 2000, available broadband 
speeds in the UK have risen from 
0.5 megabits per second to 1,000
94%
In 2000, 50% of adults in the UK 
used a mobile phone. Today this 
figure is 94%
3.2m
There are 3.2m business ISDN 
channels in the UK, for which SIP 
Trunking offers a modern, more 
flexible and lower cost alternative
Gamma Communications plc
Annual Report and Accounts 2014 5
Strategic  
report
Corporate 
governance
Financial  
statements An exciting year 
for Gamma
Chairman’s statement
2014 has been an excellent 
year for Gamma with a 
successful AIM listing  
and revenue and profit 
continuing to increase.
Introduction
I am very pleased to present my  
first report on the results of Gamma 
Communications plc for the year ended 
31 December 2014 since its successful 
IPO and listing on the Alternative 
Investment Market (AIM) on 10 October 
2014. To have the opportunity to be 
Chairman of a growing and dynamic 
company such as Gamma, operating  
in the vibrant communications market, 
and working with a truly professional 
Board and management team is very 
exciting and one to which I am greatly 
looking forward.
Gamma has had exceptional support 
from its founder Shareholders for many 
years; they nurtured its growth and 
provided an environment in which it 
could develop into the successful 
business it is today. We are pleased that 
they remain significant Shareholders  
as the Company moves to its next phase 
of growth and development as an AIM 
listed company. The AIM listing provided 
Gamma with the opportunity to broaden 
its Shareholder base, give it access to 
new sources of capital for future growth 
and development and provide increased 
visibility and recognition for the 
business in its markets.
Overview of results 
Overall Group revenue for the year  
ended 31 December 2014 increased  
by £24.5m to £173.2m (2013: £148.7m),  
an increase of 16% compared to the  
year ended 31 December 2013. Of  
this increase, £17 .9m came from the 
indirect channels business which grew 
revenue to £136.9m (2013: £119.0m) 
and £6.6m from the direct business 
which saw revenue increase to £36.3m 
(2013: £29.7m). 
Gross profit for the year to 31 December 
2014 amounted to £67 .6m, an increase 
of 25% compared to the £53.9m 
achieved in 2013, whilst the gross profit 
percentage increased to 39.0% (2013: 
36.2%). EBITDA, before exceptional costs 
and share based payments, for the Group 
as a whole increased to £23.1m (2013: 
£17 .2m), an increase of 34% compared to 
the previous year. Adjusted earnings per 
share for the year ended 31 December 
2014 were 15.0p (2013: 10.8p); 
unadjusted earnings per share were 
10.0p (2013: 9.9p).
The net operating cash inflow for the 
year was £16.4m compared to £14.0m  
in 2013. This represents a cash to 
EBITDA ratio in respect of 2014 of 92% 
compared to 86% for 2013. Despite the 
increased capital expenditure and other 
exceptional items, net cash as at 31 
December 2014 amounted to £13.4m, 
which is marginally down from £14.6m 
as at 31 December 2013. 
Dividend 
Gamma, as stated at the time of the IPO, 
is committed to a progressive dividend 
policy. I am therefore pleased to announce 
that a dividend, in respect of the year 
ended 31 December 2014, of 3.95 pence 
per share will, subject to the necessary 
Shareholder approval at the forthcoming 
Annual General Meeting, be payable to 
Shareholders on the register at 5 June 
2015. This dividend represents a yield of 
2.1% on the IPO price.
Corporate development 
Not surprisingly, Gamma’s focus in 2014 
was the successful IPO of the business, 
which in itself will enhance the corporate 
development opportunities available  
to the Company. It does, however,  
remain Gamma’s intention to look for 
opportunities to invest in new business 
areas and make appropriate earnings-
enhancing acquisitions which support  
6 its strategic objectives. In 2014 Gamma 
came to an agreement with the vendors 
of Varidion Limited (acquired in 2012)  
to settle the deferred element of the 
consideration early by paying £2.6m  
in cash. This was considered appropriate 
as it has enabled the integration and 
development of the business and  
its management to be completed  
more quickly.
In December 2014 Gamma purchased 
control equipment that provides the core 
of a mobile network. When brought into 
active use, currently anticipated to be 
2016, the Group will have much greater 
control and flexibility over its mobile 
services and be much better positioned 
for the widely anticipated market for 
converged services, with a specific  
focus on the business market.
Board and employees 
As part of the preparation for IPO a 
number of changes to the Board took 
place during 2014. Firstly, I should like  
to thank Owen Jonathan, previously 
Chairman, who retired from the Board  
in May 2014, and Ean Kuok and Steve 
Burton, who resigned from the Board  
just prior to the IPO, for their tremendous 
input into the Company and for their 
support and encouragement to the 
executive management team. Secondly,  
I should like to welcome the new members 
of the Board, Alan Gibbins and Martin  
Lea, who both joined in June 2014 as 
Independent Non-Executive Directors; 
they have taken on the roles of Chairman 
of the Audit Committee and of the 
Remuneration Committee respectively.  
I should also like to welcome Andrew 
Belshaw who was appointed to the  
Board as Finance Director in October 
2014; I believe the Board as presently 
constituted has a wealth of experience 
and the necessary understanding to help 
take Gamma through its next stage of 
development and beyond.
The senior executives, managers and 
employees are the bedrock of Gamma 
and they have significantly contributed 
to the creation of the successful 
company we have today. I should like  
to thank them for their consistent hard 
work and continued support, especially 
during the IPO process when, despite  
the significant increase in workload  
of the executive Board members and  
the senior executive team, the business 
continued to grow and develop 
successfully and provide excellent 
support to our customers and partners. 
Gamma is fully supportive of 
apprenticeship schemes, employee 
volunteering within the local community 
and has a policy of matched funding  
for charitable activities by staff. 
Employee motivation and development 
are fundamental principles of Gamma  
and lead, we believe, to a successful  
and strong business.
Outlook 
The Board looks forward to 2015  
with great enthusiasm and believes  
that Gamma will continue to benefit  
from the investment it has made and 
continues to make in its direct and 
indirect business channels. Gamma’s 
stated vision is to continue to grow  
both its market share and profitability  
by developing new innovative 
communications products for business 
and the public sector. We believe that 
Gamma has the experience, resources 
and capabilities to continue to achieve  
its objectives.
Richard Last  
Chairman and Independent  
Non-Executive Director
6th
Fixed Line Network 
Provider of the Year 2014, 
6th year in a row
100
Gamma was recognised as 
one of ‘The Sunday Times 
Best 100 Companies to 
Work For – 2014’
Corporate governance 
page 30
Gamma Communications plc
Annual Report and Accounts 2014 7
Strategic  
report
Corporate 
governance
Financial  
statements SME/Mid Market
15% of Gamma revenues
Enterprise and Public Sector
(5% of Gamma revenues)
Channel 
partners
End users/
customers
The services are provided 
for these business markets:
Gamma provides 
these services:
Voice
Data
Mobile
Channel
(80% of Gamma 
revenues)
Business model
How Gamma  
creates value
Highly cash generative  
with a resilient business 
model, a broad customer 
base and low customer 
concentration, Gamma has 
seen strong growth driven 
by repeating revenues.
Gamma is a rapidly growing, technology-
based provider of communications 
services to the UK business market. 
Gamma’s services, such as Cloud PBX, 
Inbound Call Control Services and SIP 
Trunking, are designed to meet the 
increasingly complex voice, data and 
mobility requirements of businesses, 
through the exploitation of its know- 
how and own intellectual property.
Gamma also provides services such  
as business-grade broadband, Ethernet, 
mobile and data services. Also, as a 
consequence of its history, Gamma has  
a substantial voice service capability, 
completing its comprehensive range  
of communication services. 
Our services
Our portfolio comprises voice, data  
and mobile services that are sold 
indirectly through channel partners  
and directly to end users. These 
services are sold in a standard, 
repeatable way to both partners and 
customers. What creates value and 
differentiation in our services is the way 
we deliver them to our partners via the 
Gamma portal. The business invests 
significantly in software resources to 
automate, simplify and speed up the 
provisioning and billing of our services. 
This focus on “ease of use” for all our 
services across one platform is a key 
differentiator, and reduces the back 
office costs of our partners. 
Growing our business
The business has consistently grown  
its margins over the last five years and 
this growth has come from right across 
our different channels. We do not have a 
target mix for indirect and direct business 
– we will let the business market decide. 
This growth has come despite industry 
reductions in regulated prices and 
difficult economic conditions.
A resilient business model
8 Traditional
services
Enabling
services
Growth
Margin
Ethernet
Mobile
Inbound
Cloud
PBX
SIP
Trunking
Broadband
Calls and 
lines
Strategic
services
Case study:
Alternative 
Networks
 “We’re all about designing and 
building solutions that solve 
business issues. Through the strong 
and supportive channel partner 
relationship we enjoy with Gamma, 
we benefit from innovative and 
flexible products and focused 
marketing support.
Gamma’s broad portfolio of products 
and services can uniquely blend 
together, making it easier for us  
to present a seamless proposition  
to clients, while maximising the 
cross-sell and margin opportunity. 
Our clients fully recognise the 
benefits of moving away from 
legacy technology over to 
technology that enables far more 
flexibility, provides a robust and 
resilient platform and gives them 
the ability to change the shape  
of their business. Our partnership 
with Gamma means we can help  
our clients make this change and 
realise these benefits.”
Neil Rampe
Group Commercial and Marketing 
Director at Alternative Networks
37 ,000
We have added over 37 ,000 new 
seats during 2014 to the Horizon 
product, our Cloud-based alternative 
to a traditional phone system (PBX)
Service portfolio
Public sector
This is becoming an increasingly 
important market for Gamma, both 
through a number of key channel 
partners, who are active and successful  
in the public sector, and our own direct  
sales capability. Through framework 
agreements we now have a significant 
presence in education, health and  
local government, and are now looking  
to establish a presence in central 
government under the new Public 
Services Network (PSN) framework.
Strategic services
The single biggest factor in the success of 
the business over the last five years has 
been the transition from selling traditional 
services, such as calls and lines, to 
providing the more strategic services of 
Cloud PBX, SIP T runking and Inbound Call 
Control Services. For the customer, these 
services have three inherent advantages 
over the services they replace: they cost 
less, they are more flexible and feature-
rich, and they do not require significant 
capital expenditure to implement.  
For Gamma, the investment in product 
development is returned with improved 
margins, longer contracts and lower  
churn as the products are more integral  
to a business operation. The enabling 
services of Ethernet, mobile and 
broadband (see diagram) are prerequisites 
for providing the strategic services and  
for ensuring that Gamma, and its channel 
partners, maximise the revenue 
opportunity from each customer.
Gamma Communications plc
Annual Report and Accounts 2014 9
Strategic  
report
Corporate 
governance
Financial  
statements Welcome to Gamma’s  
inaugural Annual Report
Chief Executive Officer’s review
May I echo the Chairman’s 
comment in thanking the 
founding Shareholders  
for their unstinting support 
for the business for over  
ten years.
operators to provide a much broader 
range of business IT and communications 
services has given us the opportunity  
to work with a much wider range  
of organisations, from IT specialists  
to Systems Integrators. We have been 
particularly pleased to help many of  
our partners, including larger channel 
partners such as Alternative Networks, 
Capita IT, HighNet and Focus, to expand 
their portfolios and grow their capability  
in the UK business market.
Direct sales
The direct arm of Gamma’s business  
grew rapidly, particularly in the larger 
enterprise sector. This included  
some significant wins, such as Hearst 
Magazines, for whom the business 
provides all data, voice and mobile 
services. FCC Environment also selected 
Gamma to implement and support, for  
the next three years, a fully managed 
next generation voice and data network 
for their extensive estate. We were also 
awarded major multi-year infrastructure 
contracts from BDO LLP and Moore 
Stephens LLP .
In the public sector, where we  
see considerable scope for growth,  
the business has been particularly 
successful in the education sector,  
adding 25 academic institutions that 
include Oxford and Bristol Universities. 
We also became approved suppliers of  
fixed telephony services to public sector 
organisations, being awarded one of  
ten positions in the Crown Commercial 
Listing on AIM was an important step 
forward in the development of Gamma. 
Being a listed business raises the 
corporate profile of Gamma and PLC 
status increases access to business  
and public sector markets, both important 
growth opportunities. 
It was particularly pleasing to guide  
the business on a smooth transition  
from private to public ownership while 
delivering such a strong trading 
performance. The breadth and depth  
of the broader Gamma management 
team ensured that trading remained 
undisturbed, with the business having  
a record year.
Overall, revenue grew from £148.7m  
in 2013 to £173.2m (+16%) whilst gross 
profit improved from £53.9m to £67 .6m 
(+25%). Adjusted EBITDA grew by 34% 
from £17 .2m to £23.1m, while adjusted 
profit before tax increased to £16.7m,  
up 35% from £12.4m in 2013.
The outlook for Gamma remains positive, 
and we look forward to continuing the 
strong momentum in the business and 
delivering sustainable long term value  
for our stakeholders.
Channel partners 
With almost 80% of Gamma’s revenues 
coming indirectly from our channel 
partners, we were very pleased to see 
the number of partners that trade with 
us grow from 627 to 725 during the  
year. The clear trend amongst channel 
2014 saw a strong financial and operational performance  
from Gamma, as well as a successful listing on the Alternative 
Investment Market (AIM). 
10 Service’s RM1035 framework. Gamma 
also mirrored this in Scotland, being  
one of eight approved suppliers of 
telecommunications services via the 
Scottish Procurement Framework.
Strategic products 
Our strategic products of SIP Trunking 
(business grade VoIP) and Horizon (our 
hosted PBX service) have enjoyed 
exceptional growth. Our SIP product – 
which is a more flexible alternative  
to traditional ISDN – grew by 45% from 
161,000 to 234,000 channels during 
2014. With the consistent investment  
in automated processes that we have 
made over several years, the business 
has readily coped with order volumes  
at times exceeding 10,000 channels  
per month. During 2014 we introduced  
a number of service enhancements, 
including additional resilient options,  
and new pricing initiatives that bundle  
in the call minutes. Gamma is pleased to 
be recognised as the current UK market 
leader in SIP Trunking.
As businesses look to put more services 
in the Cloud, the traditional PBX is being 
seriously challenged by hosted services. 
Gamma’s Horizon product has achieved 
growth of 86% over the last year.  
With over 80,000 connected handsets, 
Gamma now has over 250 channel 
partners accredited to sell the product.
With both SIP Trunking and Horizon,  
the business has taken the significant 
step of bundling both calls and access 
connectivity into the service package; 
Exploiting existing services
 
Infrastructure investment
Introducing new services
Developing the market
Execution
creating both a one-stop-shop for service 
and providing greater certainty on costs 
for the customer. Indeed, for Horizon,  
this bundling has extended to include  
the fixed telephone handset.
Enabling products 
Gamma’s enabling services of ethernet, 
business-grade broadband, and mobile 
also grew significantly during the year.  
For example, the number of business-
grade broadband connections grew  
from 20,000 to 29,000.
Traditional products 
Margins on the traditional business, which 
we define as conventional wholesale calls 
and lines on TDM technology, increased 
marginally over the year, ahead of the 
general reduction in the market. We have 
significantly reduced our role in carrying 
traffic for the fixed line calling card 
market, which is being steadily displaced 
by targeted mobile offerings.
Corporate development
We were particularly pleased to finalise 
the consideration paid on our 2012 
acquisition of Varidion Limited at  
£3.6m by paying £2.6m in the year.  
This business unit, which provides more 
bespoke services for larger organisations, 
has performed exceptionally well since 
becoming a part of the Gamma Group.  
In 2014 it had revenues of £7 .8m  
and EBITDA of £1.4m. It is now being 
integrated deeper into the organisation 
in anticipation of strong growth in 2015 
and beyond. 
Introducing our strategy 
for growth, find out 
more on page 14
Gamma Communications plc
Annual Report and Accounts 2014 11
Strategic  
report
Corporate 
governance
Financial  
statements Chief Executive Officer’s review
Operational performance
With Gamma now providing services to 
a growing proportion of UK businesses, 
the quality of the operational services 
is absolutely paramount, and an  
area where the business seeks to 
differentiate itself from its competitors.
Overall, across all Gamma products  
the 2014 performance was above  
the service levels offered, although  
in a technical operation of our  
scale there were inevitably a small 
number of service glitches. In all  
cases the business has been ruthless 
in identifying and eliminating the  
root causes. Overall, the service  
trend has been one of continuous 
improvement over several years. 
Strong emphasis continues to  
be placed on the quality of the 
operational service, the elimination  
of risk and improvements in security, 
and to this end the business has 
maintained its certification in both  
ISO 27001 and ISO 22301. Surveys  
of customer satisfaction have 
provided very positive results, with  
a Net Promoter Score (NPS) of +29% 
for the indirect business and +22%  
for the direct – both excellent results. 
The performance of BT Openreach 
continues to be of significant concern 
and the greatest driver of complaints.
We are working with other BT 
Openreach customers and the OTA 
(Office of the Telecommunications 
Adjudicator) to drive service 
improvement for business customers.
Welcome to Gamma’s  
inaugural Annual Report 
continued
12 Regulatory
Gamma intervened in support of an 
appeal brought by BT at the Supreme 
Court regarding the termination rates  
for non-geographic numbers; we were 
pleased that the Supreme Court allowed 
BT’s appeal. Gamma now awaits the 
outcome of two follow-on cases before 
the Competition Appeal Tribunal in 
relation to its termination rates for  
these calls. 
Investments in product development 
Over 2014 we continued our investment 
in the core network. This latest 
generation infrastructure will enable 
more converged voice, data and software 
services, to support the growth of the 
business and reduce third party costs.
The business also continues to invest 
heavily in product development, with 
around 20% of the staff resources 
allocated to this function. With a broad 
product portfolio, much of the focus has 
been on enhancing the current product 
set. A key focus in the development of 
the Horizon Cloud PBX was the addition 
of soft clients for PCs and smartphones, 
and the ability to interwork the Horizon 
product with the customer’s internal 
systems – enhancing the service from  
a replacement telephony service to  
a more unified communications solution.
We have also launched a voice business 
continuity product enabling a business  
to immediately redirect all its incoming 
calls to a pre-prepared plan in the event 
of difficulty.
In December 2014 we made an 
opportunistic, but strategic, acquisition  
of equipment that comprise the ‘core’ of  
a mobile network, i.e. the equipment 
which controls the voice and data 
services used by a mobile subscriber.  
We currently anticipate bringing those 
assets into active use in 2016. This  
will give us both a reduced cost of sale 
and the ability to add more converged 
fixed and mobile services for the UK 
business market.
People
The average number of people in the 
Gamma Group increased over the year 
from 431 to 519 primarily to support  
the growth in product volume and future 
product development. In support of  
this growth we entered into new leases 
on properties in London and Glasgow  
to cater for the continued expansion  
of the business.
Once again Gamma was recognised  
as one of “The Sunday Times 100 Best 
Companies to Work For 2014”. As well  
as aiding recruitment and retention,  
the survey process has provided us with 
valuable and detailed feedback from  
our employees.
We were also pleased to receive the 
industry awards for ‘Network Operator  
of the Year 2014’ and ‘Best Fixed Line 
Network Provider 2014’ from Comms 
Business and Comms Dealer CNA awards 
respectively.
Outlook
And so to 2015, where our core strategy 
is to remain a leader in the high growth 
sectors of the business communications 
market (such as SIP Trunking and Cloud 
PBX) underpinned by absolutely the best-
in-class in terms of quality of service and 
with the best and most motivated staff 
we can hire. We expect the volumes  
to continue to grow in strategic markets 
(SIP Trunking, Cloud PBX etc) and to 
continue to decline in traditional services 
(phone calls and lines), with our margins 
continuing to migrate from traditional  
to strategic. 
The industry as a whole continues  
to undergo major changes, such as the 
proposed acquisition of EE by BT, much  
of it driven by larger players looking  
to take multiple service offerings to the 
consumer market. Gamma, by contrast, 
remains wholly focused on the UK 
business market and the Channel  
as an effective route to that market. 
Bob Falconer
Chief Executive Officer
Gamma Communications plc
Annual Report and Accounts 2014 13
Strategic  
report
Corporate 
governance
Financial  
statements >  
>  
>  
>  
>  
>  
>  
>  
Maintaining our “Policy of One” in terms of underlying 
systems.  
Execution
Exploiting existing services
Maintaining focus on the high-growth market opportunities 
for services such as SIP Trunking and Cloud PBX. 
Continuing to minimise the erosion of traditional services 
in spite of anticipated market size reductions by oering 
customers extra features and a migration path to strategic 
services and enabling services.
   
Increasing ﬂexibility of approach to increase share of 
customer spend over time as multiple services increasingly 
procured from the same supplier and individual incumbent 
contracts expire.  
Infrastructure investment
Completing the infrastructure investment programme 
currently underway in order to better position the business 
to supply more converged services and multi-site data services.    
Reducing cost by expanding the data network deeper into 
the regulated BT Openreach exchanges. 
Seeking commercial opportunities to expand and deepen 
its technical capability in mobile services.
Introducing new services
Developing the market
Launching an MPLS data service in 2015 to address 
the needs of larger multi-site organisations supported 
by a single set of IT systems and Gamma’s portal.
Growing Gamma’s brand awareness in the UK business 
market in support of the above.
Growing business in the public sector and gaining access 
to further public sector framework agreements.
Developing more converged services, and commercial 
bundles of services, to meet the perceived demand for 
such services in the UK business market.
Our objective
Gamma’s objective is to 
continue to grow both its 
market share and proﬁtability 
by developing new innovative 
communications products 
for organisations.
Growing the number of channel partners Gamma works 
with and deepening the relationship with existing channel 
partners by providing attractive services and support.
Growing our profitability  
and market share
Strategy for growth
This strategy will be principally 
pursued organically, but Gamma  
is also well placed to consider 
strategically relevant acquisitions 
as the opportunities arise.
Our vision is delivered  
via five strategic pillars:
Key performance
indicators 
page 16
14 Innovation  
case study:
Pret A Manger
Leading food retailer Pret A Manger 
has signed a contract with Gamma for 
the provision of a secure, PCI (Payment 
Card Industry) compliant, managed 
communications solution to deliver 
mission-critical applications, such  
as credit card, voice and VDI traffic,  
to global datacentres and over 300 
high street locations. The contract  
will enable Pret to prioritise shop floor 
applications, allowing for intelligent 
use of bandwidth and secure passage 
for important traffic like credit cards. 
Furthermore, the network will be 
optimised for compliancy and cross 
border traffic flow, increasing 
productivity and customer service 
across the organisation. With an 
inclusive 24/7 managed service  
that removes burden and total cost  
of ownership, Pret is able to take 
advantage of a robust, secure and 
scalable network and focus completely 
on growing its successful business. 
A key factor in choosing Gamma  
to design, implement and manage  
the communications service was  
its service breadth and roadmap 
philosophy, explained Andy Chalklin, 
director of IT for Pret A Manger; “Our 
basic requirement was a secure, reliable 
data network that could prioritise and 
deliver critical applications, help meet 
our progressive compliancy needs, 
specifically PCI, and provide the best 
bandwidth for our budget and need.”
Andy Chalklin  
Director of IT for Pret A Manger
Gamma Communications plc
Annual Report and Accounts 2014 15
Strategic  
report
Corporate 
governance
Financial  
statements 2012 137.2
2013 148.7
2014 173.2
2012 32.7
2013 36.2
2014 39.0
2012 7.7
2013 10.1
2014 14.0
2012 7.2
2013 14.6
2014 13.4
2012 8.4
2013 10.8
2014 15.0
2012 9.2
2013 14.0
2014 16.4
2012 14.4
2013 17.2
2014 23.1
2012 44.9
2013 53.9
2014 67.6
Measuring our success
Key performance indicators
Strategy
page 14
Definition 
Revenue from sales made to all 
customers (excluding intra-group 
sales which eliminate on 
consolidation).
Outlook 
Ongoing growth driven by increased 
sales of strategic and enabling 
products.
Definition 
Gross Profit as a percentage  
of revenue. 
Outlook 
Continued growth but slowing  
as the product mix of strategic and 
enabling versus traditional tends  
to an equilibrium.
Definition 
Adjusted earnings after tax is stated 
after adjustment for exceptional items  
and share based payments and the 
tax effect of those items.
Outlook 
Continued growth is expected.
Definition 
Cash and cash equivalents held at  
the end of the year.
Outlook 
The Group intends to maintain a  
cash balance at this level subject  
to any acquisition opportunities  
that may arise.
Definition 
Revenues less direct costs of  
sales (excluding depreciation  
on specific assets which is shown  
as depreciation).
Outlook 
Ongoing growth driven by increased 
sales of strategic and enabling 
products.
Definition 
Adjusted earnings before interest, 
taxation, depreciation and 
amortisation stated before 
exceptional items and share  
based payment charges.
Outlook 
Continued growth.
Definition 
Net cash flows from operating 
activities.
Outlook 
Growth in line with EBITDA –  
cash conversion is expected to  
remain strong.
Definition 
Adjusted earnings after tax divided by 
the fully diluted number of shares.
Unadjusted earnings per share were 
10.0p (2013: 9.9p).
Outlook 
Continued growth.
Revenue (£m)
£173.2m 
Gross Profit (%)
39.0%
Adjusted EAT (£m)
£14.0m 
Net cash (£m)
£13.4m 
2014 Gross Profit (£m)
£67.6m 
Adjusted EBITDA (£m)
£23.1m 
Net operating cash flows (£m)
£16.4m 
Adjusted EPS (£p)
15.0p 
16 2012 26
2013 43
2014 80
2012 48
2013 62
2014 72
2012 59
2013 69
2014 90
2012 103
2013 161
2014 234
2012 99.978
2013 99.993
2014 99.997
2012  15.8
2013  43.1
2014  22.3
2012 525
2013 627
2014 725
2012 44
2013 56
2014 65
Performance metrics
Principal risks
page 18
Definition 
Number of billed seats at end of year 
on all of the Cloud PBX products.
Outlook 
Continued growth.
Definition 
Margin from strategic products 
(Inbound, SIP Trunking and Cloud PBX)  
and enabling products (Ethernet, 
Broadband and Mobile) as a 
percentage of the total margin.
Outlook 
Continued growth.
Definition 
Number of billed SIP Channels at  
end of the year.
Outlook 
Continued growth.
Definition 
The percentage of margin of our 
wholesale business derived from 
channel partners who are taking four 
or more strategic or enabling products. 
Outlook 
Continued growth.
Definition 
Number of direct customers 
generating monthly revenues of 
above £5,000 at the end of the year.
Outlook 
Continued growth.
Definition 
Availability of strategic platforms.
Outlook 
Similar or improving.
Definition 
The Net Promoter Score of a  
random selection of direct customers 
measured quarterly and averaged  
over the year.
Outlook 
We expect our NPS score to remain 
above 20%.
Definition 
Number of wholesale channel  
partners with monthly billing over 
£500 at the end of the year.
Outlook 
Continued growth.
Number of Hosted  
Seats (‘000s)
80 
Strategic and Enabling 
Services as percentage  
of Gross Margin (%)
65% 
Number of SIP  
Channels (‘000s)
234 
Cross sell ratios  
per channel  
partner (%)
72% 
Direct customer profile
90 
Network availability (%)
99.997% 
Customer satisfaction (%)
22.3% 
Number of channel partners
725 
Gamma Communications plc
Annual Report and Accounts 2014 17
Strategic  
report
Corporate 
governance
Financial  
statements Understanding the risks  
that affect our Company
Principal risks and uncertainties
Risk Description Potential impact Mitigating actions
Regulatory 
environment
The UK’s telecommunications sector does  
not have a “licence” requirement; it operates  
under a General Authorisation regime whereby,  
in combination with relevant UK and European 
statute, the sector’s regulator outlines the 
required compliance, which is presumed from 
telecommunications companies such as us.
Our activities within the UK can also be impacted by the decisions  
of relevant legislative, regulatory and judicial bodies both domestically  
and in the European Union, with the primary potential impact of new 
decisions being changes to buy and sale prices for products and the  
way in which we are required to engage with our customers. Should our 
activities be found to be in breach of the requirements of our General 
Authorisation, the primary impact would be the cost of negative 
publicity and any financial penalty levied.
 Gamma mitigates this risk by continuing to monitor likely regulatory 
changes; assessing their risk and potential impact; and engaging with 
regulators as appropriate.
Security By its very nature our network infrastructure 
provides customers with open access to the 
internet and global voice networks. As such there 
is a risk from cyber threat and telephony fraud  
as well as to the physical infrastructure. 
A breach of security could have a significant impact on the Company’s 
reputation and, in the case of telephony fraud, there could also be the 
chance of significant commercial impact.
 Gamma’s core infrastructure and operating capability is certified under 
ISO 27001 for security. We have a proactive approach to identifying any 
threat or attack and well proven procedures for neutralising such events.
 
We also employ external agencies to carry out penetration testing on  
our systems as well as carrying out our own security incident rehearsals.
 
Our fraud management applications aim to identify unusual traffic 
patterns within a short space of time and we have a 24/7 operational 
capability to then assess and mitigate the risk.
Network  
and systems 
performance
Reliable, high quality, voice and data services  
are critical to any business and are the core 
components of Gamma’s products. Therefore 
maintaining very high levels of service 
availability is central to any service provider’s 
credibility in this market.
If our network and systems perform below the market expectations  
then this will impact our ability to grow and sustain revenues.
We operate a comprehensive operational governance framework to 
manage the availability and performance of our services. This includes 
the design and architecture of our platforms, capacity planning, change 
management, security, business continuity planning and rehearsals, 
incident management and monitoring. This structure is subject to 
external audit via our ISO 27001, ISO 22301 and ND 1643 certifications.
Maintaining 
customer  
service levels
Communications services are critical to 
businesses. The ability to order and deliver them 
easily and get support quickly when something 
goes wrong are key areas that any service 
provider is assessed on when a customer is  
placing business.
Delivering poor customer service has two potential impacts: firstly on 
our ability to sustain and grow revenues and, secondly, dealing with 
failure increases the costs of the support operation.
We hold a monthly quality forum chaired by the CEO that reviews 
performance across all parts of the business. 
This takes into account direct customer feedback as well as providing  
a mechanism for internal feedback between the business functions.  
We also carry out regular customer surveys that focus on assessing 
how straightforward we are to work with. 
Increased 
competition
New entrants or existing service providers  
extend their product set to compete directly  
with our products and services.
This may dilute the addressable market and slow down growth. Gamma provides services which are more attractive to our customers 
than those of competitors. 
Suppliers The business relies on a number of key suppliers 
to provide elements of its products and services. 
Failure of one of these suppliers to perform may have an impact  
on our ability to deliver products and services.
Where possible we avoid reliance upon a single supplier for a particular 
element of our service, and ensure key supplier contracts have 
appropriate clauses in place to assure their performance.
Key personnel The business has grown rapidly over the  
last few years, with very low staff turnover. 
Therefore there are individuals that have  
been instrumental in its development and  
are important to its ongoing success.
Loss of key individuals could have an impact on the business’ 
continuing development.
The business has a well-established team and a reputation for being  
a good employer. In 2014, it came 29th in ‘The Sunday Times Best 100 
Companies To Work For’ ranking. This process involves a comprehensive 
staff survey, the feedback from which is actively reviewed and 
addressed by the senior management team.
Evolution  
of technology 
and markets
The communications market is constantly 
evolving both in terms of the available 
technologies and also in how people look  
to purchase certain products.
If the business does not at least keep pace with this evolving market 
then its plans for growth may be impacted.
Gamma plans, develops and markets products which match the 
evolution of market demand and of relevant technologies, and develops 
its core platforms to support these products.
As with any business, Gamma is exposed  
to a number of different risks. Whilst some 
are clear and straightforward to manage, 
others are less apparent and may be 
outside Gamma’s direct control. Therefore  
in all aspects of risk management we seek 
out new risk areas continually, as well as 
building contingency options into our plans 
and processes.
To this end Gamma operates a robust and well established 
structure for the identification, evaluation, monitoring and 
mitigation of the potential risks to its performance. There is  
a comprehensive operational governance structure, with 
regular and documented meetings to track risks through  
the four stages on opposite page. Each generic area of risk  
(e.g. Regulatory) has clearly assigned accountability at Director 
level within the management team, with reporting lines to  
the CEO and ultimately the Board.
Gamma’s business is heavily reliant on the performance of  
its network and associated application platforms. It ensures 
that the network architecture and operational support 
processes are robust and can cope with the vast majority  
of failures without impacting customer service. Gamma holds 
certification to ISO 27001, 22301 and ND 1643 which cover 
the security and business continuity of its primary products,  
as well as its core operational functions. Gamma carries out  
a full set of business continuity rehearsals, covering both 
technical failure and loss of access to physical locations.
The principal risks to the business are listed with  
a short description of their potential impact and what we  
are doing to mitigate them. This is not an exhaustive list  
and, as described above, the risk profile to the business  
is constantly evolving:
18 Identiﬁcation
Risks recorded 
in controlled 
risk registers 
Evaluation
Risk exposure 
reviewed and 
prioritised 
Mitigation
Risk owners identiﬁed 
and action plans 
implemented. Robust 
mitigation strategy 
subject to regular and 
rigorous review
Monitoring
Risks analysed for 
impact and probability 
to determine 
gross exposure
Risk Description Potential impact Mitigating actions
Regulatory 
environment
The UK’s telecommunications sector does  
not have a “licence” requirement; it operates  
under a General Authorisation regime whereby,  
in combination with relevant UK and European 
statute, the sector’s regulator outlines the 
required compliance, which is presumed from 
telecommunications companies such as us.
Our activities within the UK can also be impacted by the decisions  
of relevant legislative, regulatory and judicial bodies both domestically  
and in the European Union, with the primary potential impact of new 
decisions being changes to buy and sale prices for products and the  
way in which we are required to engage with our customers. Should our 
activities be found to be in breach of the requirements of our General 
Authorisation, the primary impact would be the cost of negative 
publicity and any financial penalty levied.
 Gamma mitigates this risk by continuing to monitor likely regulatory 
changes; assessing their risk and potential impact; and engaging with 
regulators as appropriate.
Security By its very nature our network infrastructure 
provides customers with open access to the 
internet and global voice networks. As such there 
is a risk from cyber threat and telephony fraud  
as well as to the physical infrastructure. 
A breach of security could have a significant impact on the Company’s 
reputation and, in the case of telephony fraud, there could also be the 
chance of significant commercial impact.
 Gamma’s core infrastructure and operating capability is certified under 
ISO 27001 for security. We have a proactive approach to identifying any 
threat or attack and well proven procedures for neutralising such events.
 
We also employ external agencies to carry out penetration testing on  
our systems as well as carrying out our own security incident rehearsals.
 
Our fraud management applications aim to identify unusual traffic 
patterns within a short space of time and we have a 24/7 operational 
capability to then assess and mitigate the risk.
Network  
and systems 
performance
Reliable, high quality, voice and data services  
are critical to any business and are the core 
components of Gamma’s products. Therefore 
maintaining very high levels of service 
availability is central to any service provider’s 
credibility in this market.
If our network and systems perform below the market expectations  
then this will impact our ability to grow and sustain revenues.
We operate a comprehensive operational governance framework to 
manage the availability and performance of our services. This includes 
the design and architecture of our platforms, capacity planning, change 
management, security, business continuity planning and rehearsals, 
incident management and monitoring. This structure is subject to 
external audit via our ISO 27001, ISO 22301 and ND 1643 certifications.
Maintaining 
customer  
service levels
Communications services are critical to 
businesses. The ability to order and deliver them 
easily and get support quickly when something 
goes wrong are key areas that any service 
provider is assessed on when a customer is  
placing business.
Delivering poor customer service has two potential impacts: firstly on 
our ability to sustain and grow revenues and, secondly, dealing with 
failure increases the costs of the support operation.
We hold a monthly quality forum chaired by the CEO that reviews 
performance across all parts of the business. 
This takes into account direct customer feedback as well as providing  
a mechanism for internal feedback between the business functions.  
We also carry out regular customer surveys that focus on assessing 
how straightforward we are to work with. 
Increased 
competition
New entrants or existing service providers  
extend their product set to compete directly  
with our products and services.
This may dilute the addressable market and slow down growth. Gamma provides services which are more attractive to our customers 
than those of competitors. 
Suppliers The business relies on a number of key suppliers 
to provide elements of its products and services. 
Failure of one of these suppliers to perform may have an impact  
on our ability to deliver products and services.
Where possible we avoid reliance upon a single supplier for a particular 
element of our service, and ensure key supplier contracts have 
appropriate clauses in place to assure their performance.
Key personnel The business has grown rapidly over the  
last few years, with very low staff turnover. 
Therefore there are individuals that have  
been instrumental in its development and  
are important to its ongoing success.
Loss of key individuals could have an impact on the business’ 
continuing development.
The business has a well-established team and a reputation for being  
a good employer. In 2014, it came 29th in ‘The Sunday Times Best 100 
Companies To Work For’ ranking. This process involves a comprehensive 
staff survey, the feedback from which is actively reviewed and 
addressed by the senior management team.
Evolution  
of technology 
and markets
The communications market is constantly 
evolving both in terms of the available 
technologies and also in how people look  
to purchase certain products.
If the business does not at least keep pace with this evolving market 
then its plans for growth may be impacted.
Gamma plans, develops and markets products which match the 
evolution of market demand and of relevant technologies, and develops 
its core platforms to support these products.
Risk management process
Strategy
page 14
Gamma Communications plc
Annual Report and Accounts 2014 19
Strategic  
report
Corporate 
governance
Financial  
statements We divide our business  
into our channel and direct 
business units that serve 
different markets from  
a core portfolio of services. 
Business Unit review
20 20 The largest part of our 
business, and very much the 
core of what we do; providing 
services to the UK business 
community through 725 
channel partners. We work 
closely with these partners  
to help them succeed. In turn 
they are loyal and growing  
in number. The channel route 
to market comprises 79% of 
Group revenues.
More on page 22
The balance of our revenue  
is derived from direct sales  
into the business market with  
a strong focus on opportunities 
that tend not to be the forte of 
the channel, such as the public 
sector and tailored services for 
enterprises. 
More on page 24
1
Indirect Channel
2 
Direct Channel
21
Strategic  
report
Corporate 
governance
Financial  
statements
21
Gamma Communications plc
Annual Report and Accounts 2014 Business Unit review
The largest part of our 
business, and very much  
at the heart of what we do; 
providing services to over 
725 channel partners across 
the UK. These partners work 
closely with us, are loyal,  
and growing in number.  
The channel business is close 
to 80% of Group revenues. 
The business has grown revenues 15% 
year on year, and gross profit is up 23%  
to £52.4m. Main drivers of profit growth 
have been the increase in number of 
partners and also the favourable change 
in product mix whereby more higher 
margin services (SIP Trunking, Horizon  
and Inbound) are replacing the lower 
margin traditional services. Our Cloud PBX, 
Horizon, has been a star service in 2014 
with over 34% of our partners actively 
selling the service to their customers. 
Gamma grew the number of active 
partners from 627 to 725 during 2014. 
We continue to be pleasantly surprised by 
the breadth and capability of new channel 
partners – both in terms of their scale and 
their core business activities. We were 
particularly pleased to sign up significantly 
more Microsoft Gold Partners and Systems 
Integrators, as well as IT Specialists and 
Unified Communications providers.  
This diversity and breadth of the business 
models of new channel partners confirms 
the convergence of IT and telecoms, and 
our industry’s appetite to broaden service 
portfolios. T o support the growth in 
partners, our sales team grew by 34% 
over the year. 24% of our new sales staff 
were internally promoted, and over 40% 
of our sales team have been with Gamma 
for more than five years, with 14% over 
ten years.
As ever, we have worked hard on 
deepening the relationship with our 
partners to ensure we are well connected 
right across their business and supporting 
all relevant aspects of their operations. 
Over the year we ran sales training 
sessions, operational workshops to 
support our partners’ back office staff,  
and regular webinars on product,  
market issues, and important regulatory 
information. Our accreditation schemes  
on key products continued apace, with 
over 850 individuals trained during the 
year. All of these activities combined  
to help generate a depth of relationship  
that hopefully puts Gamma at the core  
of our partners’ business; creating long 
term partnerships as opposed to short 
term transactional relationships. 
Major partners during the year included 
companies such as Alternative Networks, 
Azzurri, Daisy, Capita IT , Focus, HighNet 
15%
Revenue grew 15% over the year
1
Indirect Channel  
Business Unit
Looking ahead to 2015, we plan to:
 → Successfully launch our MPLS data product through  
the channel
 → Continue to grow the number of channel partners in 
emerging segments
 → Increase the level of business from Microsoft partners  
and Systems Integrators as a % of the whole
 → Increase cross sell ratios into the partner base
 → Work with our strategic partners to help them grow  
their businesses
22 Channel case study: 
TIC/Rapid Communications
 “ We’ve known about Gamma as a  
SIP provider for a number of years,  
but decided this year to take them on 
board as a strategic supplier and really 
wish we’d made this decision a long time 
ago. They’re easy to do business with, 
their portal is fantastic to order and 
manage services from, and they seem  
to be a really enthusiastic bunch of 
people who enjoy working for Gamma.”
Julie Purdie 
Director, TIC/Rapid Communications, a new Gamma partner in 
2014 selling SIP T runking and hosted services in the Midlands
98
Gamma added 98 new actively 
trading channel partners in 2014
and Sabio. We continue to benefit from  
a broad spread of customers and low 
customer concentration. Our top ten 
partners accounted for 26% of total 
revenues at the end of 2014.
We have continued to develop our 
commercial frameworks with partners to 
build stronger, longer-term and mutually 
beneficial relationships, increasing our 
visibility of forward revenues.
One relationship we’re looking to develop 
positively is our partnership with O2, 
focusing on helping them take SIP 
Trunking and Cloud PBX into their 
business market. We have had a number 
of significant wins with O2 this year, 
including the University of Edinburgh, 
Carillion and Swinton Insurance.
‘Simplicity’ is Gamma’s white label 
telecoms service, enabling Gamma to 
provide all, or part, of the service that  
the partner would normally provide,  
such as billing and first line support,  
whilst the partner retains the contractual 
relationship. In 2014 this has been 
particularly successful, enabling Gamma  
to partner with businesses that have 
strong customer relationships, expertise  
in related areas, but little appetite or 
capability for providing these services. 
Gamma Communications plc
Annual Report and Accounts 2014 23
Strategic  
report
Corporate 
governance
Financial  
statements Business Unit review
2 
Direct Channel  
Business Unit
SME/Mid-Market case study:
Thrifty Car & Van Rental UK
 “With Gamma we have been able to 
achieve a complete communications 
solution. We now have all our services 
under one roof and have managed to 
make continued cost savings across our 
telephony estate. We’ve been impressed 
with the continued professionalism 
Gamma have shown throughout the 
transfer and wouldn’t hesitate to 
recommend them to anyone looking 
for a truly unified solution.”
Rob Parsons
Finance Director, Thrifty Car & Van Rental UK
We find that some customers, 
particularly larger enterprises, prefer, 
indeed insist on, working directly with 
the network bearing operator, or have 
very specific requirements that require  
a more tailored response, such as the 
public sector. This is where our direct 
capability is most focused. 
It was a strong year for this side of  
our business with a number of big  
wins, including BDO, the London Stock 
Exchange, Hearst Magazines and Moore 
Stephens all signing, with an average 
contract length of three years. The 
managed service offering across voice, 
data and mobile has proven very 
successful in the enterprise space.
Our penetration of the public sector 
market, and in particular the education 
sector, continues apace. In 2014,  
a further 19 universities and colleges 
became direct Gamma customers 
including Oxford, LSE, Bristol and Ulster 
Universities, taking the total number  
of universities to which Gamma directly 
supplies services to 33. 
Gamma became one of ten service 
providers selected by the Crown 
Commercial Services to supply 
telecommunication services to any  
public sector organisations under  
the RM1035 framework. We were also 
awarded one of eight positions on the 
Scottish Government’s Fixed T elephony 
Services Framework, allowing Gamma  
to provide services to any public sector 
organisation in Scotland.
We also won managed service contracts 
with two of the largest London housing 
trusts, Catalyst and East Thames Group.
Over 65% of our new enterprise  
and public sector contracts were for 
converged services (data and voice).  
Just over 20% of our 
revenue is derived from 
direct sales into the 
business market.
24 Customer service continues to be at  
the heart of our proposition and we track  
our performance quarterly with CSAT 
surveys, using the Net Promoter Score 
methodology as a method of quantifying 
and tracking our customers’ perceptions 
on service. Our average score for the year 
across four quarters of measurement 
was 22.3.
Churn has reduced over the year in  
terms of gross profit, and, on average, 
new customers are double the size  
of those leaving. Many of our larger 
customers have re-signed contracts  
in 2014, including American Golf who 
have a signed a five year agreement for  
a data network and Cloud PBX solution, 
and Hinduja Global Systems.
Contract lengths have increased by 
approximately 12% on average in all 
product classes over 2014.
Looking ahead to 2015, we plan to:
 → Increase the average size of direct customers and  
new contracts
 → Build market share in the public sector by maximising 
opportunities from our framework contracts
 → Continue to have a CSAT Net Promoter Score above 20%
 → Push Cloud PBX and SIP Trunking harder into the  
mid market
At the same time in this segment of the 
business, we had zero churn.
In the mid-market and SME sector, 
growth has been strong with a greater 
emphasis on Cloud PBX and SIP Trunking, 
in line with the rest of the business. This  
has been key to increasing revenue  
and profitability, as usage on traditional 
services from existing customers 
continues to fall, due primarily to fixed  
to mobile substitution. The underlying 
service mix is changing significantly from 
traditional services to strategic services, 
with additional benefits of longer 
contract lengths and higher margins. 
This is borne out by both revenue and 
margin per customer increasing by 10% 
over the year. 
A major area of success in the market 
has been winning voice and data 
business in the multi-sited business 
sector. From a small business with three 
sites, to a national business with 80+ 
sites throughout the UK, our strategic 
services really lend themselves to giving 
businesses an operational flexibility in 
how they manage their customers’ calls 
without significant capital outlay. This is 
why businesses such as West Bromwich 
Building Society, Haymarket Media, Home 
Energy, and Concur Technologies have 
become Gamma customers in 2014.
Enterprise and 
Public Sector 
case study
 “It’s refreshing to have  
a service where we can 
scale our lines up and 
down when we want  
at key times of the year 
without the hassle of 
having to plan ahead. 
Gamma has given us  
the freedom to control 
how we want to 
manage our numbers.”
IT Manager, a major local authority
Gamma Communications plc
Annual Report and Accounts 2014 25
Strategic  
report
Corporate 
governance
Financial  
statements Financial review
Andrew Belshaw describes  
a positive set of results  
for 2014 as Gamma reports  
for the first time as a  
listed group. 
Revenue
Indirect Business
Revenue from the indirect business  
grew from £119.0m to £136.9m and 
gross profit grew from £42.6m to  
£52.4m – an increase of just under  
£10m of gross profit year on year, which  
is the highest annual increase in gross 
profit in the history of the Group. 
Unlike many of Gamma’s peers, the 
performance of the traditional business 
(which includes calls and lines and trade 
with other carriers) bucked the industry 
trend of decline and showed a small 
increase in gross profit, despite revenue 
declining, as a consequence of reductions 
in the cost base which were reflected in 
lower pricing. Gamma continues to attract 
traditional business as a by-product from 
channel partners who want access to our 
new products such as Cloud PBX and SIP 
T runking. The number of channel partners 
actively trading with Gamma increased 
from 627 at the start of the year to 725 
by the end of the year. These customers 
come to Gamma for our newer products 
but often bring their traditional business 
with them. 
The percentage of gross profit coming 
from channel partners who buy four or 
more products (excluding traditional calls  
and lines) from Gamma grew from 62%  
to 72%. Both the increase in channel 
partners and the fact that channel 
partners are selling more products meant 
that the revenue from new product sales 
increased from £51.2m to £72.4m  
and gross profit grew from £24.7m to 
£33.6m. The main contributor to this 
growth was SIP Trunking. The percentage 
profit on sales of new product to channel 
partners fell slightly due to a changing 
mix from strategic products to enabling 
products as well as more competitive 
pricing on Cloud PBX as Gamma seeks  
to establish a significant market share  
in this important area for future growth.
Excellent financial  
performance in 2014
£23.1m 
+34%
Overall EBITDA before  
exceptional items and share  
based payments grew from  
£17 .2m in 2013 to £23.1m
£16.4m 
+£2.4m
Cashflow from operating activities 
grew from £14.0m to £16.4m
£15.0p 
+4.2p
Adjusted EPS grew from 10.8p  
to 15.0p
£173.2m 
+16%
Overall revenue grew from 
£148.7m in 2013 to £173.2m
Highlights
26 Direct Business
The direct business has also had a year  
of unprecedented growth. Revenue 
increased from £29.7m in 2013 to £36.3m 
and gross profit from £11.3m to £15.2m. 
As for the indirect business, the growth 
was attributable to sales of new product 
and profit on these products grew from 
£5.7m to £10.6m. This includes multi-
product solution sales to larger enterprises 
made by Gamma Network Solutions 
Limited. This is particularly pleasing 
because much of the new business is  
won on multi-year contracts.
Operating expenses
Operating expenses before exceptional 
items and share based payments grew  
from £4 1.5m to £50.9m. This was due to 
increased headcount required to support  
the growth in the number of customers 
switching to new products for the first time. 
We also continue to increase our investment 
in product development and, whilst internal 
spend of £0.9m was capitalised in the year , 
we spent more on the research and initial 
development of new product offerings and 
variants on our existing product set as we 
continue to build for the future. The Group 
continues to invest in its systems to ensure 
that as sales increase, the number of 
customer service personnel required  
does not increase at the same rate.
Adjusted EBITDA
The combination of increasing sales  
of new products and operational 
improvements means that adjusted 
EBITDA grew from £17 .2m to £23.1m  
or 34% – an impressive performance.
Exceptional items and share  
based payments
There were a number of exceptional items 
which included the cost of the flotation 
(£1.2m) and a small charge for re-
structuring (£0.2m). In addition there was 
an exceptional charge (£0.6m) relating to 
the variation in the fair value of the 
deferred consideration in respect of the 
acquisition of Varidion Limited in 2012.  
The original deferred payment plan 
extended as far as 2017 but the Board 
took the opportunity to settle this early. 
This enables management to focus on 
maximising the growth opportunities.  
The Group has ultimately paid £3.6m  
for a business which had an EBITDA of  
£1.4m in 2014, which the Board believes 
represents excellent value.
Share based payment charges for the year 
were £3.2m and are expected to continue 
at approximately this level for the next 
two years as options issued to the senior 
management team pre-flotation vest over 
a three year period.
Cash flows
The cash balance at the end of the  
year was £13.4m, which is down from 
£14.6m at the end of the previous year. 
Notwithstanding this, trading cash flows 
were good and the cash conversion of 
EBITDA into net cash flow from operating 
activities was 92%.
Capital spend for the year was £12.1m, 
which is an increase from £5.9m in the 
previous year and this is discussed below.
In addition to a higher than anticipated 
capital spend, there were a number of 
exceptional cash flows:
 → £2.6m was paid as deferred 
consideration for the acquisition  
of Varidion Limited in 2012;
 → As a result of the IPO process a loan 
was made to the Chief Executive which 
resulted in net cash outflows of £1.0m;
 → The former Chief Financial Officer 
settled some share options for a cash 
payment of £1.3m;
 → On IPO, staff awards under a Shadow 
Share Option scheme crystallised 
which totalled £1.0m.
The Group continues to be debt free  
and a number of lenders have indicated 
that they would be willing to support the 
Group with debt were it to be required  
for capital expenditure or an acquisition.
Capital expenditure
Capital spend was higher than expected. 
The Board is constantly seeking 
opportunities which meet the Group’s 
strategic goals and one such opportunity 
was realised at short notice in the final 
quarter of 2014 when the Group was able 
to acquire the assets for a mobile platform. 
The Group spent £12.1m on capital which 
was split as follows:
 → £8.8m was on network assets which  
is higher than the historical run rate 
due to investment in the network and 
the mobile platform referred to above;
 → £0.9m was the capitalisation of 
development costs incurred during  
the year;
 → £1.0m was on customer premises 
equipment (“CPE”); this is “success 
based” expenditure and is expected to 
increase in line with sales growth; and
 → £1.4m of other assets.
Taxation
The effective tax rate for the year was 
18.3% (2013: 19.1 %). The low tax rate is 
attributable to the fact that the Group 
enjoys significant research and development 
tax credits. However , for 2015 and onwards 
the Group will have moved into the large 
company regime which will result in a 
reduced level of benefit and therefore a 
higher effective rate.
Dividends
Gamma’s share capital was admitted to 
AIM in October 2014 and was therefore 
publicly traded for the final quarter only. 
The Board has proposed a final dividend 
of 3.95p representing a pro-forma, post 
admission full year dividend of 5.93p per 
share. The final dividend is payable in late 
June to shareholders registered on 5 June 
2015 and will have an ex-dividend date 
of 4 June 2015. 
Andrew Belshaw
Finance Director
Gamma Communications plc
Annual Report and Accounts 2014 27
Strategic  
report
Corporate 
governance
Financial  
statements The Environment  
and CarbonNeutral
®
We made a commitment to reducing carbon footprint across our network back 
in 2006, through investment in the efficiency of our IP based network and 
other assets as well as an active offset management programme. This means 
Gamma is a fully certified CarbonNeutral® company, making us one of the 
few communications providers in the UK to have a net zero carbon footprint.
Chosen 
charity
We are proud to support the 
Woodland Trust, an organisation 
dedicated to the protection and 
promotion of natural woodlands 
across the UK.
Corporate social responsibility
Peerless efficiency and  
a top 100 employer
The Gamma culture is a  
hard thing to put into words, 
but it has been instrumental 
in the growth and success  
of the business to date. It is 
best summarised as having 
trust in staff, delegating as 
far as possible, and creating  
an informal, constructive 
environment where the 
organisation chart has little 
value. We put a lot of time 
and effort into trying to  
be different from the larger 
companies we compete 
against, and protecting  
our culture as we expand  
is a key part of that.
Communicating with staff is obviously 
paramount in maintaining an involved  
and informed group of employees.  
We have quarterly conference calls  
across the whole Company where the 
management team individually brief  
the staff, supported by regular staff 
newsletters, CEO briefings (by location) 
and an annual survey (see Best 
Companies to Work For). 
Our staff churn across the business  
is low relative to industry norms,  
and particularly so in our customer  
service teams where knowledgeable, 
experienced staff are so vital to offering 
good customer service. Wherever  
we can, our preference is to grow our  
own staff from graduates or apprentices.  
In sales, for example, our strategy is  
to recruit graduates as desk-based 
support staff, developing them into  
sales and ultimately sales management.  
The average tenure of our sales staff  
is well over five years, with many of  
our sales management having been  
with us for over ten years.
The business also offers staff a choice  
in terms of flexible benefits. This includes 
gym membership, dental and health 
plans, childcare vouchers, cycle to  
work schemes and shopping discounts. 
We believe this flexibility gives our 
employees freedom and choice in 
selecting a customised basket of benefits 
to suit their specific needs and individual 
lifestyle. We also aim to provide a degree 
of peace-of-mind for our people through 
the provision of income protection  
and life assurance policies. For those 
employees juggling work, family or carer 
commitments, or trying to enhance their 
work/life balance, we provide the option 
for them to purchase additional holidays.
Staff learning and development remains  
a key priority for Gamma. It helps us  
to maximise the potential of our people, 
retain skills, and grow the business.  
As a technically based business in a fast 
changing market we need to keep our 
people’s skills up to date and give them 
the opportunity to grow and develop  
as best they can. Fortunately, as a fast 
growing business we are well placed to  
do just that. A wide range of learning and 
development opportunities are available 
to all and many employees are funded  
by Gamma to undertake Masters  
level courses and other professional 
development courses.
28 Policy on staff support 
for good causes
Gamma operates a policy of “matched funding”  
for all qualifying staff charity activities in addition  
to supporting the Woodland Trust. In 2014 we also  
ran two charity events with our customers – car rallying  
and cycling. The Charity Mountain Bike event raised 
£5,000 for the Samaritans and Rays of Sunshine whilst  
the Gammaball Rally raised a staggering £100,000  
for HoneyPot and ATE (Action Through Enterprise).
Apprenticeships
Gamma continues to welcome and assist apprentices to 
gain invaluable work experience, continue their education 
and gain nationally recognised qualifications. With 
apprentices currently employed in IT , Infrastructure 
Support, Software Development and Customer Service, 
we have a good track record of offering permanent 
employment at the end of the apprenticeships. 
Volunteering Policy 
Gamma actively encourages and supports employees 
who wish to volunteer within the community or for 
charities. Supporting volunteers helps the Company  
to build relationships with the local community and 
improves its perception within it. Employees who  
do volunteering work can use the skills that they have 
developed at work to help in the community, or learn 
new skills, such as leadership, helping to improve their 
morale, physical health and overall work-life balance.
Best Companies to 
Work For, sponsored 
by the Sunday Times 
The Sunday Times Best Companies to Work For  
2014 recognises the opinion of Britain’s motivated 
workforces and it is widely acknowledged as the  
most searching and extensive research into employee 
engagement carried out in this country. All the scores 
and ratings that are assessed to compile the lists  
are based on employee opinions and companies  
are scored in the following categories: The Sunday 
Times 100 Best Small Companies to Work For  
(SMEs of up to 250 employees), 100 Best Companies  
to Work For in the 250–4,999 employee range, the  
25 Best Big Companies to Work For with 5,000-plus  
in the workforce and the 100 Best Not-for-Profit 
Organisations to Work For. In 2014 Gamma was  
voted the ‘29th Best Company to Work For’.
The Strategic Report was approved by the Board of Directors on 
19 March 2015.
Andrew Belshaw
Finance Director
Gamma Communications plc
Annual Report and Accounts 2014 29
Strategic  
report
Corporate 
governance
Financial  
statements The Board recognises that 
sound corporate governance 
is an essential underpinning 
for a growing, publicly-
quoted business, and is 
committed to ensuring  
the integrity of both its 
processes and of those  
of the Company as a whole.
Corporate governance
Chairman’s introduction  
to corporate governance 
The Directors do not comply with the  
UK Corporate Governance Code in all 
respects. We have reported on our 
Corporate Governance arrangements  
by drawing upon best practice available, 
including those aspects of the UK 
Corporate Governance Code we consider 
to be relevant to the Company and  
best practice.
The Board comprises seven Directors, 
two of whom are Executive Directors 
and five of whom are Non-Executive 
Directors, reflecting a blend of different 
experience and backgrounds. Of the 
Non-Executive Directors, the Group 
regards Richard Last, Alan Gibbins  
and Martin Lea as Independent  
Non-Executive Directors within  
the meaning of the UK Corporate 
Governance Code 2014.
The Board meets regularly to consider 
strategy, performance and the framework 
of internal controls. T o enable the Board  
to discharge its duties, all Directors receive 
appropriate and timely information. 
Briefing papers are distributed to all 
Directors in advance of Board meetings.
The Company has established Audit, 
Nomination and Remuneration 
Committees of the Board with formally 
delegated duties and responsibilities.  
The Company’s commitment to  
strong corporate governance and risk 
management will remain central to  
the business during 2015 and beyond.
30 Board of 
Directors
Richard Last 
Chairman and Independent 
Non-Executive Director
Bob Falconer 
Chief Executive Officer
Andrew Belshaw
Finance Director
Alan Gibbins 
Independent 
Non-Executive Director
Martin Lea 
Independent 
Non-Executive Director
Andrew Stone 
Non-Independent 
Non-Executive Director
Wu Long Peng 
Non-Independent 
Non-Executive Director
Audit Committee
Chaired by Alan Gibbins.  
Members: Richard Last and Martin Lea. 
Nomination Committee
Chaired by Richard Last. 
Members: Martin Lea, Alan Gibbins, 
Wu Long Peng and Andrew Stone.
Remuneration Committee
Chaired by Martin Lea. 
Members: Richard Last and Alan Gibbins.
Corporate governance framework
The Board has a coherent corporate governance framework, 
as illustrated below, with clearly defined responsibilities and 
accountabilities designed to safeguard and enhance long-term 
shareholder value and provide a robust platform to realise  
the Company’s strategy.
Board of Directors
page 32
Gamma Communications plc
Annual Report and Accounts 2014 31
Strategic  
report
Corporate 
governance
Financial  
statements Board of Directors
An experienced Board
1 Richard Last
Chairman and Independent  
Non-Executive Director 
Richard is currently Chairman and 
Non-Executive Director of Servelec Group 
plc, a UK-based technology group and  
of British Smaller Companies VCT 2 plc,  
a venture capital trust, both listed on  
the London Stock Exchange. Richard  
is also Chairman and Non-Executive 
Director of AIM listed Arcontech Group 
plc, a financial services software 
company and of Lighthouse Group plc,  
an AIM quoted financial services group. 
He is also a Non-Executive Director of 
Corero Network Security plc, an AIM 
quoted IT security solutions provider  
and a number of private companies.
Richard is a Fellow of the Institute  
of Chartered Accountants in England  
and Wales.
2 Bob Falconer
Chief Executive Officer
Bob began his career at BT’s Research 
Laboratories before joining ICI in 1987 , 
rising to become the global telecoms 
manager for the group. In 1994 Bob took 
a directorship at Racal Network Services 
(later Racal Telecom and Global Crossing 
UK) where he stayed until 2002, during 
which time he was responsible for group 
operations. Bob joined Gamma in 2003 as 
COO before being appointed CEO in 2004.
Bob has a BSc in Electrical and Electronic 
Engineering from Heriot-Watt University, 
Edinburgh and is a Fellow of the 
Institution of Engineering and T echnology.
We have an experienced 
Board which blends industry 
expertise, with public 
company experience and 
the knowledge and skills  
of our long standing 
shareholders.
1 2
3 4
5 6
7
32 3 Andrew Belshaw 
Finance Director
Andrew has been Finance Director  
of Gamma since 2007 and was  
appointed to the Board in October  
2014. A Chartered Accountant by 
background, he has worked in both  
audit and corporate finance at Deloitte 
and Ernst & Young, specialising in 
providing advice to a wide range of 
clients in the technology sector. After 
leaving private practice, Andrew worked 
alongside the Commercial Director in  
a new business development role at 
Xansa plc before joining Gamma.
Andrew has a degree in Maths from St 
John’s College, Cambridge and gained an 
MBA from Warwick University Business 
School. He is a Fellow of the Institute  
of Chartered Accountants in England  
and Wales.
4 Alan Gibbins
Independent Non-Executive Director
Alan has extensive experience of public 
company reporting and financial services 
spanning 30 years with Price Waterhouse 
and PricewaterhouseCoopers LLP , having 
been a Partner from 1985 until 2006.  
His responsibilities included one of the 
main London audit groups and he was  
an Audit and Business Assurance Partner. 
Alan has been a Non-Executive Director 
and Audit Committee Chairman for 
BlueBay Asset Management plc as well 
as being a Non-Executive Director for a 
number of private companies. Alan joined 
Gamma in June 2014 and is Chairman of 
the Audit Committee.
Alan has an MA in Modern History from 
Lincoln College, Oxford and is a member 
of the Institute of Chartered Accountants 
in England and Wales.
5 Martin Lea
Independent Non-Executive Director
Martin has over 20 years’ experience 
leading businesses within the support 
services, telecommunications and 
network, integration and service sectors. 
Most recently, he served as interim CEO 
at Multicom Security Group, Sweden’s 
leading provider of monitored alarm 
transmission services, and was President 
and CEO of Invitel from 2004 to 2011, 
during which time it grew to become 
Hungary’s second largest fixed line 
operator. Prior to Invitel, Martin was 
Executive Vice President of Intertek 
Group plc and Managing Director of  
Racal T elecom, a national UK alternative 
telecom operator and managed service 
provider. Martin joined Gamma in  
June 2014 and is Chairman of the 
Remuneration Committee.
Martin has a BA 1st class (hons) degree  
in Business Studies, and is a Fellow of  
the Institute of Directors.
6 Andrew Stone 
Non-Independent Non-Executive Director
Andrew is a founding Director of 
Greenstone+ Ltd (formerly Greenstone 
Carbon Management Ltd) and was 
previously a Non-Executive Director  
of Armajaro Trading Ltd, a global soft 
commodity trading house, from 2011 
until 2012 when he was appointed Global 
Head of Commodities and one of the 
CEOs from January 2013 to July 2013. 
Andrew has also acted as Non-Executive 
Director at Openfield plc, one of the UK’s 
largest grain marketing organisations. 
From 1993 to 2006, Andrew was 
employed at ED&F Man in a variety  
of senior positions including Managing 
Director of ED&F Man Asia, and a director 
of both SIS 88 Pte Ltd and Asian Blending 
Pte Ltd. He is also a Director of Epsilon 
Global Communications Pte Ltd.
7 Wu Long Peng
Non-Independent Non-Executive Director
Long Peng has more than 30 years’ 
experience in finance and corporate 
affairs. He is an Executive Director of 
Kuok (Singapore) Limited, Pacific Carriers 
Limited and Malaysian Bulk Carriers 
Berhad (a company listed on Bursa 
Malaysia). He is also a Non-Executive 
Director of Pacc Offshore Services 
Holdings Limited (a company listed on 
the Singapore Exchange) and a Director 
of Epsilon Global Communications  
Pte Ltd. Long Peng joined the Board  
of Gamma in 2011.
Long Peng is a Fellow Member of  
the Association of Chartered Certified 
Accountants in the United Kingdom 
and a member of the Institute of 
Singapore Chartered Accountants.
Gamma Communications plc
Annual Report and Accounts 2014 33
Strategic  
report
Corporate 
governance
Financial  
statements Senior management
Robust leadership
1 Richard Bligh
Group Marketing Director
Richard joined Gamma in 2004 and has 
nearly 20 years’ telecoms experience  
in a variety of marketing and business 
development Vice President roles. These 
include UK and international experience 
in ECI Conferencing, Intertek plc, Global 
Crossing and Racal Telecom. Richard  
has extensive experience of business 
markets from serving multinational 
corporates to selling via the channel.
Richard is a graduate of Cardiff University 
and a member of the Chartered Institute 
of Marketing.
2 Andy Morris
Group Operations Director
Andy joined Gamma in 2006 with  
a proven track record of establishing  
and running high quality, customer 
orientated operations. Previously  
at Cable & Wireless he successfully  
ran a business unit responsible for 12  
of Cable and Wireless’ largest corporate 
customers including Marks and Spencer 
and Alliance & Leicester. Prior to that  
he was involved with a number of 
telecoms start ups both in the UK and 
across a number of European countries. 
He spent the early part of his career  
with GEC Marconi Aerospace and is an 
engineering graduate of Nottingham 
Trent University.
The Gamma management 
team has many years’ 
experience in both Gamma 
and the communications 
industry. The average 
tenure at Gamma is over 
eight years. Commitment, 
knowledge and a passion  
for Gamma are what drives 
this team. 
1 2
3 4
5 6
7
34 3 John Haw
Sales Director
John was promoted to Sales Director  
after successfully developing the  
system integrator and VAR channel  
for Gamma. A university graduate  
with a degree in Business Studies,  
John has had a successful career in 
telecoms sales, including positions  
with MCI and Vodafone. 
He has nearly 20 years’ experience  
in channel sales and development.
4 Paul Peel
Development Programme Director
Paul joined the leadership team as  
its Programme Director having spent  
over 20 years managing programmes  
and projects in technology intensive 
industries. A graduate of the RMA 
Sandhurst, he spent his early years  
in telecoms with the Royal Signals, 
completing a degree in Electronic 
Systems Engineering en route. He  
joined Gamma from General Dynamics  
in 2003 since when he has been  
involved in delivering many of  
Gamma’s significant business 
transformation projects.
He has an MBA and Masters degrees  
from King’s College London and Cranfield 
University. He is also a Member of the 
British Computer Society, reflecting  
his wider role at the head of Gamma’s 
software development teams.
5 Malcolm Goddard
Group Commercial Director and  
Company Secretary
Malcolm joined Gamma in 2005 bringing 
over 15 years’ experience in mergers and 
acquisitions, multinational procurement, 
business management and IT outsourcing.
Malcolm’s early career was with ICI and 
AstraZeneca, and he has a degree in 
Engineering from Cambridge University.
6 David Macfarlane
Managing Director – Gamma  
Network Solutions
David joined Gamma in 2012 following 
Gamma’s acquisition of his managed 
services business Varidion Limited  
and now heads up our enterprise 
solutions division. 
Prior to this, David was the CTO at 
Sirocom and laterally the Group CTO  
at Azzurri Communications and has  
over 25 years’ experience in creating  
and delivering managed services.
7 Alan Mackie
Product Director
Alan has over 20 years’ experience in  
the telecoms and data managed services 
industry, in senior product management, 
marketing and project management  
roles. Immediately prior to his current 
role, Alan was Head of Voice Services  
at Gamma, having undertaken product/
project management roles at application 
hosting companies Aspective and Global 
Crossing earlier in his career.
Alan is a graduate of Napier University, 
with a degree in Communications 
Engineering.
Gamma Communications plc
Annual Report and Accounts 2014 35
Strategic  
report
Corporate 
governance
Financial  
statements The Directors support high standards of corporate governance. 
We do not comply with the UK Corporate Governance Code in  
all respects. We have reported on our Corporate Governance 
arrangements by drawing upon best practice available, including 
those aspects of the UK Corporate Governance Code we consider 
to be relevant to the Company and best practice.
Notwithstanding this, as an AIM quoted company, the Company 
is not required to comply with the Code.
The Board is responsible for establishing and maintaining the 
system of internal controls which has been in place throughout 
2014. The effectiveness of the Group’s system of internal control 
is reviewed annually by the Audit Committee on behalf of the 
Board, as referred to in the Audit Committee Report.
The workings of the Board and its Committees
At 31 December 2014 the Board was comprised of five 
Non-Executive Directors, one of whom is the Chairman, and  
two Executive Directors. Of the Non-Executive Directors, three 
are considered to be independent. The Board is responsible  
to the shareholders for the proper management of the Group.  
It meets regularly, as set down in the table below, to review 
trading performance, set and monitor strategy, examine 
acquisition and divestment possibilities, approve major capital 
expenditure projects and other significant financing matters 
and report to shareholders. The Board delegates authority to 
the management for the day-to-day business under a set of 
delegated authorities which cover: routine operational matters, 
purchasing procedures, financial authority limits, contract 
approval procedures and the hiring of full time and temporary 
staff and consultants. 
Matters reserved for the Board are communicated in advance  
of formal meetings. All of the Directors are subject to election  
by shareholders at the first AGM after their appointment to the 
Board and to re-election by shareholders at least once every 
three years. In addition, any Non-Executive Director who has 
served on the Board for more than nine years will be subject  
to annual re-election.
The Chairman and Non-Executive Directors have other third 
party commitments including directorships of other companies as 
disclosed in the Directors’ biographies. The Company is satisfied 
that these associated commitments have no measurable impact 
on their ability to discharge their responsibilities effectively.  
The Executive Directors have no third party commitments.
New Directors receive induction on their appointment to the 
Board which covers the activities of the Group and its key 
business and financial risks, the terms of reference of the 
Board, and its committees, and the latest financial information 
about the Group.
All Directors have access to the advice and services of the 
Company Secretary, who is responsible to the Board for ensuring 
that Board procedures are followed and that applicable rules  
and regulations are complied with. In addition, the Company 
Secretary will ensure that the Directors receive appropriate 
training as necessary. The appointment and removal of the 
Company Secretary is a matter for the Board as a whole. All 
Directors are supplied with information in a timely manner in a 
form, and of a quality, appropriate to enable them to discharge 
their duties.
Since the impact Board meeting on 2 October 2014, there have 
been three further Board meetings during the year. The 
following is a table of attendance:
Board  
Meeting
Audit 
Committee
Remuneration 
Committee
Executive Directors
Bob Falconer 3/3 N/A N/A
Andrew Belshaw 3/3 N/A N/A
Non-Executive Directors
Richard Last (Independent) 3/3 3/3 3/3
Alan Gibbins (Independent) 3/3 3/3 3/3
Martin Lea (Independent) 3/3 3/3 3/3
Wu Long Peng 3/3 N/A N/A
Andrew Stone 3/3 N/A N/A
Details of Directors who ceased to hold office prior to flotation 
have been omitted.
During 2014, certain Directors who were not committee 
members attended meetings of the Audit Committee and 
Remuneration Committee by invitation. These details have not 
been included in the table. Where a Director is unable to attend 
meetings of the Board or of Board committees, such Director  
is invited to review the relevant papers for the meetings and 
provide his comments to the Board or the Board committees  
in advance of such meetings.
The Nomination Committee did not meet in 2014.
Corporate governance
Corporate governance report
36 Board performance
The Company has a formal process of annual performance 
evaluation for the Board, its committees and individual 
Directors. The Board and its committees are satisfied that  
they are operating effectively.
A performance evaluation of the Board, the Board committees 
and individual Directors will continue to be conducted annually 
and the method for such review will continue to be reviewed  
by the Board in order to optimise the process.
The performance of the Executive Directors is reviewed by 
the Remuneration Committee and the bonuses payable to  
the Executive Directors are linked directly to the results of 
these reviews.
The Company has Directors’ and officers’ liability insurance  
in place.
Committees
The following committees deal with specified aspects of the 
Group’s affairs.
Audit Committee
The make-up and workings of the Audit Committee are set out 
in the Audit Committee report on page 38.
Remuneration Committee
The make-up and workings of the Remuneration Committee, 
together with details of the Directors’ remuneration, interest in 
options, together with information on service contracts, are set 
out in the Report on Directors’ Remuneration. No Director is 
involved in the decision about their own remuneration.
Nomination Committee
The Nomination Committee will assist the Board in discharging 
its responsibilities relating to the composition and make-up  
of the Board and any committees of the Board. It will also be 
responsible for periodically reviewing the Board’s structure  
and identifying potential candidates to be appointed as 
Directors or committee members as the need may arise.  
The Nomination Committee will be responsible for evaluating 
the balance of skills, knowledge and experience and the size, 
structure and composition of the Board and committees of  
the Board, retirements and appointments of additional and 
replacement Directors and committee members and will make 
appropriate recommendations to the Board on such matters.
The Nomination Committee is chaired by Richard Last and its 
other members are Martin Lea, Alan Gibbins, Wu Long Peng  
and Andrew Stone. 
The Company’s policy is to attract and develop a highly 
qualified and diverse workforce, to ensure that all selection 
decisions are based on merit and that all recruitment activities 
are fair and non-discriminatory. We continue to focus on 
encouraging diversity of business skills and experience, 
recognising that Directors and managers with diverse skills 
sets, capabilities and experience gained from different 
backgrounds enhance the Group. 
Relations with shareholders
Communication with shareholders is given high priority by  
the Board and is undertaken through press releases, general 
presentations at the time of the release of the annual and 
interim results and face-to-face meetings. The Group issues 
its results promptly to individual shareholders and also 
publishes the same on the Company’s website. Regular 
updates to record news in relation to the Company are also 
included on the website.
In order to ensure that the members of the Board develop  
an understanding of the views and concerns of major 
shareholders there is regular dialogue with institutional 
shareholders, including meetings after the announcement  
of the Company’s annual and interim results. The Board uses 
the Annual General Meeting to communicate with private and 
institutional investors and welcomes their participation.
Signed on behalf of the Board by:
Richard Last
Chairman and Independent  
Non-Executive Director
Gamma Communications plc
Annual Report and Accounts 2014 37
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
Audit Committee  
report
Alan Gibbins
Audit Committee Chairman
This first report of the Audit Committee covers 
the period from July 2014 to the review of 
Gamma’s first set of results following the 
October 2014 IPO.
Membership
The members of the Audit Committee and meetings 
attended are:
Name Meetings attended
Alan Gibbins, Chairman 3/3
Richard Last 3/3
Martin Lea 3/3
The Audit Committee is responsible for ensuring that the 
financial performance of Gamma is properly monitored, 
controlled and reported. The Committee consists of the three 
Independent Non-Executive Directors, including the Chairman  
of the Board, who between them have a balance of recent  
and relevant financial experience and accounting training,  
and general business background.
The Board established the Audit Committee and agreed  
its terms of reference in July 2014 prior to the IPO, and the 
Committee has met three times since with all members present. 
The CEO and Finance Director, and other Non-Executive 
Directors (all by invitation), and the external auditors, have  
also all attended each meeting. The chairman of the Committee 
maintains a regular dialogue with the Finance Director.
Role of the Committee
The Audit Committee:
 → Monitors the integrity of Gamma’s financial statements,  
the appropriateness of accounting policies, and significant 
reporting judgements.
 → Reviews the effectiveness of financial controls and systems. 
In this context it keeps under review the need for an internal 
audit function.
 → Oversees the relationship with external auditors, including 
meeting with the auditors at the planning and completion 
stages of their work, the scope of any non-audit services and 
fees, and assessing their independence and effectiveness.
38 Areas of focus since establishment, including areas  
of judgement
The Committee reviewed the integrity of the 2013 financial 
statements included in Gamma’s Listing Particulars on 16 
September 2014 and was satisfied with this. Due diligence 
reporting for the IPO was carried out by Grant Thornton but 
using a separate team from a different office from that which 
carries out the external audit. This arrangement facilitated the 
IPO process and the Committee was satisfied that appropriate 
independence between the teams was maintained. Gamma’s 
tax affairs are handled by a different firm.
The Committee noted the extensive due diligence on financial 
controls as part of the IPO process, and also the findings of  
the external auditors, and is satisfied at present that no internal 
audit establishment is required. We also reviewed the audit  
plan for the 2014 audit provided by the auditors and were 
satisfied that this focused on key risk and judgemental areas. 
Subsequently, the audit findings report prepared by the 
auditors was reviewed in detail and the Committee was 
satisfied with those findings and the conclusions.
Areas of risk and judgement reviewed by the Committee 
included the following. In each case the Committee endorsed 
management’s judgement as to the accounting treatment:
 → Carrying value of intangible assets. Gamma carries out a 
significant level of in house development which is capitalised 
and amortised where appropriate – that is, where projects are 
technically feasible, can be completed and that the asset can 
or will be capable of use or sale. The Committee considers 
management’s capitalisation process and assessment of  
the carrying value.
 → Goodwill relating to past acquisitions is not amortised but  
is tested every year for impairment using estimates of the 
present value of future cash flows. The Committee was 
satisfied with the impairment testing process. The amount 
recognised as an intangible asset for customer contracts 
when a business is acquired requires consideration, inter alia,  
of the rate of future renewals. The Committee reviewed 
management’s judgements in this area.
 → Revenue recognition. Gamma has a number of revenue 
streams arising from its various products and services which 
should be recognised in line with relevant contractual terms. 
The Committee’s consideration of this area took into account 
the extensive work carried out by Gamma’s Revenue 
Assurance function on the integrity of amounts billed and 
charges received.
 → The charge in the financial statements for share based 
payments can be complex and has been an area of focus  
for management and the external auditors.
 → Leasehold Dilapidations. Provisions for leasehold 
dilapidations are estimates of the cost of returning leasehold 
properties to a defined condition at the end of the lease.  
The Committee has satisfied itself as to the basis of the 
estimates made.
 → T axation. The Committee considered the estimates involved 
in arriving at the provision for taxation and was satisfied 
with management’s approach.
 → Contingent assets and liabilities. The Committee considered 
and agreed with management’s judgements in relation  
to contingent assets and liabilities and the need for any 
reference to these in the notes to the financial statements.
Alan Gibbins
Audit Committee Chairman
19 March 2015
Gamma Communications plc
Annual Report and Accounts 2014 39
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
This report is on the activities of the 
Remuneration Committee for the period  
to 31 December 2014. It sets out the 
remuneration policy and the remuneration  
details for the Executive and Non-Executive 
Directors of the Company.
The report is split into three main areas:
Page
The statement by the Chairman of the Remuneration Committee 40
The Directors’ remuneration policy 41
The Annual Report on Remuneration 44
Membership
The members of the Remuneration Committee and meetings 
attended are:
Name Meetings attended
Martin Lea, Chairman 3/3
Richard Last 3/3
Alan Gibbins 3/3
Martin Lea
Remuneration Committee 
Chairman
Remuneration Committee  
report
Dear Shareholders
I am pleased to introduce the Director’s Remuneration Report 
for the 2014 financial year. The Chairman’s statement (on 
pages 6 to 7) provides a summary of the progress the Group 
has made over the year. The Remuneration Committee is 
committed to structuring senior executive remuneration that  
is competitive, incentivises and rewards good performance,  
and that will help the Company to continue building on this 
strong performance, thereby creating value for shareholders. 
The Remuneration Committee is appointed by the Board, and 
comprises the three Independent Non-Executive Directors. 
The Committee is primarily responsible for determining and 
agreeing with the Board the broad policy for the remuneration 
and employment terms of the Executive Directors, Chairman 
and other senior executives and, in consultation with the CEO, 
for determining the total individual remuneration packages of 
senior executive managers. The Committee is also responsible 
for the review of, and making recommendations to the Board  
in connection with share incentive plans, and performance 
related pay schemes and their associated targets, and for the 
oversight of employee benefit structures across the Group.  
The Committee’s full terms of reference are reviewed regularly 
and approved by the Board. No Director or manager is involved 
in any decisions as to their own remuneration.
Short term performance for senior executives is incentivised using 
an annual bonus scheme based on the achievement of profitability 
targets, and long term performance is incentivised by way of a  
long term incentive plan (L TIP) based on the achievement of T otal 
Shareholder Return (TSR) and Earnings Per Share (EPS) growth 
goals, over a three year measurement period. 
In addition to the L TIP , in order to further facilitate the alignment of 
employee and shareholder interests, prior to its admission to AIM, 
the Group also adopted a Group-wide general Share Incentive  
Plan (SIP) and a Company Share Option Plan (CSOP). Under the  
SIP , awards of 256,320 free shares were made to all employees  
in October 201 4. The CSOP will enable the Group to selectively 
incentivise key high performing employees.
All employees in the Group participate in a bonus scheme  
that enables them to earn up to 10% of basic salary based half  
on personal performance and half on Company performance. 
Furthermore, based on the Company’s performance in 201 4, and  
the contribution and hard work of all the employees, the Board was 
pleased to approve a 3% increase in like for like salary cost for 2015 
to cover the annual salary review and increases to reflect additional 
individual responsibilities. This increase does not apply to Directors.
This Remuneration Report includes a summary of the Company’s 
Remuneration Policy, details of Directors’ Service Agreements as 
well as the Annual Report on Remuneration. As an AIM listed 
company, this report is not mandatory, but is included as a matter  
of best practice, and the Remuneration Report will be put to a vote 
at the forthcoming Annual General Meeting. 
 
Martin Lea
Remuneration Committee Chairman
19 March 2015
40 Directors’ Remuneration Policy
This part of the Directors’ Remuneration Report sets out the remuneration policy of the Company with regard to its Directors.
Policy on Executive Director Remuneration
The Company’s remuneration policy is designed to ensure that the Company is able to attract, retain and motivate executives and 
senior management of the right quality to enable the Company to fulfil its objectives and longer term potential. The retention of key 
management and the alignment of management incentives with the creation of shareholder value are a key objective of this policy.
Setting base salary levels for Executive Directors at an appropriate level is key to management retention. Therefore, the 
Remuneration Committee seeks to ensure that salaries are market competitive for comparable companies. The aim is to set total 
compensation within a range around the median level for the Company’s peer group.
The Remuneration Committee is directly responsible for setting the remuneration of Executive Directors and for giving guidance  
on and approving recommendations for the remuneration of other members of the senior management team.
The main components of the remuneration policy for the year ending 31 December 2015 and how they are linked to and support 
the Company’s business strategy are summarised below:
Purpose and link to strategy Operation Potential remuneration Performance metrics
Base salary
To be set at a level which  
is sufficiently competitive to  
recruit and retain individuals  
of the appropriate calibre to 
deliver the Company’s strategy, 
and which takes into account  
the Director’s experience and 
personal contribution to the 
Company’s strategy.
Salaries are typically reviewed 
annually, with any changes 
effective from 1 January.
The review takes into account:
 → Company performance;
 → the role experience and 
performance of the  
individual Director;
 → average workforce salary 
adjustments within  
the Company.
Salaries are benchmarked from 
time to time against comparable 
roles at companies of a similar size 
and complexity in the Telecoms 
and IT services sectors.
The Executive Directors base 
salaries were last reviewed in 
October 2014 at the time of  
the Company’s admission to the 
AIM market.
The CEO’s salary is currently 
£294,000, and is not due for 
further review until January 2016.
The Finance Director’s (who was 
newly appointed at the time of  
the IPO) salary is currently 
£140,000, and this is scheduled  
to be reviewed at the end of June 
2015, following his initial nine 
months in post.
Not applicable.
Benefits
To complement basic salary  
by providing market competitive 
benefits to attract and retain 
executives.
Reviewed from time to time  
to ensure that benefits when 
taken together with other 
elements of remuneration  
remain market competitive.
Benefits for the Executive 
Directors currently comprise 
participation in the Company’s  
life assurance and permanent 
health insurance schemes. 
The cost of providing these 
benefits vary year on year 
depending on the schemes’ 
premiums.
Not applicable.
Pension
To provide retirement benefits, 
which when taken together  
with other elements of the 
remuneration package, will  
enable the Company to attract  
and retain executives.
The Executive Directors  
(together with all other eligible 
staff) are able to participate in the 
Company’s defined contribution 
(money purchase) pension scheme.
The Company contributes  
a maximum of 5.1% of salary.
A contribution of 5.1% per annum 
of salary is paid into the scheme,  
by the Company, on behalf of the 
Finance Director. The Finance 
Director is able to request that the 
Company, at the discretion of the 
Remuneration Committee, makes 
additional contributions where 
salary or bonus has been waived.
The CEO does not participate in 
the scheme.
Not applicable.
Gamma Communications plc
Annual Report and Accounts 2014 41
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
Purpose and link to strategy Operation Potential remuneration Performance metrics
Annual bonus
To incentivise the achievement  
of the Company’s annual  
financial targets.
The Executive Directors (as well  
as the other senior executive 
managers) participate in a 
discretionary, annual, performance 
related bonus scheme. 
Targets are set at the beginning 
of each year based on the 
recommendations of the 
Remuneration Committee. 
Bonuses are paid in cash based  
on audited financial results.
For the CEO and Finance Director 
the on target bonus potential is 
50% of salary, with the maximum 
bonus (achievable in the event  
of overachievement of target)  
capped at 100% of salary.
For the year ending 2014, the 
targets were based on growth  
in Earnings After Tax. 
For 2015, targets will be based  
on growth in Adjusted Profit 
Before Tax (PBT).
Long Term Incentive Plan (LTIP)
To motivate executives and 
incentivise the achievement 
of longer-term financial 
performance. 
To align the interests of 
executives and Shareholders.
The Executive Directors  
(as well as other senior executive 
managemers) participate in  
a discretionary LTIP.
The plan entitles participants to an 
allocation of, or options over, free 
(or nominal value) shares after a 
performance period of three years, 
subject to certain performance and 
service conditions being met.
Participation is at the discretion  
of the Remuneration Committee.
Awards will typically be made 
annually based on a multiple of 
annual salary.
Performance conditions are set  
by the Remuneration Committee 
at the time of the award. 
The plan rules amongst other things 
include claw-back provisions and a 
limitation to ensure that new shares 
issued, when aggregated with all 
other employee share awards must 
not exceed 10% of issued share 
capital over any ten year period.
The Remuneration Committee 
would in normal circumstances 
expect to make annual LTIP 
awards to the Executive Directors 
(and other senior executive 
managers) at a value of 100%  
of base salary.
Special pre IPO awards were 
granted to the CEO and Finance 
Director (and other senior 
executive managers) in 2014 at  
a value of 200% of base salary.
These awards will vest in April 
2017 , subject to service conditions 
and Total Shareholder Return 
(TSR) and Earnings per Share  
(EPS) performance conditions.
It is anticipated that further 
awards will be made in April 2015 
following announcement of the 
Group’s annual results.
Vesting of the 2014 LTIP awards 
in April 2017 is conditional upon 
the following performance 
conditions:
 → 15% of the shares if annual 
compound total shareholder 
return (TSR) over the 
performance period equals  
8%, and 50% of the shares  
if annual compound TSR over 
the performance period equals 
15% or higher with straight  
line vesting in between.
 → 15% of the shares if annual 
compound growth of adjusted 
earnings per share (adjusted 
for exceptional costs and  
share based payment costs) 
over the performance period 
equals 8%, and 50% of the 
shares if annual compound 
growth of adjusted EPS over 
the performance period equals 
20% or higher with straight  
line vesting in between.
Previous share awards
Prior to the adoption of the LTIP , 
the Executive Directors had  
been made awards under other 
historic schemes.
Following flotation, no further 
awards will be made under such 
schemes. As such they no longer 
form part of the Company’s 
remuneration policy.
Details of unvested awards under 
the historic schemes are in the 
Annual Report on Remuneration.
Not applicable.
Remuneration Committee report 
continued
42 Policy on Non-Executive Director Remuneration
The Chairman and the other Non-Executive Directors’ remuneration comprises only fees. The Chairman’s fee is approved by  
the Board on the recommendation of the Remuneration Committee. The other Non-Executives’ fees are approved by the Board  
on the recommendation of the Chairman and Executive Directors. The Non-Executive Directors are not involved in any decisions 
about their own remuneration.
Additional fees over and above the base fee are payable to the chairmen of the Audit and Remuneration Committees.  
They are reviewed annually with changes effective from 1 January each year.
The Chairman and the other Independent Non-Executive Directors are entitled to be reimbursed for reasonable expenses.
Details of the fees currently payable are set out in the Annual Report on Remuneration. The fees were set at the time the 
Chairman and other Independent Non-Executive Directors joined the Board during the second quarter of 2014, and will not  
be reviewed until January 2016. 
 
Directors’ Service Agreements
Executive Directors’ Service Agreements
The key elements of the Executive Directors’ Service Agreements are summarised in the table below:
Key element CEO Bob Falconer Finance Director Andrew Belshaw
Effective date of  
Service Agreement
AIM admission date AIM admission date
Notice period 6 months notice given by either party 6 months notice given by either party
Basic salary £294,000 per annum £140,000 per annum
Annual bonus Discretionary performance related Discretionary performance related
Pension None Company contributes 5.1% of basic salary into  
defined contribution money purchase scheme
Benefits Participation in Company life assurance and  
permanent health insurance schemes
Participation in Company life assurance and  
permanent health insurance schemes
Share schemes Eligible to participate in Company share schemes Eligible to participate in Company share schemes
Termination payments The Company has the discretion to make  
a payment of basic salary in lieu of notice  
to terminate the employment forthwith in  
the event of notice being given
The Company has the discretion to make  
a payment of basic salary in lieu of notice to  
terminate the employment forthwith in the  
event of notice being given
Non-Executive Director Letters of Appointment
The Non-Executive Directors have Letters of Appointment stating that their appointment is for an initial term of three years from 
the date of the appointment letter. The Letters of Appointment provide for termination of the appointment with three months’ 
notice by either party. 
The current Non-Executive Directors’ appointments commenced on the following dates:
Director Date of Appointment
Alan Gibbins 17 June 2014
Richard Last 17 June 2014
Martin Lea 17 June 2014
Wu Long Peng 6 June 2014
Andrew Stone 6 June 2014
Gamma Communications plc
Annual Report and Accounts 2014 43
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
Annual Report on Remuneration
Introduction
This Annual Report on Remuneration sets out information about the remuneration of the Directors of the Company, for the period 
ended 31 December 2014. Please note that this only includes those individuals that have acted as Directors since the admission to AIM.
Remuneration Committee
Membership
The Remuneration Committee consisted of the following Directors in the period from the date of AIM admission to  
31 December 2014. 
Martin Lea (Chairman), Independent Non-Executive Director.
Alan Gibbins, Independent Non-Executive Director.
Richard Last, Independent Non-Executive Director and Chairman of the Board.
Activities in 2014
In the run up to the IPO and after the Listing, the Committee met three times in 2014 in order to conduct the following main items  
of business: Terms of reference of the Remuneration Committee; the CEO loan to facilitate him converting his B shares into A 
shares and the related post IPO lock-in period; the terms of the new LTIP scheme and the pre IPO awards and related targets; the 
terms of the new Company SIP and the initial award of free shares; the terms of the new Company CSOP scheme; the revisions  
to Executive Directors remuneration and Service Agreements to be effective from date of admission to AIM; the Company annual 
salary review; senior executive managers’ annual salary review; executive annual bonus scheme structure and targets for 2015.
Advisors
Prior to Listing, the Company received independent advice from h2glenfern Remuneration Advisory on a number of issues 
including Executive Director remuneration benchmarking and the structuring of the Long Term Incentive Plan (LTIP). H2glenfern 
Remuneration Advisory operates in accordance with the principles of the Code of Conduct of the Remuneration Consultants Group  
in relation to remuneration consulting in the UK. The fees for this advice excluding VAT were £28,000.
Remuneration of the Executive Directors
Director Salary and fees Benefits Annual bonus Pension
Total for  
2014
Bob Falconer £250,793 – £294,000 – £544,793
Andrew Belshaw £113,797 – £40,000 £114,189 £267,986
Bonuses are shown on an accrued basis.
In addition to the above, prior to flotation, Malcolm Goddard served as a Director from 17 March 2014 (incorporation) to 30 August 2014 and Gerard Sreeves from 
23 May 2014 to 1 October 2014 as detailed in note 7 of the financial statements. 
Bob Falconer became a Director on 27 June 2014 but was also a director of the former group holding company (Gamma Telecom 
Holdings Limited) which was acquired by Gamma Communications plc by way of a share for share exchange on 12 May 2014. His 
remuneration is shown assuming that Gamma Communications plc had been the holding company for this year and the prior year 
and that he had been paid by that company.
Andrew Belshaw became a Director of the Company on 1 October 2014 and his salary from then until the end of the period was 
£38,505. He waived £100,000 of his bonus relating to 2014 and received a pension contribution of the same amount. 
Director Salary and fees Benefits Annual bonus Pension
Total for  
2013
Bob Falconer 227,986 – 184,500 85,600 498,086
Remuneration of the Non-Executive Directors 
Director
  
Directors’ Fee
Committee  
Chair Fee
Total for  
2014
Richard Last £43,750 - £43,750
Alan Gibbins £20,416 £2,917 £23,333
Martin Lea £20,416 £2,917 £23,333
Wu Long Peng £20,417 - £20,417
Andrew Stone £20,417 - £20,417
Remuneration Committee report 
continued
44 Share scheme interests awarded during the year ended 31 December 2014
Deferred Share Scheme (DSS)
The following awards were made under the DSS in respect of the financial performance for the 18 months ended  
30 June 2014. There are no performance conditions attached.
Director
Type of 
scheme interest Basis of award
Number of  
awards Vesting date Exercise price
Bob Falconer Nil-Cost Option Discretionary 219,496 1 Feb 2015 £0.0025
Nil-Cost Option Discretionary 329,244 10 Oct 2016 £0.0025
Andrew Belshaw Nil-Cost Option Discretionary 71,765 1 Feb 2015 £0.0025
Nil-Cost Option Discretionary 71,765 1 Feb 2016 £0.0025
Nil-Cost Option Discretionary 35,882 1 Feb 2017 £0.0025
Unapproved share option plan
The following award was made under an unapproved share option plan. There are no vesting conditions.
Director
Type of 
scheme interest Basis of award
Number of  
awards Vesting date Exercise price
Andrew Belshaw Option Discretionary 31,204 Immediate £1.87
This award was made pre-IPO to compensate Andrew Belshaw for the fact that he was unable to exercise existing options on IPO.
Long Term Incentive Plan (LTIP)
The following awards were made under the LTIP . The performance conditions are set out below the table.
Director
Type of  
scheme interest Basis of award
Number of  
awards Vesting date Exercise price
Bob Falconer Nil-Cost Option 200% of Salary 288,220 1 April 2017 £0.0025
Andrew Belshaw Nil-Cost Option 200% of Salary 170,732 1 April 2017 £0.0025
At the time of making an award the Remuneration Committee set challenging long term performance targets in order to align the 
interests of the Directors with shareholders and which, together with continuous employment conditions, must be satisfied before an 
award vests. 
The awards granted in 2014 have a performance period of three years starting from the vesting commencement date, being  
1 April 2014. The awards will vest as follows:
 → 15% of the shares if annual compound total shareholder return (“TSR”) over the performance period equals 8%, and 50% of the shares 
if annual compound TSR over the performance period equals 15% or higher with pro rata straight line vesting in between; and
 → 15% of the shares if the annual compound growth of the Company’s adjusted earnings per share between the financial years at the 
beginning and the end of the performance period is equal to 8%, and 50% of the shares if the annual compound growth of the Company’s 
adjusted earnings per share over the same period is equal to or in excess of 20% with pro rata straight line vesting in between.
Statement of Directors’ shareholding and share interests
Directors’ share interests at 31 December 2014 are set out below:
Options
Number  
of beneficially 
owned shares
With 
performance 
measures
Without 
performance 
measures
Vested but 
unexercised
Exercised  
during  
the year
Executive Director
Bob Falconer 4,566,528 288,280 329,234 219,496 Nil
Andrew Belshaw 276,337 170,732 179,412 107,541 Nil
Non-Executive Director
Richard Last 53,475 – – – Nil
Alan Gibbins 13,368 – – – Nil
Martin Lea 13,368 – – – Nil
Wu Long Peng – – – – Nil
Andrew Stone 3,700,000 – – – Nil
As the Company was incorporated during the year there were no opening shareholding and share interests.
This report was approved by the Board of Directors on 19 March 2015 and signed on its behalf by:
Martin Lea
Remuneration Committee Chairman
Gamma Communications plc
Annual Report and Accounts 2014 45
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
Directors’ report
Details of significant events since the balance sheet date are 
contained in note 30 to the financial statements. An indication  
of likely future developments in the business of the Company 
and details of research and development activities are included 
in the Strategic Report.
Information about the use of financial instruments by the 
Company and its subsidiaries is given in note 18 to the  
financial statements.
Dividends
The Directors recommend a final dividend of 3.95 pence per 
Ordinary Share to be paid in late June to ordinary Shareholders 
on the register on 5 June 2015. No interim dividend has been 
proposed or paid.
Directors
The names and biographies of the Directors during the year  
are disclosed on pages 32 to 35. In addition, prior to flotation, 
Malcolm Goddard served as a Director from 17 March 2014 to  
30 August 2014 and Gerard Sreeves from 23 May 2014 to  
1 October 2014.
Share capital and share options
Details of the share capital of the Company and options over 
shares of the Company are set out in notes 21 and 25 to the 
Group financial statements. Over the period, the Company had 
three share incentive schemes by which Directors and employees 
may: (i) be granted options under a long term incentive scheme 
to subscribe for nil cost shares in the Company, (ii) be issued 
shares under the Company Share Option Plan, and (iii) be issued 
shares under a Share Incentive Plan.
The maximum aggregate number of shares which may be issued 
in respect of these schemes is limited to 10% of the issued  
share capital.
Composition of Group
Details concerning subsidiary undertakings are given in Note 13 
to the Group financial statements.
Directors’ interests in share capital
The Directors’ interest in share capital is shown within the 
Remuneration Report.
Directors’ indemnities
The Company has made qualifying third party indemnity 
provisions for the benefits of its Directors which were made 
during the course of the year and remain in force at the date  
of this report. 
Going concern
The Group’s business activities, together with the factors likely 
to affect the future development, performance and position, 
are set out in the Strategic Report. The financial position of  
the Group, its cash flows and liquidity position and borrowing 
facilities are described in the Finance Review section in the 
Strategic Report and in note 18. Further information on the 
Group’s exposure to financial risks and the management 
thereof is provided in note 18. 
The Board’s review of the accounts, budgets and financial  
plan leads the Directors to believe that the Group has sufficient 
resources to continue in operation for the foreseeable future.
The financial accounts are therefore prepared on a going 
concern basis. 
The Directors present their Annual Report  
on the affairs of the Group, together with 
the financial statements for the year ended 
31 December 2014.
46 Treasury policy
The objective of the Group’s treasury policy is to manage  
the Group’s financial risk and to minimise the adverse effects  
of fluctuations in the financial markets on the value of the 
Group’s financial assets and liabilities, on reported profitability 
and on the cash flows of the Group. Note 18 sets out the 
particular risks to which the Group is exposed, and how these 
are managed.
Interests in contracts
There have been no contracts or arrangements during the financial 
year in which a Director of the Company was materially interested 
and which were significant in relation to the Group’s business.
Health, safety, the environment and the community
The Group has a formal Health, Safety and Environmental  
Policy which requires all operations within the Group to pursue 
economic development whilst protecting the environment.  
The Directors aim not to damage the environment of the areas 
in which the Group operates, to meet all relevant regulatory  
and legislative requirements and to apply responsible standards 
of its own where relevant laws and regulations do not exist.
It is the policy of the Group to consider the health and welfare 
of employees by maintaining a safe place and system of work 
as required by legislation in each of the countries where the 
Group operates.
Political donations
No political donations were made in the year.
Employee consultation
Gamma recognises the essential importance of employees  
to the success of the business and ensures that they are fully 
informed of events that directly affect them and their working 
conditions. Information on matters of concern to employees is 
given in briefings that seek to provide a common awareness on 
the part of all employees of the financial and economic factors 
affecting the Group’s performance.
During both the year and the prior year Gamma undertook  
the Best Companies Limited employee engagement survey  
and achieved a 2-star accreditation. The results from this survey 
attracted a listing in the Sunday Times Best 100 Companies  
to Work For and Gamma was placed in the top 50 companies  
in the UK.
Disabled employees
Applications for employment by disabled persons are given full 
and fair consideration for all vacancies in accordance with their 
particular aptitudes and abilities. It is the policy of the Company 
that training and promotion opportunities should be available  
to all employees.
Auditors and their independence
A resolution to appoint auditors for the year to 31 December 
2015 will be proposed at the Annual General Meeting. The 
Company has a policy for approval by the Audit Committee of 
non-audit services by the auditor, to preserve independence.
Disclosure of information to auditors
The Directors who held office at the date of approval of this 
Directors’ report confirm that, so far as they are each aware, 
there is no relevant audit information of which the Company’s 
auditor is unaware; and each Director has taken all the steps 
that he ought to have taken as a Director to make himself 
aware of any relevant audit information and to establish that 
the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance 
with the provisions of s418 of the Companies Act 2006.
By order of the Board:
Andrew Belshaw
Finance Director
19 March 2015
Gamma Communications plc
Annual Report and Accounts 2014 47
Strategic  
report
Corporate 
governance
Financial  
statements Corporate governance
Statement of Directors’  
responsibilities
Company law requires the Directors to prepare financial statements 
for each financial year . Under that law the Directors have to prepare 
the financial statements in accordance with International Financial 
Reporting Standards (IFRSs) as adopted by the European Union  
and have also chosen to prepare the parent company financial 
statements under United Kingdom Generally Accepted 
Accounting Practice. Under company law the Directors must not 
approve the financial statements unless they are satisfied that  
they give a true and fair view of the state of affairs and profit  
or loss of the Company and Group for that period. In preparing 
these financial statements, the Directors are required to:
 → select suitable accounting policies and then apply them 
consistantly;
 → make judgements and accounting estimates that are 
reasonable and prudent;
 → state whether applicable IFRSs have been followed, subject 
to any material departures disclosed and explained in the 
financial statements;
 → prepare the financial statements on the going concern basis 
unless it is inappropriate to pressume that the Company will 
continue in business.
The Directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the Company’s 
transactions and disclose with reasonable accuracy at  
any time the financial position of the Company and enable  
them to ensure that the financial statements comply with  
the Companies Act 2006. They are also responsible for 
safeguarding the assets of the Company and hence for taking 
reasonable steps for the prevention and detection of fraud  
and other irregularities.
The Directors are responsible for the maintenance and  
integrity of the corporate and financial information included  
on the Company’s website. Legislation in the United Kingdom 
governing the preparation and dissemination of financial 
statements may differ from legislation in other jurisdictions.
Andrew Belshaw
Finance Director 
19 March 2015
The Directors are responsible for preparing 
the Annual Report and the financial 
statements in accordance with applicable 
law and regulations.
48 Independent auditor’s report to the 
members of Gamma Communications plc
The financial reporting framework that has been applied in  
the preparation of the parent company financial statements  
is applicable law and United Kingdom Accounting Standards 
(United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members,  
as a body, in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006. Our audit work has been undertaken  
so that we might state to the Company’s members those 
matters we are required to state to them in an auditor’s report 
and for no other purpose. To the fullest extent permitted  
by law, we do not accept or assume responsibility to anyone 
other than the Company and the Company’s members as  
a body, for our audit work, for this report, or for the opinions  
we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities 
Statement, the Directors are responsible for the preparation  
of the financial statements and for being satisfied that they 
give a true and fair view. Our responsibility is to audit and 
express an opinion on the financial statements in accordance 
with applicable law and International Standards on Auditing  
(UK and Ireland). Those standards require us to comply with  
the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements  
is provided on the Financial Reporting Council’s website at 
www.frc.org.uk/auditscopeukprivate
Opinion on financial statements
In our opinion:
 → the financial statements give a true and fair view of the 
state of the Group’s and of the parent company’s affairs  
as at 31 December 2014 and of the Group’s profit for the 
year then ended; 
 → the Group financial statements have been properly  
prepared in accordance with IFRSs as adopted by the 
European Union; 
 → the parent company financial statements have been 
prepared in accordance with United Kingdom Generally 
Accepted Accounting Practice; and
 → the financial statements have been prepared in accordance 
with the requirements of the Companies Act 2006.
In our opinion the Group financial statements comply with 
IFRSs as issued by the IASB.
Opinion on other matter prescribed by the  
Companies Act 2006
In our opinion the information given in the Strategic Report  
and Directors’ Report for the financial year for which the 
financial statements are prepared is consistent with the 
financial statements.
 
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters 
where the Companies Act 2006 requires us to report to you if, 
in our opinion:
 → adequate accounting records have not been kept by the 
parent company, or returns adequate for our audit have  
not been received from branches not visited by us; or
 → the parent company financial statements are not in 
agreement with the accounting records and returns; or
 → certain disclosures of Directors’ remuneration specified  
by law are not made; or
 → we have not received all the information and explanations 
we require for our audit.
Nicholas Watson
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Reading
19 March 2015
We have audited the financial statements of 
Gamma Communications plc for the period 
ended 31 December 201 4 which comprise the 
consolidated statement of financial position, 
the parent company balance sheet, the 
consolidated statement of comprehensive 
income, the consolidated statement of cash 
flow, the consolidated statement of changes 
in equity and the related notes. The financial 
reporting framework that has been applied in 
preparation of the Group financial statements 
is applicable law and International Financial 
Reporting Standards (IFRSs) as adopted by 
the European Union.
Gamma Communications plc
Annual Report and Accounts 2014 49
Strategic  
report
Corporate 
governance
Financial  
statements Notes
 2014 
 £m
2013
£m
Revenue 4 173.2 148.7
Cost of sales (105.6) (94.8)
Gross profit 67.6 53.9
Operating expenses 5 (56.1) (42.4)
Operating profit before share based payment, depreciation, amortisation  
and exceptional items 5 23.1 17.2
Share based payment expense 25 (3.2) (0.9)
Exceptional items 6 (2.0) –
Operating profit before depreciation and amortisation 17.9 16.3
Depreciation and amortisation 5 (6.4) (4.8)
Profit from operations 5 11.5 11.5
Finance income 8 – –
Profit before tax 11.5 11.5
Tax expense 9 (2.1) (2.2)
Profit after tax 9.4 9.3
Total comprehensive income attributable to the owner of the parent 9.4 9.3
Earnings per share 10
Basic per ordinary share (pence) 10.6 10.5
Diluted per ordinary share (pence) 10.0 9.9
 Adjusted earnings per share is shown in note 10.
 The notes on pages 54 to 80 form part of these financial statements.
Financial statements
Consolidated statement of comprehensive income
For the year ended 31 December 201 4
50 Notes
2014
£m
2013
£m
Assets
Non-current assets
Property, plant and equipment 11 18.9 12.8
Intangible assets 12 10.8 11.2
Deferred tax asset 20 2.3 0.6
32.0 24.6
Current assets
Inventories 14 1.1 0.5
Trade and other receivables 15 32.5 26.4
Cash and cash equivalents 16 13.4 14.6
47.0 41.5
Total assets 79.0 66.1
Liabilities
Non-current liabilities
Other payables 17 – 1.4
Provisions 19 0.9 1.0
Deferred tax liability 20 0.2 1.0
1.1 3.4
Current liabilities
Trade and other payables 17 25.9 24.7
Current tax liability 0.8 1.1
26.7 25.8
Total liabilities 27.8 29.2
Issued capital and reserves attributable to owners of the parent
Share capital 21 0.2 0.2
Share premium reserve 3.2 –
Merger reserve 2.3 2.3
Share option reserve 2.4 1.1
Retained earnings 43.1 33.3
Total equity 51.2 36.9
Total equity and liabilities 79.0 66.1
The financial statements on pages 50 to 83 were approved and authorised for issue by the Board of Directors on 19 March 2015 
and were signed on its behalf by:
Andrew Belshaw
Finance Director 
The notes on pages 54 to 80 form part of these financial statements.
Consolidated statement of financial position
At 31 December 201 4
Gamma Communications plc
Annual Report and Accounts 2014 51
Strategic  
report
Corporate 
governance
Financial  
statements Notes
2014
£m
2013
£m
Cash flows from operating activities
Profit for the year before tax 11.5 11.5
Adjustments for:
Depreciation of property, plant and equipment 11 5.1 3.7
Amortisation of intangible assets 12 1.3 1.1
Change in fair value of contingent consideration 6 0.6 –
Share based payment expense 25 3.0 0.4
21.5 16.7
(Increase) in trade and other receivables (3.3) (3.9)
(Increase) in inventories (0.6) (0.2)
Increase in trade and other payables 1.9 3.7
(Decrease)/Increase in provisions and employee benefits (0.1) 0.1
Taxes paid (3.0) (2.4)
Net cash flows from operating activities 16.4 14.0
Investing activities
Purchases of property, plant and equipment 11 (11.2) (5.1)
Expenditure on development costs 12 (0.9) (0.8)
Payment of deferred consideration (2.6) –
Loans made to individuals to subscribe for shares (2.8) –
Net cash used in investing activities (17.5) (5.9)
Financing activities
Share buybacks and cancellations (3.1) (0.7)
Share issues 3.0 –
Net cash used in financing activities (0.1) (0.7)
Net (decrease)/increase in cash and cash equivalents (1.2) 7.4
Cash and cash equivalents at beginning of year 14.6 7.2
Cash and cash equivalents at end of year 16 13.4 14.6
The notes on pages 54 to 80 form part of these financial statements.
Financial statements
Consolidated statement of cash flows
For the year ended 31 December 201 4
52 Consolidated statement of changes in equity
For the year ended 31 December 201 4
Share
capital
£m
 Share 
premium
£m
Merger 
reserve
£m
Share option 
reserve
£m
Retained
earnings
£m
Total
equity
£m
1 January 2013 0.2 – 2.3 0.7 24.6 27.8
Share buybacks and cancellations – – – – (0.6) (0.6)
Issue of shares – – – 0.4 – 0.4
Transaction with owners – – – 0.4 (0.6) (0.2)
Profit for the year – – – – 9.3 9.3
T otal comprehensive income – – – – 9.3 9.3
31 December 2013 0.2 – 2.3 1.1 33.3 36.9
1 January 2014 0.2 – 2.3 1.1 33.3 36.9
Share option cancellations – – – (0.6) (2.4) (3.0)
Issue of shares – 3.2 – (1.1) 0.9 3.0
Deferred tax on share based payments – – – – 1.9 1.9
Recognition of share based payments – – – 3.0 – 3.0
Transaction with owners – 3.2 - 1.3 0.4 4.9
Profit for the year – – – – 9.4 9.4
T otal comprehensive income – – – – 9.4 9.4
31 December 2014 0.2 3.2 2.3 2.4 43.1 51.2
Gamma Communications plc
Annual Report and Accounts 2014 53
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4
1. Accounting policies
Basis of preparation
Gamma Communications plc (the “Company”) is a company 
domiciled in England. The Company was incorporated on  
17 March 2014 as Gamma Communications Limited and this is 
the first set of financial information prepared by the Company. 
The Company changed its name to Gamma Communications plc 
on 3 October 2014 when it became a public company.
The Group was formed on 12 May 2014 when Gamma 
Communications Limited acquired the entire share capital  
of Gamma Telecom Holdings Limited and its wholly owned 
subsidiaries through the issue of 20,590,196 Ordinary Shares 
and 1,699,983 B1 Shares (further detail on the share capital  
is set out in note 21). 
The acquisitions of the subsidiaries are deemed to be 
‘combinations under common control’ as ultimate control  
before and after the acquisition was the same. As a result,  
the transaction is outside the scope of IFRS 3 “Business 
combinations” and has been included under the principles  
of merger accounting by reference to UK GAAP . 
Accordingly, although the units which comprise the Group did 
not form a legal group for the entire period, the current period 
and comparative results comprise the results of the subsidiary 
companies as if the Group had been in existence throughout 
the entire period. 
These financial statements have been prepared in accordance 
with International Financial Reporting Standards, International 
Accounting Standards and Interpretations (collectively IFRS) 
issued by the International Accounting Standards Board (IASB) 
as adopted by European Union (“adopted IFRSs”), and are in 
accordance with IFRS as issued by the IASB, and are presented 
in Sterling and, unless otherwise stated, have been rounded to 
the nearest 0.1 million (£m).
The former group, Gamma Telecom Holdings Limited, adopted 
IFRS for the first time in its Historical Financial Information  
for the three years ended 31 December 2013 as presented in  
the Placing and Admission to AIM document dated 7 October 
2014 which can be found on www.gamma.co.uk. Gamma 
Communications plc is a continuation of Gamma Telecom 
Holdings Limited as reflected in the merger accounting principle 
that has been adopted. Therefore the Group is not deemed to 
be a first time adopter of IFRS in these financial statements.
The principal accounting policies adopted in the preparation  
of the financial statements are set out below. The policies  
have been consistently applied to all the periods presented.
Standards, amendments and interpretations to existing 
standards that are not yet effective and have not been adopted 
early by the Group
At the date of authorisation of these financial statements, 
certain new standards, and amendments to existing standards 
have been published by the IASB that are not yet effective, and 
have not been adopted early by the Group. New accounting 
standards expected to be relevant to the Group are listed below.
 → IFRS 15 Revenue and Contracts with Customers  
(effective 1 January 2017);
 → Amendments to IAS 16 and IAS 38 clarifying  
Acceptable Methods of Depreciation and Amortisation 
(effective date 1 January 2016); and
 → Annual improvements to IFRSs 2012-2014 Cycle  
(effective 1 January 2016).
Management anticipates that all relevant pronouncements will 
be adopted in the Group’s accounting policies for the first period 
beginning after the effective date of the pronouncement. New 
standards, interpretations and amendments not either adopted 
or listed below are not expected to have a material impact on 
the Group’s financial statements.
Going concern
The Directors prepare a detailed annual budget and constantly 
reforecast for the next 12 month period. The Group has a 
significant cash balance and is not reliant on any debt facilities. 
Therefore, at the time of approving the financial statements, 
the Directors have a reasonable expectation that the Company 
and the Group have adequate resources to continue in 
operational existence for the foreseeable future. Thus they 
continue to adopt the going concern basis of accounting in 
preparing the financial statements.
Basis of consolidation
The Group financial statements consolidate those of the  
parent company and all of its subsidiaries. The parent controls  
a subsidiary if it has power over the investee to significantly 
direct the activities, exposure or rights to variable returns from 
its involvement with the investee, and the ability to use its 
power over the investee to affect the amount of the investor’s 
returns. All subsidiaries have a reporting date of 31 December.
All transactions and balances between Group companies are 
eliminated on consolidation, including unrealised gains and 
losses on transactions between Group companies. Where 
unrealised losses on intra-Group asset sales are reversed  
on consolidation, the underlying asset is also tested for 
impairment from a Group perspective. Amounts reported  
in the financial statements of subsidiaries have been  
adjusted where necessary to ensure consistency with  
the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries 
acquired or disposed of during the year are recognised from  
the effective date of acquisition, or up to the effective date  
of disposal, as applicable.
54 The consolidated financial statements consist of the results  
of the following entities:
Entity Summary description
Gamma Communications plc Holding company
Gamma T elecom Holdings Limited Intermediate holding company
Gamma T elecom Limited Trading company
Gamma Business Communications 
Limited
Holdings and trading company
Gamma Network Solutions Limited Trading company
Peach Amber Kft Trading company
Gamma Metronet Limited Dormant
NP4UK Limited Dormant
Uniworld Bureau Services Limited Dormant
Go Worldwide Solutions Limited Dormant
Blue Spot T echnologies Limited Dormant
Gamma T elecom Employee  
Benefit Trust
EBT
As set out in the basis of preparation note, the units which 
comprise the Group have all been under common management 
and control throughout the period presented in the consolidated 
financial information but they did not form a legal group 
throughout that period, the Group coming into existence on  
12 May 2014. As a result, the Group Reconstruction is outside 
the scope of IFRS 3 “Business combinations”. In accordance  
with IAS 8, the Directors have determined that the most 
appropriate method of accounting for the Group Reconstruction 
is to follow the principles of merger accounting by reference  
to UK GAAP . 
The aim of merger accounting is to show the results and 
financial position of the Group as if the Group had always been 
in existence, as follows:
 → The results of the subsidiaries have been included in the 
consolidated results for the entire period during which the 
Group Reconstruction took place, as well as prior periods; and
 → The consolidated results include the assets and liabilities  
of the subsidiaries at the book values at which they were 
recorded prior to the Group Reconstruction: there is no 
requirement to fair value, and no goodwill arises as a result. 
The share capital issued to effect the merger has been shown 
as if it had always been issued.
These financial statements incorporate the results of business 
combinations using the acquisition method with the exception of 
the common control transaction on the forming of the Group. In 
the statement of financial position, the acquiree’s identifiable 
assets, liabilities and contingent liabilities are initially recognised 
at their fair values at the acquisition date. The results of acquired 
operations are included in the consolidated statement of 
comprehensive income from the date on which control is 
obtained. They are deconsolidated from the date control ceases.
Revenue
Revenue represents the fair value of the consideration received 
or receivable for communication services and equipment sales, 
net of discounts and sales taxes. 
Revenue is recognised when it is probable that the economic 
benefits associated with a transaction will flow to the Group 
and the amount of revenue and associated costs can be 
measured reliably.
The Group sells a number of communications products (both 
traditional and new) each of which typically consists of all or 
some of four main types of revenue – voice and data traffic,  
a subscription or rental, equipment and installation fees. 
Revenue for each element of the sale of the product is 
recognised as described below.
To the extent that invoices are raised to a different pattern 
than the revenue recognition described below, appropriate 
adjustments are made through deferred and accrued income  
to account for revenue when the underlying service has been 
performed or goods have transferred to the customer.
Voice and data traffic
Revenue from traffic is recognised at the time the call  
is made.
Revenue arising from the interconnection of voice and data 
traffic between other telecommunications operators is 
recognised at the time of transit across the Group’s network.
Subscriptions and rentals
Revenue from the rental of analogue and digital lines is 
recognised evenly over the period to which the charges relate. 
Subscription fees, consisting primarily of monthly charges  
for access to broadband, hosted IP services and other internet 
access or voice services, are recognised as revenue as the 
service is provided. 
Equipment sales
Revenue from the sale of peripheral and other equipment  
is recognised when all the significant risks and rewards of 
ownership are transferred to the buyer, which is normally  
the date the equipment is delivered and accepted by the 
customer. Where the buyer has a right of return, the Group 
defers recognition of revenue until the right to return has 
lapsed. However, where the Group retains only insignificant 
risks of ownership due to the right of return, revenue is not 
deferred, but the Group recognises a provision based on 
previous experience and other relevant factors. The same 
policy applies to warranties.
Installations
Revenue arising from separable installation and connection 
services is recognised when it is earned, upon activation.
Arrangements with multiple deliverables
Where goods and/or services are sold in one bundled 
transaction, the Group allocates the total arrangement’s 
consideration to the different individual elements based  
on their relative fair values. Management determines the  
fair values of individual components based on actual amounts 
charged by the Group on a stand-alone basis, or alternatively 
based on comparable pricing arrangements observable in  
the market.
Gamma Communications plc
Annual Report and Accounts 2014 55
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
1. Accounting policies continued
Advances made to channel partners
Advances paid upfront to channel partners are only capitalised 
where the Group can demonstrate recovery of the asset 
through contractual claw back provisions and past evidence  
of recovery. Where they are capitalised they are written  
off rateably over the period of the contract to cost of sales.  
Where this is not possible they are charged directly to the 
consolidated statement of comprehensive income.
Goodwill
Goodwill represents the excess of the cost of a business 
combination over, in the case of business combinations 
completed prior to 1 January 2011, the Group’s interest in  
the fair value of identifiable assets, liabilities and contingent 
liabilities acquired and, in the case of business combinations 
completed on or after 1 January 2011, the total acquisition  
date fair value of the identifiable assets, liabilities and 
contingent liabilities acquired. 
For business combinations completed prior to 1 January 2011, 
cost comprised the fair value of assets acquired, liabilities 
assumed and equity instruments issued, plus any direct costs  
of acquisition. Changes in the estimated value of contingent 
consideration arising on business combinations completed  
by this date were treated as an adjustment to cost and, in 
consequence, resulted in a change in the carrying value  
of goodwill. 
For business combinations completed on or after 1 January 
2011, cost comprises the fair value of assets acquired, liabilities 
assumed and equity instruments issued, plus the amount  
of any non-controlling interests in the acquiree plus, if the 
business combination is achieved in stages, the fair value of  
the existing equity interest in the acquiree.
Contingent consideration
Contingent consideration is included in cost at its acquisition 
date fair value and is classified as a financial liability, re-measured 
at fair value subsequently through profit or loss. Contingent 
consideration classified as equity is not re-measured.
Direct costs
For business combinations completed on or after 1 January 
2011, direct costs of acquisition are recognised immediately  
as an expense. 
Impairment
Goodwill is capitalised as an intangible asset with any 
impairment in carrying value being charged to the consolidated 
statement of comprehensive income. Where the fair value of 
identifiable assets, liabilities and contingent liabilities exceed 
the fair value of consideration paid, the excess is credited in  
full to the consolidated statement of comprehensive income  
on the acquisition date. 
Intangible assets
An intangible asset, which is an identifiable non-monetary 
asset without physical substance, is recognised to the extent 
that it is probable that the expected future economic benefits 
attributable to the asset will flow to the Group and that its cost 
can be measured reliably. The asset is deemed to be identifiable 
when it is separable or when it arises from contractual or other 
legal rights.
Intangible assets acquired as part of a business combination are 
shown at fair value at the date of the acquisition less accumulated 
amortisation. Amortisation is charged on a straight line basis 
through the profit or loss. The rates applicable, which represent 
the Directors’ best estimate of the useful economic life, are:
 → Customer contracts – five years
Impairment of non-financial assets (excluding inventories  
and deferred tax assets)
Impairment tests on goodwill and other intangible assets with 
indefinite useful economic lives are undertaken annually at  
the financial year end. Other non-financial assets are subject to 
impairment tests whenever events or changes in circumstances 
indicate that their carrying amount may not be recoverable. 
Where the carrying value of an asset exceeds its recoverable 
amount (i.e. the higher of value in use and fair value less costs 
to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount  
of an individual asset, the impairment test is carried out on  
the smallest group of assets to which it belongs for which  
there are separately identifiable cash flows: its cash generating 
units (‘CGUs’). Goodwill is allocated on initial recognition to  
each of the Group’s CGUs that are expected to benefit from  
the synergies of the combination giving rise to the goodwill.
Impairment charges are included in profit or loss, except to  
the extent they reverse gains previously recognised in other 
comprehensive income. An impairment loss recognised for 
goodwill is not reversed.
Development costs
Expenditure on the research phase of an internal project is 
recognised as an expense in the period in which it is incurred. 
Development costs incurred on specific projects are capitalised 
when all the following conditions are satisfied:
 → Completion of the asset is technically feasible so that it will 
be available for use or sale;
 → The Group intends to complete the asset and use or sell it;
 → The Group has the ability to use or sell the asset and the 
asset will generate probable future economic benefits  
(over and above cost);
 → There are adequate technical, financial and other resources  
to complete the development and to use or sell the asset; and
 → The expenditure attributable to the asset during its 
development can be measured reliably.
56 Development costs not meeting the criteria for capitalisation 
are expensed as incurred. The cost of an internally generated 
asset comprises all directly attributable costs necessary to 
create, produce and prepare the asset to be capable of 
operating in the manner intended by management. Directly 
attributable costs include employee (other than Directors)  
costs incurred along with third party costs.
Judgement by the Directors is applied when deciding whether 
the recognition requirements for development costs have  
been met. Judgements are based on the information available  
at each statement of financial position date. In addition, all 
internal activities related to the research and development  
of new projects are continuously monitored by the Directors.
Foreign currency
Transactions entered into by Group entities in a currency  
other than the currency of the primary economic environment 
in which they operate are recorded at the rates ruling when  
the transactions occur. Foreign currency monetary assets 
and liabilities are translated at the rates ruling at the reporting  
date. Exchange differences arising on the retranslation  
of unsettled monetary assets and liabilities are recognised 
immediately in profit or loss, except for foreign currency 
borrowings qualifying as a hedge of a net investment in  
a foreign operation, in which case exchange differences are 
recognised in other comprehensive income and accumulated  
in the foreign exchange reserve along with the exchange 
differences arising on the retranslation of the foreign operation.
On consolidation, the results of overseas operations are 
translated into sterling at rates approximating to those ruling 
when the transactions took place. All assets and liabilities of 
overseas operations, including goodwill arising on the acquisition 
of those operations, are translated at the rate ruling at the 
reporting date. Exchange differences arising on translating the 
opening net assets at opening rate and the results of overseas 
operations at actual rate are recognised in other comprehensive 
income and accumulated in the foreign exchange reserve. 
Exchange differences recognised in the profit or loss of Group 
entities on the translation of long-term monetary items forming 
part of the Group’s net investment in the overseas operation 
concerned are reclassified to other comprehensive income and 
accumulated in the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange 
differences recognised in the foreign exchange reserve relating 
to that operation up to the date of disposal are transferred to 
the consolidated statement of comprehensive income as part  
of the profit or loss on disposal.
Segment reporting
Operating segments are reported in a manner consistent with 
the internal reporting provided to the chief operating decision-
maker. The chief operating decision-makers have been identified 
as the Chief Executive Officer, Finance Director and the 
Management Committee. For further details please see note 4.
Financial assets
The Group does not have any financial assets which it would 
classify as fair value through profit or loss, available for sale  
or held to maturity. Therefore, all financial assets are classed  
as loans and receivables as defined below.
Loans and receivables
These assets are non-derivative financial assets with fixed  
or determinable payments that are not quoted in an active 
market. They arise principally through the provision of goods 
and services to customers (e.g. trade receivables), but also 
incorporate other types of contractual monetary asset.  
They are initially recognised at fair value plus transaction  
costs that are directly attributable to their acquisition or issue,  
and are subsequently carried at amortised cost using the 
effective interest rate method, less provision for impairment. 
Impairment provisions are recognised when there is objective 
evidence (such as significant financial difficulties on the part  
of the counterparty or default or significant delay in payment) 
that the Group will be unable to collect all of the amounts  
due, the amount of such a provision being the difference 
between the net carrying amount and the present value of  
the future expected cash flows associated with the impaired 
receivable. For trade receivables, which are reported net,  
such provisions are recorded in a separate allowance account 
with the loss being recognised within administrative expenses 
in the consolidated statement of comprehensive income.  
On confirmation that the trade receivable will not be  
collectable, the gross carrying value of the asset is written  
off against the associated provision.
The Group’s loans and receivables comprise trade and other 
receivables and cash and cash equivalents in the consolidated 
statement of financial position. 
Cash and cash equivalents includes cash in hand, deposits  
held at call with banks, other short term highly liquid 
investments with original maturities of three months  
or less, and – for the purpose of the statement of cash  
flows – bank overdrafts. Bank overdrafts are shown  
within loans and borrowings in current liabilities on the 
consolidated statement of financial position.
Financial liabilities
Apart from contingent consideration the Group does not have 
any financial liabilities that would be classified as fair value 
through profit or loss. Therefore, these financial liabilities  
are classified as financial liabilities at amortised cost, as  
defined below. 
Other financial liabilities include the following items:
 → T rade payables and other short term monetary liabilities, 
which are initially recognised at fair value and subsequently 
carried at amortised cost using the effective interest method.
Share capital
The Group’s Ordinary Shares and deferred shares are classified 
as equity instruments.
Gamma Communications plc
Annual Report and Accounts 2014 57
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
1. Accounting policies continued
Retirement benefits: defined contribution schemes
Contributions to defined contribution pension schemes are 
charged to the consolidated statement of comprehensive 
income in the year to which they relate.
Share based payments
Where equity settled shares or share options are awarded  
to employees, the fair value of the options at the date of grant  
is charged to the consolidated statement of comprehensive 
income over the vesting period. Non-market vesting conditions 
are taken into account by adjusting the number of equity 
instruments expected to vest at each reporting date so that, 
ultimately, the cumulative amount recognised over the vesting 
period is based on the number of options that eventually  
vest. Non-vesting conditions and market vesting conditions  
are factored into the fair value of the options granted. As long  
as all other vesting conditions are satisfied, a charge is made 
irrespective of whether the market vesting conditions are 
satisfied. The cumulative expense is not adjusted for failure  
to achieve a market vesting condition or where a non-vesting 
condition is not satisfied.
Where the terms and conditions of options are modified  
before they vest, the increase in the fair value of the options, 
measured immediately before and after the modification,  
is also charged to the consolidated statement of comprehensive 
income over the remaining vesting period.
The fair value of the options is measured by use of either the 
Black-Scholes method or the Monte Carlo method; the latter 
methodology being used where there are market conditions 
attached to the share awards. 
Prior to flotation, the Group also operated a shadow share 
option scheme (a cash settled share based payment). An option 
pricing model is used to measure the Group’s liability at each 
reporting date, taking into account the terms and conditions on 
which the bonus is awarded and the extent to which employees 
have rendered service. Movements in the liability are recognised 
in the consolidated statement of comprehensive income. All 
such awards crystallised on flotation and were settled in 2014.
Exceptional items
The Group treats certain items which are considered to be 
one-off and not representative of the underlying trading of  
the Group as exceptional in nature.
The Directors apply judgement in assessing the particular items, 
which by virtue of their scale and nature should be classified  
as exceptional items. The Directors consider that separate 
disclosure of these items is relevant to an understanding of  
the Group’s financial performance.
Leased assets
Where substantially all of the risks and rewards incidental  
to ownership are not transferred to the Group (an “operating 
lease”), the total rentals payable under the lease are charged  
to the consolidated statement of comprehensive income on  
a straight line basis over the lease term. The aggregate benefit 
of lease incentives is recognised as a reduction of the rental 
expense over the lease term on a straight line basis.
Dividends
Dividends are recognised when they become legally payable.  
In the case of interim dividends to equity shareholders, this is 
when declared by the Directors. In the case of final dividends, 
this is when approved by the shareholders at the AGM. Dividend 
distributions payable to equity shareholders are included in 
other liabilities when the dividends have been approved in  
a general meeting prior to the reporting date.
Taxation
The tax expense represents the sum of the tax currently 
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the 
year. T axable profit differs from net profit as reported in the 
income statement because it excludes items of income or 
expense that are taxable or deductible in other years and it 
further excludes items that are never taxable or deductible.
Deferred tax
Deferred tax assets and liabilities are recognised where the 
carrying amount of an asset or liability in the consolidated 
statement of financial position differs from its tax base,  
except for differences arising on:
 → the initial recognition of goodwill;
 → the initial recognition of an asset or liability in a transaction 
which is not a business combination and at the time of the 
transaction affects neither accounting or taxable profit; and
 → investments in subsidiaries and jointly controlled entities 
where the Group is able to control the timing of the reversal 
of the difference and it is probable that the difference will 
not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances 
where it is probable that taxable profit will be available against 
which the deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to 
apply in the period when the liability is settled or the asset is 
realised based on tax laws and rates that have been enacted or 
substantively enacted at the balance sheet date. Deferred tax 
is charged or credited in the income statement, except when it 
relates to items charged or credited in other comprehensive 
income, in which case the deferred tax is also dealt with in 
other comprehensive income.
Deferred tax assets and liabilities are offset when there is a 
legally enforceable right to set off current tax assets against 
current tax liabilities and when they relate to income taxes 
levied by the same taxation authority and the Group intends  
to settle its current tax assets and liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in profit or loss,  
except when they relate to items that are recognised in other 
comprehensive income or directly in equity, in which case,  
the current and deferred tax are also recognised in other 
comprehensive income or directly in equity respectively.  
Where current tax or deferred tax arises from the initial 
58 accounting for a business combination, the tax effect is 
included in the accounting for the business combination.
Property, plant and equipment
Items of property, plant and equipment are initially recognised 
at cost. As well as the purchase price, cost includes directly 
attributable costs and the estimated present value of any 
future unavoidable costs of dismantling and removing items. 
The corresponding liability is recognised within provisions.
Assets in the course of construction for use in the supply of 
communication products, or for administration purposes not yet 
determined, are carried at cost, less any recognised impairment 
loss. Cost includes professional fees. Depreciation of these 
assets, on the same basis as other assets, commences when 
the assets are ready for their intended use.
Assets which are supplied to customers as part of a service  
(for example, a broadband router), known as Customer Premises 
Equipment, are capitalised and depreciated over the length  
of the contract for the relevant service.
Depreciation is provided on all other items of property, plant and 
equipment so as to write off their carrying value over their expected 
useful economic lives. It is provided at the following rates:
Network assets 10%–33% per annum straight line
Customer Premises Equipment 20%–50% per annum straight line
Computer equipment 25%–50% per annum straight line
Fixtures and fittings 20%–25% per annum straight line
Inventories
Inventories are initially recognised at cost, and subsequently at 
the lower of cost and net realisable value. Cost comprises all 
costs of purchase, costs of conversion and other costs incurred in 
bringing the inventories to their present location and condition.
Weighted average cost is used to determine the cost of 
ordinarily interchangeable items.
Work in progress is valued at the lower of cost, comprising direct 
materials and labour plus attributable overheads less provision for 
foreseeable losses and progress payments, and net realisable value.
Employee Benefit Trust (EBT)
As the Company is deemed to have control of its EBT, it is 
treated as a subsidiary and consolidated for the purposes  
of the consolidated financial statements. The EBT’s assets 
(other than investments in the Company’s shares), liabilities, 
income and expenses are included on a line-by-line basis in  
the consolidated financial statements. 
Provisions
The Group recognises provisions where there is a present 
obligation as a result of a prior event. The Group has recognised 
provisions for liabilities of uncertain timing or amount relating 
to leasehold dilapidations. The provision is measured at the best 
estimate of the expenditure required to settle the obligation at 
the reporting date, discounted at a pre-tax rate reflecting 
current market assessments of the time value of money and 
risks specific to the liability. 
2. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions 
regarding the future. Estimates and judgements are 
continually evaluated based on historical experience  
and other factors, including expectations of future events 
that are believed to be reasonable under the circumstances. 
In the future, actual experience may differ from these 
estimates and assumptions. The estimates and assumptions 
that have a significant risk of causing a material adjustment 
to the carrying amounts of assets and liabilities within  
the next financial year are discussed below.
(a) Valuation of intangibles
Acquisitions may result in customer contracts being recognised. 
These are valued using discounted cash flow methods which 
require the application of certain key judgements and 
estimates. In particular, management has had to estimate the 
likely future rate of contract renewals which involves a level of 
judgement due to the short trading history of the acquisition. If 
the contract renewals are lower than estimated this may result 
in an impairment to the asset valuation. The level of renewal 
experienced to date supports management’s estimates.
(b) Impairment of goodwill
The Group is required to test, on an annual basis, whether goodwill 
has suffered any impairment. The recoverable amount is 
determined based on value in use calculations. The use of this 
method requires the estimation of future cash flows and the 
choice of a discount rate in order to calculate the present value of 
the cash flows. Actual outcomes may vary. Impairment testing has 
not indicated any impairment in goodwill over the period end dates.
(c) T axation
Significant judgement is required in determining the provision  
for income taxes. During the ordinary course of business, there 
are transactions and calculations for which the ultimate tax 
determination is uncertain. As a result, the Company recognises 
tax liabilities based on estimates of whether additional taxes  
and interest will be due. These tax liabilities are recognised  
when, despite the Group’s belief that its tax return positions  
are supportable, the Group believes that certain positions could  
be challenged and upon review by tax authorities. The Group 
believes that its accruals for tax liabilities are adequate for all 
open audit years based on its assessment of many factors 
including past experience and interpretations of tax law. This 
assessment relies on estimates and assumptions and may involve 
a series of complex judgements about future events. T o the 
extent that the final tax outcome of these matters is different 
from the amounts recorded, such differences will impact income 
tax expense in the period in which such determination is made.
(d) Control assessment
IFRS 10 has introduced a new definition of control. 
Management considers that this does not affect its assessment 
that the Group continues to consolidate all entities within these 
consolidated financial statements as the Company has control 
over the following:
 → power over the investee to significantly direct the activities;
 → exposure, or rights, to variable returns from its involvement 
with the investee; and 
 → the ability to use its power over the investee to affect the 
amount of the investor’s returns. 
Gamma Communications plc
Annual Report and Accounts 2014 59
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
2. Critical accounting estimates and judgements continued
In particular, management believes that the Group exercises 
this level of control over the Employee Benefit Trust.
(e) Leasehold dilapidations
Leasehold dilapidations relate to the estimated cost of 
returning a leasehold property to a defined condition at the  
end of the lease in accordance with the lease terms. Once  
the stage of the lease has been reached at which a reliable 
estimate of the costs can be made, a provision is recognised in 
the profit and loss. The main uncertainty relates to estimating 
the cost that will be incurred at the end of the lease.
(f) Contingent assets and liabilities
The Group exercises judgement in measuring and recognising 
contingent assets and the exposures to contingent liabilities 
related to pending litigation or other outstanding claims subject 
to negotiated settlement, mediation, arbitration or government 
regulation, as well as other contingent assets or liabilities. 
Judgement is necessary in assessing the likelihood that a 
pending claim will succeed, or an asset/liability will arise, and  
to quantify the possible range of the financial settlement. 
Because of the inherent uncertainty in this evaluation process, 
actual gains or losses may be different from the originally 
estimated provision.
(g) Capitalisation of internal development costs
The Group carries out a number of research and development 
projects. Some of these projects consist of speculative research 
whilst others are considered to be closer to the maintenance  
of existing systems. However, where a piece of development  
is producing an asset which will be used within the business  
or sold directly (and it is probable that it will generate future 
economic benefits) then the development cost is capitalised 
and amortised. Each year the Directors consider the work which 
has been performed by the development team and where it is 
assessed that the appropriate criteria are met the costs are 
capitalised; this involves inherent judgement as to the likely 
future economic benefit to be derived from the asset.
(h) Acquisition of assets
During the year the business acquired various assets. In one 
instance assets were acquired along with various support 
contracts for those assets and also some staff contracts. The 
Directors considered whether this acquisition was, in fact, the 
acquisition of a business. The Directors considered guidance  
in IFRS 3 B7 which states that a business will consist of inputs, 
processes and outputs. Whilst this involves some judgement, 
the Directors felt that in the case of this acquisition, all criteria 
were not met and hence the acquisition has been accounted  
for as a purchase of assets.
(i) Share Based Payment Charges
The Company runs a number of share option schemes which 
give rise to share based payment charges. The calculation  
of the charges involves a significant level of estimate 
particularly around market volatility and yield. In instances 
where there are performance conditions (i.e. the LTIP scheme) 
the Directors must also consider the likelihood of the 
performance conditions being met. The Directors use the 
services of a firm of Chartered Accountants (who are not  
the auditor) to assist with these valuations.
3. Revenue
Revenue in all periods principally arises from the provision  
of services. There is an immaterial level of sales of goods. 
4. Segment information
The Group has two main operating segments:
 → Indirect – This division consists of the Gamma Business  
Unit. It sells the products developed by Gamma to channel 
partners and contributed 79% (2013: 80%) of the Group’s 
external revenue. 
 → Direct – This division consists of Gamma Business 
Communications Limited and Gamma Network Solutions 
Limited. These companies sell Gamma’s traditional and new 
products to end users in the private and public sectors 
together with an associated service wrap. They contributed 
21% (2013: 20%) of the Group’s external revenues.
There are no material non UK segments and no material 
non-current assets outside the UK.
Both operating segments sell a combination of traditional 
products (which is mainly voice traffic from which revenues 
are derived from channel partners and other carriers as well  
as rentals for wholesale lines) and new products (which 
consists of IP voice traffic, rental income derived from SIP 
trunks, hosted IP voice systems and Gamma’s hosted inbound 
product and data products).
Factors that management used to identify the Group’s 
reportable segments
The Group’s reportable segments are strategic business units 
that offer products and services into different markets. They 
are managed separately because each business requires 
different marketing strategies. 
Measurement of operating segment profit or loss, assets  
and liabilities
The accounting policies of the operating segments are the 
same as those described in the summary of significant 
accounting policies.
The Group evaluates performance on the basis of profit or loss 
from operations but excluding non-recurring losses, such as 
goodwill impairment, and the effects of share based payments.
Inter-segment sales are priced along the same lines as sales to 
external customers, with an appropriate discount being applied  
to encourage use of Group resources at a rate acceptable to 
local tax authorities. This policy was applied consistently 
throughout the current and prior period. 
Loans and borrowings are allocated to the segments based on 
relevant factors (e.g. funding requirements). Details are 
provided in the reconciliation from segment assets and 
liabilities to the Group position.
60 Indirect
£m
Direct
£m
Total
£m
2014
Traditional products 64.5 13.7 78.2
New products 72.4 22.6 95.0
Total revenue from external customers 136.9 36.3 173.2
Inter-segment revenue 8.2 – 8.2
Traditional products 18.8 4.6 23.4
New products 33.6 10.6 44.2
Total gross profit 52.4 15.2 67.6
Segment operating profit before share based payment, depreciation,  
amortisation and exceptional items 17.4 5.7 23.1
Share based payment expense (3.2) – (3.2)
Exceptional Items (1.4) (0.6) (2.0)
Segment EBITDA 12.8 5.1 17.9
Depreciation and amortisation (5.8) (0.6) (6.4)
Segment profit 7.0 4.5 11.5
Tax (0.9) (1.2) (2.1)
Group profit after tax 6.1 3.3 9.4
External revenue of customers has been derived principally from the United Kingdom and no single customer contributes more 
than 10% of revenue.
Indirect
£m
Direct
£m
Total
£m
Additions to non-current assets 11.6 0.5 12.1
Reportable segment assets 54.2 24.8 79.0
Reportable segment liabilities 12.2 15.6 27.8
Indirect
£m
Direct
£m
Total
£m
2013
Traditional products 67.8 17.1 84.9
New products 51.2 12.6 63.8
Total revenue from external customers 119.0 29.7 148.7
Inter-segment revenue 6.5 – 6.5
Traditional products 17.9 5.6 23.5
New products 24.7 5.7 30.4
Total gross profit 42.6 11.3 53.9
Segment operating profit before share based payment, depreciation,  
amortisation and exceptional items 13.6 3.6 17.2
Share based payment expense (0.9) – (0.9)
Segment EBITDA 12.7 3.6 16.3
Depreciation and amortisation (4.2) (0.6) (4.8)
Segment profit 8.5 3.0 11.5
Interest income – – –
Tax (1.7) (0.5) (2.2)
Group profit after tax 6.8 2.5 9.3
External revenue of customers has been derived principally from the United Kingdom and no single customer is over 10%  
of revenue.
Gamma Communications plc
Annual Report and Accounts 2014 61
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
4. Segment information continued
Indirect
£m
Direct
£m
Total
£m
Additions to non-current assets 5.5 0.4 5.9
Reportable segment assets 45.4 20.7 66.1
Reportable segment liabilities 16.3 12.9 29.2
5. Profit on ordinary activities
Profit on ordinary activities is stated after charges/credits of the following amounts
2014
£m
2013
£m
Changes in inventories 0.6 0.2
Staff costs (see note 7) 30.1 21.9
Depreciation of property, plant and equipment (incl. impairment) 5.1 3.7
Amortisation of intangible assets 1.3 1.1
Fees payable to the Company’s auditor for the audit of the parent company and consolidated financial statements – –
Fees payable to the Company’s auditor for other services:
– Audit of the Company’s subsidiaries pursuant to legislation 0.1 0.1
– Other services 0.3 –
Operating lease expense:
– Property 1.2 1.1
Fees payable to the Company’s auditor for the audit of the parent company and consolidated financial statements totalled £16k 
for the year.
6. Exceptional items
2014
£m
2013
£m
IPO costs 1.2 –
Change in the fair value of contingent consideration relating to the purchase of Varidion Limited (note 26) 0.6 –
Restructuring 0.2 –
2.0 –
IPO costs relate to the professional fees incurred on the admission of the Group to AIM.
The change in the fair value of contingent consideration is because during the course of the year the Directors took an opportunity 
to settle the consideration relating to the purchase of Varidion Limited. 
7 . Staff costs
2014
£m
2013
£m
Staff costs (including Directors) comprise:
Wages and salaries 23.2 17.7
Defined contribution pension cost (note 24) 1.2 1.2
Social security contributions and similar taxes 2.5 2.1
26.9 21.0
Share based payment expense (note 25) 3.2 0.9
30.1 21.9
Employee numbers
The average number of staff employed by the Group during the financial year amounted to: 
2014
Number
2013
Number
Operational 272 214
Selling, administration and distribution 247 217
519 431
62 Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the 
activities of the Group, including the Directors of the Company listed on page 32, and the Management Committee listed on  
page 34.
2014
£m
2013
£m
Salary 2.3 1.9
Defined contribution pension costs 0.2 0.4
Social security contributions and similar taxes 0.3 0.3
2.8 2.6
Share based payment expense (note 25) 2.9 0.5
5.7 3.1
Emoluments in respect of Directors are summarised below
2014
£m
2013
£m
Salary 0.9 0.7
Compensation for loss of office 0.2 –
Defined contribution pension costs 0.1 0.2
Social security contributions and similar taxes 0.1 0.1
1.3 1.0
Share based payment expense (note 25) 1.0 0.2
2.3 1.2
Emoluments disclosed above include the following amounts in respect of the highest paid Director.
2014
£m
2013
£m
Salary 0.6 0.4
T otal pension and other post-employment benefit costs 0.0 0.1
Share based payment expense 0.6 0.1
1.2 0.6
During the year, one Director (2013: two Directors) participated in a private money purchase defined contribution pension scheme.
The remuneration for the Directors who have served as such since flotation is shown within the Remuneration Report. Between 
incorporation and flotation, there were two additional Directors who received remuneration from the Group. Malcolm Goddard 
served as Director from incorporation on 17 March 2014 to 30 August 2014 and Gerard Sreeves from 23 May 2014 to  
1 October 2014. During those periods their remuneration was as follows:
Director
Salary and 
fees Bonus
Compensation for  
loss of office Pension
Total for 
period  
served as 
Director
Gerard Sreeves 56,968 - 181,424 9,055 247 ,447
Malcolm Goddard 49,639 39,994 - - 89,633
Bonuses are shown on an accrued basis.
Gerard Sreeves also exercised 118,381 options over £0.0025 Ordinary Shares shortly after he ceased to be a Director. A payment 
of £1,104,000 was also paid for cancellation options over 400,000 A1 ordinary shares.
8. Finance income
Recognised in profit or loss
2014
£m
2013
£m
Finance income
Interest received on bank deposits – –
Total finance income – –
Gamma Communications plc
Annual Report and Accounts 2014 63
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
9. Tax expense
2014
£m
2013
£m
Current tax expense
Current tax on profits for the year 2.9 2.9
Adjustment in respect of prior year (0.2) (0.5)
Total current tax 2.7 2.4
Deferred tax expense
Origination and reversal of temporary differences (note 20) (0.6) (0.2)
Total tax expense 2.1 2.2
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United 
Kingdom applied to profits for the year are as follows:
2014
£m
2013
£m
Profit before income taxes 11.5 11.5
Expected tax charge based on the standard rate of United Kingdom corporation tax at the domestic rate of 21.5% 
(2013: 22.25%) 2.5 2.6
Expenses not deductible for tax purposes 0.5 0.4
Additional deduction for R&D expenditure (0.7) (0.3)
Adjustment in respect of prior year (0.2) (0.5)
Total tax expense 2.1 2.2
The Finance Act 2013 includes provision for the main rate of corporation tax to reduce to 20% from 1 April 2015.
10. Earnings per share and dividends
Earnings per share
The calculation of basic earnings per Ordinary Share is based on a profit after tax of £9.4 million (2013: profit of £9.3 million)  
and 88,349,480 (2013: 88,326,746) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the  
period (adjusted for the fact that there was a share split during the period). Because the Group was formed by a share for share 
exchange, for the purposes of calculating earnings per share, it has been assumed that the number of shares at incorporation  
was the number of shares between 1 January 2013 and incorporation for the purposes of calculating a weighted average.
The diluted earnings per Ordinary Share is calculated by including in the weighted average number of shares the dilutive effect  
of potential Ordinary Shares related to committed share options as described in note 25. For 2014 the diluted Ordinary Shares  
were based on 93,601,600 Ordinary Shares that included 5,252,120 potential Ordinary Shares.
The following reflects the income and share data used in the calculation of adjusted earnings per share computations before  
share based payments, one-off costs and their associated tax effect.
Total  
2014
£m
Total  
2013
£m
Profit for the year 9.4 9.3
Exceptional costs 2.0 –
Share based payment costs 3.2 0.9
Less tax benefit associated with share based payment costs and one-off costs (0.6) (0.1)
Adjusted profit after tax for the year 14.0 10.1
Total  
2014
No.
Total  
2013
No.
Weighted average number of Ordinary Shares for basic earnings per share 88,349,480 88,326,746
Effect of dilution resulting from share options 5,252,120 5,274,854
Weighted average number of Ordinary Shares adjusted for the effect of dilution 93,601,600 93,601,600
2014 2013
Adjusted earnings per Ordinary Share – basic (pence) 15.9 11.4
Adjusted earnings per Ordinary Share – diluted (pence) 15.0 10.8
64 There have been no material transactions involving Ordinary Shares or potential shares between the reporting date and the date  
of completion of the financial statements.
Dividends
During 2014, Gamma Communications plc did not pay an interim dividend.
A final dividend of 3.95p will be proposed at the Annual General Meeting but has not been recognised as it requires approval.
11. Property, plant and equipment
Network
assets
£m
Customer-
Premises
equipment
£m
Computer
equipment
£m
Fixtures
and fittings
£m
Total
£m
Cost
At 1 January 2013 30.3 0.2 9.9 1.1 41.5
Additions 2.7 0.7 1.6 – 5.0
At 31 December 2013 33.0 0.9 11.5 1.1 46.5
Depreciation
At 1 January 2013 21.6 – 7.5 0.9 30.0
Charge for the year 2.2 0.2 1.2 0.1 3.7
At 31 December 2013 23.8 0.2 8.7 1.0 33.7
Net book value
At 1 January 2013 8.7 0.2 2.4 0.2 11.5
At 31 December 2013 9.2 0.7 2.8 0.1 12.8
Cost
At 1 January 2014 33.0 0.9 11.5 1.1 46.5
Additions 8.8 1.0 1.0 0.4 11.2
At 31 December 2014 41.8 1.9 12.5 1.5 57.7
Depreciation
At 1 January 2014 23.8 0.2 8.7 1.0 33.7
Charge for the year 3.2 0.6 1.3 – 5.1
At 31 December 2014 27.0 0.8 10.0 1.0 38.8
Net book value
At 1 January 2014 9.2 0.7 2.8 0.1 12.8
At 31 December 2014 14.8 1.1 2.5 0.5 18.9
Included within network assets are assets in the course of construction with a value of £4.0m (2013: £Nil) for which no 
depreciation has been charged. Depreciation will commence when the asset enters operational use.
There was no property, plant or equipment held under finance leases at the end of the period (2013: £Nil).
There was no property, plant or equipment held as security at the end of the period (2013: £Nil).
Gamma Communications plc
Annual Report and Accounts 2014 65
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Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
12. Intangible assets
Goodwill on
Consolidation
£m
Development
costs
£m
Customer
Contracts
£m
Total
£m
Cost
At 1 January 2013 12.5 2.6 2.1 17.2
Additions – 0.8 – 0.8
At 31 December 2013 12.5 3.4 2.1 18.0
Amortisation
At 1 January 2013 4.5 0.8 0.4 5.7
Charge for the year – 0.7 0.4 1.1
At 31 December 2013 4.5 1.5 0.8 6.8
Carrying value
At 1 January 2013 8.0 1.8 1.7 11.5
At 31 December 2013 8.0 1.9 1.3 11.2
Cost
At 1 January 2014 12.5 3.4 2.1 18.0
Additions – 0.9 – 0.9
At 31 December 2014 12.5 4.3 2.1 18.9
Amortisation
At 1 January 2014 4.5 1.5 0.8 6.8
Charge for the year – 0.9 0.4 1.3
At 31 December 2014 4.5 2.4 1.2 8.1
Carrying value
At 1 January 2014 8.0 1.9 1.3 11.2
At 31 December 2014 8.0 1.9 0.9 10.8
Research and development costs expensed in the year totalled £4.4m (2013: £3.8m).
The estimates of the useful economic lives of the intangible assets are as follows:
 → Customer contracts – five years
 → Development costs – various but no more than four years
 → Goodwill on consolidation – indefinite (subject to impairment)
The carrying amount of goodwill is allocated to the cash generating units (CGUs) as follows:
2014
£m
2013
£m
Gamma Business Communications Limited 6.8 6.8
Gamma Network Solutions Limited 1.2 1.2
8.0 8.0
The carrying value of the Group’s goodwill is not subject to annual amortisation and was tested for impairment at 31 December 2014 
and 2013. The recoverable amount has been determined on a value-in-use basis on each CGU using the management approved 
12-month budget for each CGU. The base 12-month projection is amended for years two to five as follows: (a) by increasing revenue 
by 6% for Gamma Business Communications Limited and by 25% for Gamma Network Solutions Limited; (b) gross margin percentage 
is assumed to be held constant; and (c) overheads are assumed to grow in line with inflation. These cash flows are then discounted at 
15% which management believes reflects the Group’s cost of capital and any risk factors associated with the direct business – both 
CGUs form the direct part of the Group and therefore it is appropriate to use a single discount rate across both CGUs.
Based on the results of the impairment reviews carried out for each period (giving a recoverable amount of £22.0m in respect of 
Gamma Business Communications Limited and £9.3m in respect of Gamma Network Solutions Limited), no impairment charges have 
been recognised by the Group in either of the years. Management has considered various sensitivity analyses in order to appropriately 
evaluate the carrying value of goodwill. Having assessed the anticipated future cash flows, the Directors do not consider there to be 
any reasonably possible changes in assumptions that would lead to such an impairment charge in any of the years.
66 13. Subsidiaries
The principal subsidiaries of Gamma Communications plc, all of which are 100% owned and have been included in these financial 
statements in accordance with the merger accounting as set out in the basis of preparation and basis of consolidation note 1,  
are as follows:
Name
Country of
incorporation
Nature of
business Notes
Gamma T elecom Holdings Limited United Kingdom Intermediate holding company
Gamma T elecom Limited United Kingdom T elephony services
Gamma Metronet Limited United Kingdom Dormant
Gamma Business Communications Limited United Kingdom Retail telephony services
Gamma Network Solutions Limited United Kingdom Data and communications networks (a)
Peach Amber Kft Hungary Software services
Notes:  
(a) Gamma Network Solutions Limited is owned by Gamma Business Communications Limited
Gamma Business Communications Limited held 100% of the share capital of the following dormant subsidiaries, all incorporated  
in the United Kingdom, at 1 January 2013, 31 December 2013 and 31 December 2014:
 → Blue Spot Technologies Limited
 → Go Worldwide Communications Limited
 → Uniworld Bureau Services Limited
Gamma Telecom Limited is also a member of NP4UK Limited which is a dormant company (limited by guarantee) incorporated  
in the United Kingdom. 
The Group also consolidates the Gamma Telecom Employee Benefit Trust.
The Group held no interests in unconsolidated structured entities.
14. Inventories
2014
£m
2013
£m
Raw materials and consumables 1.2 0.6
Provision (0.1) (0.1)
Total inventories 1.1 0.5
15. Trade and other receivables
2014
£m
2013
£m
Trade receivables 17.9 15.9
Less: provision for impairment of trade receivables (1.2) (0.9)
Trade receivables – net 16.7 15.0
Accrued income 7.6 7.3
Prepayments 4.6 3.2
Other receivables 3.6 0.9
Total trade and other receivables 32.5 26.4
Due to the short term nature of trade and other receivables and as the credit risk has been adjusted for, the book value 
approximates to fair value.
As at 31 December 2014 and 2013 trade receivables as shown below were past due but not impaired. They relate to customers 
with no default history or where we have an offset arrangement. The ageing analysis of these receivables is as follows:
2014
£m
2013
£m
Up to 3 months 1.7 1.6
3 to 6 months 0.3 1.5
6 to 12 months 0.2 0.4
Older than 1 year 0.2 –
2.4 3.5
Gamma Communications plc
Annual Report and Accounts 2014 67
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
15. Trade and other receivables continued
As at 31 December 2014 trade receivables of £0.8m (2013: £0.4m) were past due and impaired. The amount of the provision as  
at 31 December was £1.2m (2013: £0.9m). The main factors considered by the Credit Committee in determining that the amounts 
due are impaired are that the customers are unlikely to be trading or the debts are three months and more past due. The ageing of 
these receivables is as follows:
2014
£m
2013
£m
Not due 0.3 0.5
Up to 3 months 0.1 –
3 to 6 months 0.3 0.1
6 to 12 months 0.2 0.1
Older than 1 year 0.3 0.2
1.2 0.9
The Group does not have any concentration of credit risk. None of the customers represents more than 10% of trade receivables.
Movements on the Group provision for impairment of trade receivables are as follows:
2014
£m
2013
£m
At beginning of the year 0.9 1.5
Provided during the year 0.3 –
Receivable written off during the year as uncollectible – (0.5)
Unused amounts reversed – (0.1)
1.2 0.9
The movement on the provision for impaired receivables has been included in the selling and administrative expenses line in the 
consolidated statement of comprehensive income.
16. Cash and cash equivalents notes
2014
£m
2013
£m
Cash at bank available on demand 13.4 14.6
17 . Trade and other payables
2014
£m
2013
£m
Current
Trade payables 3.3 6.3
Other payables 0.9 0.8
Accruals 17.3 13.7
Contingent consideration (note 26) 0.1 0.7
21.6 21.5
Tax and social security 2.6 1.4
Deferred income 1.7 1.8
Total trade and other payables 25.9 24.7
2014
£m
2013
£m
Non-current
Contingent consideration (note 26) – 1.4
Total other payables – 1.4
Book values approximate to fair value at 31 December 2014 and 31 December 2013.
All current trade and other payables are payable within three months of the period end date shown above with the exception of 
the contingent consideration which is payable between three and 12 months and as such they are all considered current.
68 18. Financial instruments – Risk Management
The Group is exposed through its operations to the following financial risks:
 → Credit risk
 → Fair value or cash flow interest rate risk
 → Market risk
 → Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note 
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them.  
Further quantitative information in respect of these risks is presented throughout these financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
 → Trade receivables 
 → Cash and cash equivalents
 → Trade and other payables
A summary of the financial instruments held by category is provided below:
Financial assets – loans and receivables – amortised cost
2014
£m
2013
£m
Cash and cash equivalents 13.4 14.6
Trade receivables – net 16.7 15.0
Accrued income 7.6 7.3
Other receivables 3.6 0.9
Total financial assets 41.3 37.8
Financial liabilities – amortised cost
2014
£m
2013
£m
Trade and other payables 21.5 20.8
Total financial liabilities – amortised cost 21.5 20.8
Financial liabilities – fair value through profit or loss (FVTPL)
2014
£m
2013
£m
Contingent consideration 0.1 2.1
Total financial liabilities – FVTPL 0.1 2.1
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst 
retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the 
effective implementation of the objectives and policies to the Group’s Management Committee. The Board receives quarterly 
reports from the Management Committee through which it reviews the effectiveness of the processes put in place and the 
appropriateness of the objectives and policies it sets. 
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s 
competitiveness and flexibility. Further details regarding these policies are set out on the next page:
Gamma Communications plc
Annual Report and Accounts 2014 69
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
18. Financial instruments – Risk Management continued
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its contractual 
obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk 
of new customers before entering contracts. Such credit ratings are taken into account by local business practices. 
The Credit Committee has established a credit policy under which each new customer is analysed individually for creditworthiness 
before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings 
when available. Purchase limits are established for each customer, which represent the maximum open amount without requiring 
approval from the Credit Committee. 
The Credit Committee determines concentrations of credit risk by quarterly monitoring the creditworthiness rating of existing 
customers and through a monthly review of the trade receivables’ ageing analysis. 
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial 
institutions, only independently rated parties with high credit status are accepted.
The Group does not enter into derivatives to manage credit risk, although in certain isolated cases it may take steps to mitigate 
such risks if they are sufficiently concentrated. 
Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below. Further disclosures regarding 
trade and other receivables, which are neither past due nor impaired, are provided in note 15.
Financial assets – maximum exposure
2014
£m
2013
£m
Cash and cash equivalents 13.4 14.6
Trade receivables – net 16.7 15.0
Accrued income 7.6 7.3
Other receivables 3.6 0.9
Total financial assets 41.3 37.8
The Credit Committee monitors the utilisation of the credit limits regularly and at the reporting date does not expect any losses 
from non-performance by the counterparties.
Cash in bank
The Group is continually reviewing the credit risk associated with holding money on deposit in banks and seek to mitigate this risk 
by holding deposits with banks with high credit status.
Fair value and cash flow interest rate risk
As of 31 December 2013 and 31 December 2014 the Group’s exposure to fair value and cash flow interest rate risk was not 
material. It is Group policy that all borrowings are approved by the Finance Director to ensure that it is not taking on significant  
risk related to possible movements in interest rates. Although the Board accepts that this policy neither protects the Group  
entirely from the risk of paying rates in excess of current market rates nor eliminates fully cash flow risk associated with  
variability in interest payments, it considers that it achieves an appropriate balance of exposure to these risks.
Market risk
The market risk relates to foreign exchange. Foreign exchange risk arises because the Group has a small operation located in 
Hungary whose functional currency is not the same as the functional currency in which the Group companies are operating. 
Although the fact that its overseas operations are small compared to those in the UK reduces the Group’s operational risk, the 
Group’s net assets arising from such overseas operations are exposed to currency risk resulting in gains or losses on retranslation 
into sterling. Given the levels of materiality, the Group does not hedge its net investments in overseas operations as the cost of 
doing so is disproportionate to the exposure.
Foreign exchange risk also arises when individual Group entities enter into transactions denominated in a currency other than their 
functional currency; the Group has very few customers who are invoiced in currency other than sterling and no regular suppliers 
invoice in currency other than sterling. Again, these transactions are not hedged because the cost of doing so is disproportionate 
to the risk.
As of 31 December 2013 and 31 December 2014 the Group’s exposure to foreign exchange risk was not material. 
A sensitivity analysis for market risk has not been prepared as the risk is immaterial.
70 Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty  
in meeting its financial obligations as they fall due.
It is the Group’s aim to settle balances as they become due.
 
The Board receives annual 24-month cash flow projections. At the end of the financial year, these projections indicated that  
the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:
Up to 3
months
£m
Between
3 and 12
months
£m
Between
1 and 2
year
£m
Between
2 and 5
years
£m
Over
5 years
£m
2014
Trade and other payables 21.5 – – – –
Contingent consideration – 0.1 – – –
Total 21.5 0.1 – – –
Up to 3
months
£m
Between
3 and 12
months
£m
Between
1 and 2
year
£m
Between
2 and 5
years
£m
Over
5 years
£m
2013
Trade and other payables 20.8 – – – –
Contingent consideration 0.7 – 0.6 0.8 –
Total 21.5 – 0.6 0.8 –
More details in regard to the line items are included in the respective notes:
 → Trade and payables – note 17
Capital disclosures
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising its 
return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged 
from the prior year. The Group monitors “adjusted capital” which comprises all components of equity (i.e. share capital, share 
premium reserve, merger reserve, share option reserve and retained earnings).
The Group’s objectives when maintaining capital are:
 → to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders  
and benefits for other stakeholders; and
 → to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group has historically maintained very low levels of gearing and is not exposed to externally imposed capital requirements. 
The Group will continue to manage the amount of capital it requires in proportion to risk. The Group manages its capital structure 
and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
2014
£m
2013
£m
T otal equity 51.2 36.9
Cash and cash equivalents 13.4 14.6
Capital 64.6 51.5
T otal equity 51.2 36.9
Overall financing 51.2 36.9
Capital–to–overall financing ratio 1.26 1.40
Gamma Communications plc
Annual Report and Accounts 2014 71
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Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
19. Provisions
Leasehold
dilapidation
provision
£m
At 31 December 2012 and 2013 1.0
Released in year (0.1)
At 31 December 2014 0.9
Due within one year or less 0.1
Due after more than one year 0.8
0.9
At each year end date, the leasehold provision is payable in greater than one year.
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to a defined condition at the end of the 
lease in accordance with the lease terms. Once the stage of the lease has been reached at which a reliable estimate of the costs 
can be made, a provision is recognised in the profit and loss. The main uncertainties relate to estimating the cost that will be 
incurred at the end of the lease and also whether the option to break from the lease will be exercised.
20. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2013: 23%).
The movement on the deferred tax account is as shown below:
2014
£m
2013
£m
Liability at 1 January (0.4) (0.6)
Tax credit recognised in profit and loss 0.6 0.2
Recognised directly in equity 1.9 –
Asset/(liability) at 31 December 2.1 (0.4)
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. All deferred tax has  
been recognised.
72 The deferred taxation asset/(liability) consists of the tax effect of temporary differences as follows:
Asset
£m
Liability
£m
Net
£m
(Charged)/
Credited to
Profit or
loss
£m
Credited to
equity
£m
2014
Difference in capital allowances and depreciation/amortisation (0.1) – (0.1) 0.5 –
Other temporary and deductible differences 0.1 – 0.1 (0.4) –
Deferred tax on share options 2.3 – 2.3 0.4 1.9
Business combinations – (0.2) (0.2) 0.1 –
Deferred tax asset/liability 2.3 (0.2) 2.1 0.6 1.9
Asset
£m
Liability
£m
Net
£m
Credited to
Profit or
loss
£m
2013
Difference in capital allowances and depreciation/amortisation 0.1 (0.7) (0.6) –
Other temporary and deductible differences 0.5 – 0.5 0.2
Business combinations – (0.3) (0.3) –
Deferred tax asset/liability 0.6 (1.0) (0.4) 0.2
21. Share capital
On incorporation, the issued share capital of the Company was 1 Ordinary Share of £1.00. The share capital from 17 March 2014 
(incorporation) to 12 May 2014 was as follows:
2014
Number
2014
£m
Allotted and fully paid
Ordinary Shares of £1 each 1 0.0
0.0
On 12 May 2014, the Company acquired the group headed by Gamma Telecom Holdings Limited by virtue of a share for share 
exchange. 1,699,983 B1 Ordinary Shares of £0.01 each and 20,590,196 Ordinary Shares of £0.01 were issued on that date. The 
share capital from 12 May 2014 to 2 October 2014 was as follows:
2014
Number
2014
£m
Allotted and fully paid
B1 Ordinary Shares of £0.01 each 1,699,983 –
Ordinary Shares of £0.01 each 20,590,196 0.2
0.2
In addition to the above shares, the Company also had another class of share being an A1 Ordinary Share of £0.001 each with none 
in issue.
The Ordinary Shares and B1 Shares together (the “Equity Shares”) confer on their holders the right to receive notice of and to 
attend, speak, and vote at all general meetings of the Company and to sign written resolutions of the Company. The holders of A1 
Shares are not entitled to receive notice of or to attend general meetings of the Company and are not entitled to vote thereat nor 
are they entitled to receive or participate in written resolutions of the Company.
Every dividend to be paid by the Company, other than a dividend payable on or following the occurrence of certain changes of 
control, will be distributed to the holders of the Equity Shares pro rata to their holdings of Equity Shares. The holders of any shares 
not being Equity Shares are not entitled to participate in or receive any dividend other than a dividend payable on or following the 
occurrence of an Event.
Gamma Communications plc
Annual Report and Accounts 2014 73
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
21. Share capital continued
On or following the occurrence of a change of control, the receipts from the acquirer shall be applied as follows:
(a)  firstly, to the holders of the Ordinary Shares and A1 Shares, an amount equal to £3.75 for each Ordinary Share or A1 Share held 
by them on the date of the acquisition or, if the receipts from the acquirer divided by the aggregate number of Ordinary Shares 
and A1 Shares in issue at the date of the acquisition (on a fully diluted basis) is less than £3.75, the whole of the receipts at such 
date shall be paid to the holders of the Ordinary Shares and A1 Shares pro rata to the number of Ordinary Shares and A1 Shares 
held by them;
(b)  the balance thereof (if any) shall be paid to the holders of the Equity Shares pro rata to their respective holdings of  
Equity Shares.
On 2 October 2014, in preparation for the flotation, the share capital of the Company underwent a four for one split. The share 
capital on 2 October 2014 was as follows:
2014
Number
2014
£m
Allotted and fully paid
B1 Ordinary Shares of £0.0025 each 6,799,932 –
Ordinary Shares of £0.0025 each 82,360,784 0.2
0.2
Following the share split on 2 October 2014, 3,356,528 B1 Ordinary Shares of £0.0025 each in the Company were redesignated  
as 3,356,528 Ordinary Shares, subject to a payment from the shareholder of the sum of £3.1m to the Company (being £0.9375  
per B1 Ordinary Share registered in his name).
On 6 October 2014 the holders of all the remaining issued B1 ordinary shares of £0.0025 in the Company voluntarily converted 
their B1 Ordinary Shares into 1,726,481 Ordinary Shares and 1,717 ,323 Deferred Shares pursuant to the articles of association  
of the Company. The conversion rate was calculated by applying a formula based on the Placing Price to reflect the equity value  
of the B1 Ordinary Shares. 
Also on 6 October 2014 12,000 Ordinary Shares were issued and allotted to satisfy an exercise of options which had taken place 
earlier at an exercise price of 62.5p; 608,481 Ordinary Shares were issued following the exercise of options held by certain 
employees pursuant to the 2013 Unapproved Share Option Scheme and the Unapproved Share Option Scheme. A further 256,320 
Ordinary Shares were allotted to the SIP Trust.
On 9 October 2014 an additional 6,152 Ordinary Shares were issued at a price of £1.87 .
As a result of the above share transactions, on 10 October 2014 (at flotation) the share capital was as follows:
2014
Number
2014
£m
Allotted and fully paid
Ordinary Shares of £0.0025 each 88,326,746 0.2
Deferred Shares of £0.0025 each 1,717,323 -
0.2
The Deferred Shares have no voting rights and do not carry any entitlement to attend general meetings of the Company,  
nor will they be admitted to trading on AIM or any other market. They will not carry any dividend rights and will only be entitled  
to a payment on a return of capital or winding-up of the Company after each Ordinary Share has received a payment of £0.1m.  
They are not transferable without the prior written consent of the Company. 
On 20 November 2014, 202,381 Ordinary Shares were issued to satisfy options which had been exercised.
74 At 31 December 2014 the share capital was as follows:
2014
Number
2014
£m
Allotted and fully paid
Ordinary Shares of £0.0025 each 88,529,127 0.2
Deferred Shares of £0.0025 each 1,717,323 -
0.2
Subsequent to the end of the period, the Company bought back the issued Deferred Shares on 20 February 2015 from 
distributable profits.
22. Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess of nominal value.
Merger reserve Represents the share capital and share related movements of the previous holding company  
Gamma T elecom Holdings Limited following the common control transaction as set out in note 1. 
Share option reserve Represents credit to equity relating to share based payment expense on share options.
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations into sterling.
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
23. Leases
The Group had commitments under non-cancellable operating leases as set out below:
Land and
Buildings
£m
Other
£m
2014
In one year or less 1.0 –
Between one and five years 3.2 0.2
In five years or more 2.1 –
6.3 0.2
Land and
Buildings
£m
Other
£m
2013
In one year or less 1.1 0.1
Between one and five years 2.9 0.1
In five years or more 2.3 –
6.3 0.2
24. Retirement benefits
The Group operates a defined contribution pension scheme for the benefit of its employees. The assets of the scheme are 
administered by trustees in a fund independent from those of the Group. The pension costs charged for each year are listed below:
2014
£m
2013
£m
Defined contribution pension scheme 1.2 1.2
Gamma Communications plc
Annual Report and Accounts 2014 75
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
25. Share based payment 
Share Options
Following the share for share exchange which took place on 12 May 2014, the Company and Gamma Telecom Holdings Ltd granted 
that holders of Gamma Telecom Holdings Ltd share options could exchange their options for equivalent options over shares in the 
Company. There is no incremental fair value as a result of the modification.
On 2 September 2014 the Board approved a Long Term Incentive Plan for the senior management team which granted 349,833 
options over £0.01 Ordinary Shares at an exercise price of £0.01 per share which will vest on 1 April 2017 subject to performance 
conditions. The awards granted will have a performance period of three years starting from the vesting commencement date, 
being 1 April 2014.
The awards will vest as follows: 
 → 50% of the shares are subject to an award if annual compound total shareholder return over the performance period exceeds  
or equals 15% and 15% of the shares are subject to an award if the annual compound total shareholder return over the period 
equals 8% with pro rata straight line vesting in between; and
 → 50% of the shares are subject to an award if annual compound growth of the Company’s adjusted earnings per share over  
the performance period exceeds or equals 20% between the financial years at the beginning and the end of the performance 
period and 15% of the shares are subject to an award if the annual compound growth of the Company’s adjusted earnings  
per share exceeds or equals 8% with pro rata in between.
As at 2 September 2014 the following options were therefore in existence:
Date of grant
Exchanged/
Granted in
year
Exercise
Price
Class of
Share Notes
6 June 2014 226,667 £1.000 Ordinary (a)
6 June 2014 18,000 £2.500 Ordinary (a)
6 June 2014 25,000 £3.000 Ordinary (a)
6 June 2014 910,000 £0.990 A1 Ordinary (a)
6 June 2014 495,658 £0.001 A1 Ordinary (a)
2 September 2014 349,833 £0.010 Ordinary (b)
Notes:
(a) Vesting period was immediate.
(b) Vesting period starts on the earlier of a flotation or 24 June 2015.
On 1 October 2014, 949,132 options over £0.001 A1 shares were cancelled and a cash settlement was made at £3.75 per share 
less the exercise price. The following options were in existence immediately prior to the subdivision of shares which occurred on  
2 October 2014:
Date of grant
Exchanged/
Granted in 
year
Cancelled/
lapsed
Pre
Conversion
Exercise
Price
Class of
Share
6 June 2014 226,667 – 226,667 £1.000 Ordinary
6 June 2014 18,000 – 18,000 £2.500 Ordinary
6 June 2014 25,000 – 25,000 £3.000 Ordinary
6 June 2014 910,000 (850,000) 60,000 £0.990 A1 Ordinary
6 June 2014 495,658 (99,132) 396,526 £0.001 A1 Ordinary
2 September 2014 349,833 – 349,833 £0.010 Ordinary
On 2 October 2014, at the time of the share sub-division, the options were redesignated as follows:
Date of grant
Pre  
conversion Ratio
Post 
conversion Price Share
6 June 2014 226,667 4.0000 906,668 £0.2500 Ordinary
6 June 2014 18,000 4.0000 72,000 £0.6250 Ordinary
6 June 2014 25,000 4.0000 100,000 £0.7500 Ordinary
6 June 2014 60,000 2.0053 120,320 £0.4940 Ordinary
6 June 2014 396,526 2.0053 795,169 £0.0025 Ordinary
2 September 2014 349,833 4.0000 1,399,332 £0.0025 Ordinary
There is no incremental fair value as a result of the modification.
76 Movements in the number of options from 2 October 2014 (post conversion) to the end of the year were as follows:
The options below were exercised at a weighted average share price of £1.96.
2014 
Date of grant
Post
conversion Granted Exercised End of year
Exercise
Price
Class of
Share Notes
6 June 2014 906,668 – (190,000) 716,668 £0.2500 Ordinary (a)
6 June 2014 72,000 – (36,000) 36,000 £0.6250 Ordinary (a)
6 June 2014 100,000 – – 100,000 £0.7500 Ordinary (a)
6 June 2014 120,320 – – 120,320 £0.4940 Ordinary (a)
6 June 2014 795,169 – (614,091) 181,078 £0.0025 Ordinary (a)
2 September 2014 1,399,332 – – 1,399,332 £0.0025 Ordinary (b)
6 October 2014 – 922,880 – 922,880 £0.0025 Ordinary (c)
6 October 2014 – 329,244 – 329,244 £0.0025 Ordinary (d)
6 October 2014 – 703,384 – 703,384 £0.0025 Ordinary (e)
6 October 2014 – 372,477 – 372,477 £0.0025 Ordinary (f)
6 October 2014 – 123,200 – 123,200 £1.8700 Ordinary (g)
6 October 2014 – 67,892 – 67,892 £0.0025 Ordinary (b)
Notes:
(a) Options have vested and are exercisable.
(b)  The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 April 2014. The awards will vest  
as follows: 
 i.  50% of the shares are subject to an award if annual compound total shareholder return over the performance period exceeds or equals 15% and 15%  
of the shares are subject to an award if the annual compound total shareholder return over the period equals 8% with pro rata straight line vesting  
in between; and
 ii.  50% of the shares are subject to an award if annual compound growth of the Company’s adjusted earnings per share over the performance period 
exceeds or equals 20% between the financial years at the beginning and the end of the performance period and 15% of the shares are subject to an 
award if the annual compound growth of the Company’s adjusted earnings per share exceeds or equals 8% with pro rata in between.
(c) Awards vest on 1 February 2015; there are no vesting conditions.
(d) Awards vest on 10 October 2015; there are no vesting conditions.
(e) Awards vest on 1 February 2016; there are no vesting conditions.
(f) Awards vest on 1 February 2017; there are no vesting conditions.
(g)  123,200 options over Ordinary Shares at an exercise price of £1.87 to compensate holders of options over A Ordinary Shares which were granted in 
conjunction with the issue of B shares for the loss of capital gains tax treatment in relation to the reorganisation of the share capital. These options are  
fully vested and exercisable.
Apart from the options noted as exercisable, all other options above are outstanding.
The Company was incorporated in March 2014 and therefore options in the prior period were held in the former group holding 
company, Gamma Telecom Holdings Limited (and these are shown below):
2013 
Date of grant
Start of year/
Granted in
year
Cancelled/
lapsed End of year
Exercise
Price Notes
29 August 2003 5,122 (5,122) – £2.50 (a)
6 September 2005 12,000 – 12,000 £2.50 (a)
8 July 2009 1,076,027 (972,500) 103,527 £1.00 (a)
2 September 2009 37,500 – 37,500 £1.00 (a)
10 March 2010 131,351 (23,000) 108,351 £1.00 (a)
7 July 2010 25,000 (8,333) 16,667 £1.00 (a)
24 June 2013 910,000 – 910,000 £0.99 (b)
24 June 2013 4,425 – 4,425 £0.001 (b)
24 June 2013 495,658 – 495,658 £0.001 (c)
All options lapse ten years after the date on which they were issued.
Notes:
(a) Options over £0.01 Ordinary Shares; vesting period starts on date of issue.
(b) Options over £0.001 A1 Shares; vesting period starts on date of issue.
(c) Options over £0.001 A1 Shares; vesting period of two years.
The share options are subject to equity-settled share based payments.
The share options outstanding at 31 December 2014 represented 6% of the issued share capital as at that date (2013: 1%)  
and would generate additional funds of £0.6m (2013: £1.2m) if fully exercised. The weighted average remaining life of the share 
options was 20 months (2013: 106 months), with a weighted average remaining exercise price of 11 pence (2013: 18 pence;  
after adjustment for the share split).
Gamma Communications plc
Annual Report and Accounts 2014 77
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
25. Share based payment continued
Shadow Share Option Scheme (cash settled)
Under this scheme, the Group used to award employees with a shadow share option which will only vest on a change of control in 
the Company or a listing. Within 30 days of vesting, the employee will receive a payment equal to the number of units multiplied by 
the difference in market value at the date of vesting and market value of the date of grant.
On 31 October 2013, 10,000 options were issued at a notional market value of £3.39 and 5,000 options were issued at a notional 
market value of £2.43. On 12 November 2013, a further 5,000 options were issued at £2.43 and on 14 January 2014, 25,000 
options were issued at £3.39. 
Employee Shareholder Status Shares
On 27 November 2013, Gamma T elecom Holdings Limited issued 112,000 B1 shares for nil consideration as “Employee Shareholder 
Status Shares”.
Share based payment expense
Equity-settled share based payments are measured at fair value (excluding the effect of market-based vesting conditions) at  
the date of grant. The fair value determined at the grant date of the equity-settled share based payments is expensed over the 
vesting period, based on the Company’s estimate of shares that will eventually vest and adjusted for the effect of non-market 
based vesting conditions.
Application of the fair value measurement results in a charge to operating expenses within the subsidiary company Gamma 
Telecom Limited. The charge has been made to the profit and loss account of the subsidiary as the employees’ services are 
provided to the subsidiary company. The charge for each year is as listed below:
2014
£m
2013
£m
Share options issued to key management 2.9 0.4
Share options issued to other employees 0.1 –
Shadow Share Options 0.2 0.5
Total share based payment expense 3.2 0.9
Fair value is measured using the binomial pricing model and includes the information set out in the table below. The expected life 
used in the model assumes that vesting conditions will be met and all options will be exercised at the earliest opportunity. 
2014 2013
Share price at grant date (pence) 187 61–85
Exercise price (pence) 0–62.5 0–25
Expected volatility 30% 25%
Risk free rate 0.7–1.06% 0.823%
Expected dividend yield 3% 0%
The share price at grant date and the exercise price have been adjusted for the share split.
The assumptions relating to volatility and the risk free rate are calculated with reference to other comparable companies within 
the telecommunications sector.
The Group did not enter into any share based payment transactions with parties other than employees during any of the periods. 
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
78 26. Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three  
Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, 
as follows:
 → Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
 → Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly  
or indirectly
 → Level 3: unobservable inputs for the asset or liability.
The Group only has one Level 3 financial liability being the contingent consideration.
The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values,  
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 Finance Director.
The valuation techniques used for instruments categorised in Level 3 are described below.
The fair value of contingent consideration related to the acquisition of Gamma Network Solutions Limited (see note 16) was based 
on the expected gross margins earned by the business in the five years following acquisition.
The discount rate used is based on the Group’s estimated cost of debt. The effects on the fair value of risk and uncertainty  
in the future cash flows are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate.
The most significant sensitivity is a change in future gross margin. An increase/(decrease) by 10% of the future gross margin  
made by the business will result in an increase/(decrease) of fair value of £297 ,000. Theoretically the contingent consideration 
could range from zero through to an unlimited amount however in practice the amount due is bounded by the level of sales made 
by a finite sales force. The acquisition was constructed in such a way that the gross margin from future sales is at least as large  
as the contingent consideration.
Management has recalculated the fair value of the contingent consideration at the end of each accounting period and there  
has been no material difference in the fair value. 
Level 3 fair value measurements
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
2014
£m
2013
£m
Contingent consideration at 1 January 2.1 2.1
Adjustment to contingent consideration 0.6 –
Realised during period (2.6) –
Contingent consideration at 31 December 0.1 2.1
27 . Capital commitments
The Group had no capital commitments at 31 December 2014 and 31 December 2013.
Gamma Communications plc
Annual Report and Accounts 2014 79
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the financial statements
For the year ended 31 December 201 4 continued
28. Related party transactions
Details of key management’s remuneration are given in note 7 . As at 31 December 2014 an amount of £0.5m (2013: £0.6m)  
was owed to the Group by key management personnel; this sum includes £50,000 owed by Andrew Belshaw. On 6 May 2014, a 
subsidary (Gamma Telecom Holdings Limited) made an interest free loan of £50,000 to Andrew Belshaw to enable him to repay  
a loan of £50,000 from the Employee Benefit Trust. This loan is repayable on the earlier of the date on which Andrew Belshaw 
sells the 200,000 £0.0025 Ordinary Shares which are held in the Employee Benefit Trust (and it is part payable if there is a partial 
disposal) or within 30 days of Andrew Belshaw ceasing to be employed by the Group or 4 April 2021.
On 2 October 2014, the Company agreed certain arrangements with Bob Falconer to enable him to maintain his holding of 5%.  
of the issued Ordinary Share capital of the Company for the purposes of enabling him to benefit from “entrepreneur’s relief” from 
UK capital gains tax. In order to achieve this, Bob Falconer agreed to pay to the Company the sum of £3.1m, being £0.9375  
in respect of each of the 3,356,528 B1 shares held by him, such that each of his B1 shares converted into one Ordinary Share 
(each, a “Converted Share”). To part fund that payment, the Company’s subsidiary, Gamma Telecom Holdings Limited, made an 
interest free loan to Bob Falconer of £2.6m (“Loan”). If Bob Falconer ceases to be a Director of the Company the Loan is repayable 
on expiry of his notice period or three months after termination if no notice period applies. The Loan is also repayable if Bob 
Falconer disposes of the Converted Shares or upon certain events of default, including his bankruptcy or within six months of  
his death. There is also a part repayment obligation if Bob Falconer sells only part of the Converted Shares. The Loan is secured  
by an unregistered charge over 1,580,159 Ordinary Shares registered in Bob Falconer’s name. As part of these arrangements,  
the Company cancelled Bob Falconer’s options over 549,132 A shares in return for a cancellation payment to Bob Falconer of 
£1.6m, being equal to the capped value of the A shares pursuant to the terms of the Company’s articles of association in force  
at that time less the option exercise price for those A shares. Bob Falconer used part of the cancellation payment to repay a loan  
of £0.3m which had previously been made by Gamma Telecom Holdings Limited to him in April 2014.
No dividends were paid to Directors during the year and no dividends were payable to Directors at the year end. 
There were no other transactions with related parties during the period.
29. Contingent assets and liabilities
In July 2014 the Supreme Court overturned a Court of Appeal judgment, made in July 2012, which had disallowed a ladder pricing 
policy in use by the Group. The Group received the Supreme Court Order in December 2014 and it will start the process to recover 
the money from the mobile operators. Any ongoing benefit for the period after the Supreme Court’s judgment will depend on 
whether the mobile operators alter their pricing, which would impact the termination rates they are charged. 
Neither the Group nor the Company has recognised any benefit from ladder pricing to date. All ladder pricing will cease from  
the end of June 2015 when new pricing arrangements for Non-Geographic Call Services in the UK come into effect.
The Group had no contingent liabilities at 31 December 2014 or 31 December 2013 other than the contingent consideration  
in relation to the business acquisition discussed in note 26.
30. Events after the reporting date
On 20 February 2015 Gamma Communications plc bought-back 1,717 ,323 Deferred Shares at a price of £0.0025 per share from 
distributable profits.
31. Ultimate controlling party
There is no ultimate controlling party.
80 Company balance sheet
At 31 December 201 4
Note
2014
£m
Fixed assets
Investments 2 2.3
2.3
Current assets
Debtors 3 11.4
Cash at bank and in hand 6.7
18.1
Net current assets 18.1
Total assets less current liabilities 20.4
Capital and reserves
Called-up equity share capital 4 0.2
Share premium account 5 3.2
Share option reserve 5 2.1
Profit and loss account 5 14.9
Shareholders’ funds 6 20.4
The financial statements on pages 81 to 83 were approved and authorised for issue by the Board of Directors on 19 March 2015 
and were signed on its behalf by:
Andrew Belshaw
Finance Director
The notes on pages 82 to 83 form part of these financial statements.
Gamma Communications plc
Annual Report and Accounts 2014 81
Strategic  
report
Corporate 
governance
Financial  
statements Financial statements
Notes forming part of the Company financial statements
From the date of incorporation to 31 December 201 4
1. Accounting policies
Basis of accounting
The financial statements for the Company have been prepared in accordance with applicable accounting standards (being  
those accepted within the UK, “UK GAAP”) and under the historical cost convention. In future periods the Company will report 
under FRS101.
The principal accounting policies are set out below.
The accounts are prepared on the going concern basis. In assessing whether the going concern assumption is appropriate, the 
Directors have taken into account all relevant available information about the future trading including profit and cash forecasts 
and available facilities and funding. The business has a track record of profitable growth and is cash generative and this is 
expected to continue. It is therefore considered appropriate to adopt the going concern basis of accounting in the preparation  
of the annual financial statements.
As a consolidated profit and loss account is published, a separate profit and loss account for the parent company is omitted from 
the Group financial statements by the virtue of section 408 of the Companies Act 2006. The loss in respect of the Company for 
the year was £0.1m.
Cash flow statement
The Directors have taken advantage of the exemption in Financial Reporting Standard No 1 (Revised 1996) from including cash 
flow statements in the financial statements on the grounds that the Company is wholly owned and its parent publishes a 
consolidated cash flow statement.
Investments
Investments are recorded at cost less amounts written off. 
The cost of acquisition is the amount of cash or cash equivalents paid and the fair value of other purchase consideration given  
by the acquirer, together with the expenses of the acquisition. Where the payment of consideration for an acquisition is to be  
made after the date of acquisition, reasonable estimates of the amounts expected to be paid are included in the cost of acquisition 
at their present values.
The cost of acquisition is adjusted when revised estimates are made, with consequential corresponding adjustments continuing  
to be made to the cost of the investment, and therefore goodwill, until the ultimate amount is known.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. 
An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its  
financial liabilities.
Dividends and distributions relating to equity instruments are debited direct to equity.
2. Investments
2014
£m
Additions 2.3
Total investments 2.3
On 12 May 2014, the Company acquired Gamma Telecom Holdings Limited by way of a share for share exchange.
At 31 December 2014 the Company held share capital of the following subsidiaries, all of which are registered in England and 
Wales with the exception of Peach Amber Kft which is registered in Hungary:
82 Entity Nature of business Proportion held Note
Gamma T elecom Holdings Limited Intermediate holding company 100%
Gamma T elecom Limited T elephony services 100% (a)
Gamma Business Communications Limited Retail telephony services 100% (a)
Gamma Network Solutions Limited Data and communications networks 100% (b)
Peach Amber Kft Software services 100% (a)
Gamma Metronet Limited Dormant 100% (a)
NP4UK Limited Dormant 100% (a)
Uniworld Bureau Services Limited Dormant 100% (b)
Go Worldwide Solutions Limited Dormant 100% (b)
Blue Spot T echnologies Limited Dormant 100% (b)
Notes:
(a) All 100% owned via intermediate holding company Gamma Telecom Holdings Limited.
(b) All 100% owned via intermediate trading entity Gamma Business Communications Limited.
3. Debtors
2014
£m
Amounts owed from Group undertakings 11.4
4. Share capital
Details of the share capital and movement during the period are given in note 21 to the consolidated accounts.
5. Reserves
Share  
capital
£m
Share 
premium 
account
£m
Share  
option reserve
£m
Profit  
and loss 
account
£m
On incorporation – – – –
Profit for the financial period – – – 14.9
Share buybacks and cancellations – – 2.1 -
Share issues 0.2 3.2 – –
At 31 December 2014 0.2 3.2 2.1 14.9
6. Reconciliation of shareholders’ funds and movements on reserves 
2014
£m
Profit for the financial year 14.9
New shares issued 3.4
Share buybacks and cancellations 2.1
Net increase in shareholders’ equity funds 20.4
Opening shareholders' funds –
Closing shareholders’ funds 20.4
7 . Contingent liabilities 
The Company had no contingent liabilities at 31 December 2014.
8. Capital commitments
The Company had no capital commitments at 31 December 2014.
9. Post balance sheet events 
On 20 February 2015 the Company bought-back 1,717 ,323 Deferred Shares at a price of £0.0025 per share from  
distributable profits.
10. Related party transactions
The Group has taken advantage of the FRS 8 ‘Related Party Transaction’ exemption from disclosure of intra group transactions 
between the parent and a wholly owned subsidiary.
Gamma Communications plc
Annual Report and Accounts 2014 83
Strategic  
report
Corporate 
governance
Financial  
statements Supplementary information
Glossary of terms
BYOD
“Bring your own device”, a relatively recent trend where 
employees use their own personal mobile devices as work 
mobiles during the working day. 
“Cloud PBX”
A “multi company” phone system that is located in Gamma data 
centres and provides advanced phone system functionality,  
and is regularly updated with new features and functionality.  
It also enables businesses to pay for phone services out of 
Opex rather than Capex.
This service is part of a wider trend in ICT, whereby businesses 
are replacing hardware with services from the Cloud. It is 
impacting significantly on IT, Software and Telecoms.
Inbound
A software based service that enables businesses to 
dynamically manage phones calls into their business – where 
they arrive, who they go to, what services are added (voicemail, 
call queuing, etc) to inbound calls.
IP telephony
A method of delivering telephony calls over “data” lines, such as 
broadband, using Internet Protocol. This negates the need for 
businesses to have both data and voice lines for their premises.
ISDN 
Means an integrated service digital network and BT’s telephony 
product of that name which is generally sold and/or resold to 
businesses. The service is used primarily as a dedicated voice 
line for businesses. 
MPLS
“Multi Protocol Layer Switching”. A technology implemented 
across private wide area data networks that enables businesses 
to prioritise traffic by type – voice, video, data etc.
“SIP Trunking”
A business grade service that carries voice over a data circuit, 
instead of having a dedicated voice circuit (such as ISDN), 
enabling businesses to reduce the number of lines they pay  
for and has greater flexibility than dedicated voice lines (around 
phone numbering, capacity changes and speed of installation).
TDM
Time Division Multiplexing: A means of transmitting and 
switching calls and data across a single channel by providing 
dedicated time slots. 
84 fsc logo.pdf   1   17/03/2015   12:17
Company information
Registered Office
5 Fleet Place
London
EC4M 7RD
Head Office
Kings House
Kings Road West
Newbury
Berkshire
RG14 5BY
Nominated Adviser and Broker
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Auditors to the Company
Grant Thornton UK LLP
1020 Eskdale Road
Winnersh
Wokingham
Berkshire
RG41 5TS
Legal Advisers to the Company
Bird & Bird LLP
15 Fetter Lane
London
EC4A 1JP
Registrar
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Company website
www.gamma.co.uk
Company number
08943488
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Printed by Principal Colour. Principal Colour are ISO 14001 certified, Alcohol Free and FSC®  
Chain of Custody certified. Newbury Head Office
Kings House
Kings Road West
Newbury
RG14 5BY
Manchester
1st Floor
The Malthouse
Elevator Road
Trafford Park
Manchester
M17 1BR
Unit C Focal Point
The Village
Third Avenue
Trafford Park
Manchester
M17 1FG
London
Holland House
4 Bury St
London
EC3A 5AW
Glasgow
1st Floor
7 , West Nile Street
Glasgow
G1 2PR
Fareham
2 Manor Court
Barnes Wallis Road
Segensworth
Fareham
Hampshire
PO15 5TH 
Budapest
Vármegye u 3–5
2nd floor
1052 Budapest
Hungary
www.gamma.co.uk