Gamma Communications plc Annual Report 2021

FY2021 Annual Report · Gamma Communications plc

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Working smarter,
together.

Gamma Communications plc
Annual Report and Accounts 2021

Empowering people
to communicate

Gamma is a leading provider of Unified
Communication as a Service (“UCaaS”)
products to the business market in
Western Europe.

Strategic report
Chair’s statement

The Gamma business

Market trends

Chief Executive Officer’s statement

Our strategy

Key performance indicators

Risk management

Our principal risks

Section 172

Financial review

Environmental, social and governance report

Governance report
Chair’s introduction to corporate governance

Board of Directors

Senior Leadership Team

Corporate governance report

Nomination Committee report

Audit Committee report

Risk Committee report

ESG Committee report

Directors’ Remuneration report

Directors’ report

Statement of Directors’ responsibilities

Financial statements
Independent auditor’s report

Consolidated statement of profit or loss

Consolidated statement of financial position

Consolidated statement of cash flows

Consolidated statement of changes in equity

Notes to the financial statements

Company statement of financial position

Company statement of changes in equity

Notes to the Company financial statements

131

Supplementary information
Company information

Glossary

127

128

129

131

132

Online report

Read our report online
for additional video
content

This year we have adopted a digital first approach
reflecting how we operate as a business. As a result,
while the Annual Report continues to be a core part of
our reporting suite, we have simplified the format and
included links to interactive online content, such as
videos. Please refer to the QR codes throughout the
document. This online material brings to life what we do,
how we do it, and provides you with a better overall
understanding of our business.

Online report
Scan to go to our online Annual
Report and Accounts 2021.
gammacommunicationsplc.com/
AR2021

Chair’s overview
Scan to watch a video of our Chair,
Richard Last, talking about our
Partnerships and new Board
appointments.

Chief Executive Officer’s
overview
Scan to watch a video of our CEO,
Andrew Taylor, summarising our
performance and growth over 2021.

Chief Financial Officer’s
overview
Scan to watch a video of our CFO,
Andrew Belshaw, discussing our 2021
financial performance.

Environmental overview
Scan to watch a video of our Group
Sustainability Director, Sarah Kirton,
talking about our plans to become
Carbon Net-Zero.

Social overview
Scan to watch a video of our Chief
People Officer, Chris Bradford, talking
about some key People initiatives.

This Report contains references to Gamma’s website, and other
supporting disclosures located thereon such as videos. These
references are for readers’ convenience only and information
included on Gamma’s website is not incorporated in, and
does not form part of, this Annual Report.

The Group had a strong
financial performance
with good growth across
all key product categories
during the year.

Revenue

£447.7m

Growth from £393.8m to £447.7m (these figures include acquisitions made)

+14%

Profit from operations

£68.3m

Decrease from £75.7m to £68.3m, due to an exceptional gain of £19.6m in 2020 mainly relating to the
disposal of a subsidiary, see note 8

-10%

Adjusted EBITDA*

£95.4m

Growth from £79.0m to £95.4m

Dividend per share

13.2p

Grew from 11.7p to 13.2p

+21%

+13%

* All adjusted measures set out throughout this document which are described as “adjusted” represent Alternative Performance
Measures (“APMs”) and are defined and reconciled in the Financial Review section and are applied consistently. Where reference
is made to adjusted EPS this is stated on a fully diluted basis (“FD”). Our policy on the use of APMs is included in note 3.

Chair’s statement

Richard Last
Chair

2021 has been another good
year for Gamma. The year has been
one of strong strategic execution.

+25%

Overview of the year
As outlined in this report, the year has been one of strong strategic
execution for Gamma with the following highlights:

Dividend per share

13.2p

Grew from 11.7p to 13.2p

Earnings per share

+13%

55.2p

Decrease from 66.6p to 55.2p, due to an exceptional gain of £19.6m
in 2020 mainly relating to the disposal of a subsidiary, see note 8

-17%

Adjusted earnings per share

64.0p

Grew from 51.3p to 64.0p

Cash generated by operations

£89.8m +28%

Grew from £70.3m to £89.8m

Chair’s overview
Scan to watch a video of our Chair,
Richard Last, talking about our
Partnerships and new Board
appointments.

Overview of results
Group revenue for the year ended 31 December 2021 increased by
£53.9m to £447.7m (2020: £393.8m), an increase of 14% on the prior
year. Profit before tax for the year was £67.2m, a decrease of 10%
from the prior year figure of £75.0m; the reduction is driven by the
2020 exceptional gain on the sale of our subsidiary, The Loop (the
fibre business based in Manchester). Adjusted EBITDA for the Group
increased by £16.4m (21%) to £95.4m (2020: £79.0m). Adjusted
items are explained and reconciled in the Financial review and note 3.

Fully diluted earnings per share for the year decreased by 17% to
55.2p (2020: 66.6p); the prior year figure was increased by the profit
of £19.5m made on the sale of our subsidiary, The Loop. Adjusted
earnings per share (Fully Diluted) for the year increased by 25% to
64.0p (2020: 51.3p).

The cash generated by operations for the year was £89.8m
compared to £70.3m in 2020. The closing Net Cash balance for the
year was £49.5m (2020: £48.0m). It is pleasing to see that this cash
balance has increased despite investing £16.8m on capital
expenditure, £49.3m on acquisitions and paying £11.7m in
dividends. This is testament to a strong focus on cash generation
from management.

• The whole business has continued to respond well to the

ongoing difficulties COVID-19 has brought; we have
demonstrated that we are able to run the business with the vast
majority of our staff working from their homes. We are moving to
hybrid working for some parts of our business which we believe
will allow us to attract and retain staff.

• The Group’s revenue model has proved robust and its product

set supports businesses which have either had to work remotely
or have chosen to do so because they see the advantages of
flexible working patterns.

• On 3 March 2021 we significantly expanded our software

development capability through the acquisition of Manchester
based Mission Labs. Gamma had been partnering with Mission
Labs for over 18 months on projects such as PhoneLine+. The
acquisition gives Gamma additional development capabilities in
the rapidly evolving markets of Cloud Contact Centre and Cloud
Communications.

• The acquisition also enables us to accelerate our digital strategy.
Mission Labs owns a digitally based voice application CircleLoop
(www.circleloop.com). This is a UCaaS technology platform which
provides a cloud-based telephony product fully serviced through
web, desktop and mobile applications. It is aimed at the micro-

Gamma Communications plc Annual Report and Accounts 2021

business market. The fact that we own this capability will enable
us to roll it out in other territories to address a key market
opportunity in the UK and Europe.

• During the year we have increasingly seen the importance of

partnering with Microsoft Teams. We had previously launched a
Microsoft Teams Direct Routing product to our Channel Partners,
making Gamma’s market-leading SIP trunks available to
Enterprises which use Microsoft Teams. On 27 September 2021
we announced we had been successful in our efforts to work with
Microsoft to join the Operator Connect for Microsoft Teams
programme. Operator Connect is a new operator-managed
programme from Microsoft designed to enable seamless and
integrated PSTN calling to Teams.

•

In July 2021 we launched a product enhancement which allows
users to integrate their Horizon Cloud product with Microsoft Teams.

• During the first half we launched our Cloud Contact Centre

product – Horizon Contact. This was developed by our team of
in-house software developers and is a fully integrated additional
module that attaches to our core Horizon Cloud product.

• We committed to becoming a carbon net-zero business by 2042.

During the year we have found recruitment harder than previously
and we are also seeing inflationary pressure in wages. However, we
continue to see the Gamma culture as a differentiator which allows
us to recruit and retain the talented individuals that we need to drive
the business forwards.

We would like to express our thanks to all of our staff for their dedication,
hard work and enthusiasm.

Dividend
Gamma remains committed to a progressive dividend policy which
has seen the dividend increase by between 10-15% every year
since our IPO in 2014. Gamma has paid one third of the dividend as
an interim dividend with the final two thirds paid as a final dividend
once the results for the full year are known.

The Board is pleased to propose a final dividend, in respect of the
year ended 31 December 2021, of 8.8p per share (2020: 7.8p), an
increase of 13%. Subject to shareholder approval at the
forthcoming AGM, this dividend will be payable on Thursday 23
June 2022 to shareholders on the register on Friday 3 June 2022.
When added to the 4.4p interim dividend (2020: 3.9p) this would
make a total dividend of 13.2p for the year as a whole (2020: 11.7p).

Board and governance
In December 2021, I was pleased to announce two key
appointments which reiterate our focus on developing our senior
leadership capacity, ensuring that we capitalise on Gamma’s
significant growth opportunities.

Environmental
As a business which enables other companies to reduce their
carbon footprint by communicating and collaborating from multiple
sites and thereby reducing the need to travel, we continue to
challenge ourselves on our own environmental credentials.

First, Andrew Belshaw, who has been Chief Financial Officer since
Gamma’s IPO in 2014, will be appointed Deputy Chief Executive
from 1 May 2022. He will continue to report to Andrew Taylor and to
be a member of Gamma’s Board of Directors. In this role, Andrew
will take on a range of strategic and operational responsibilities to
support the development and growth of the Group. These
responsibilities will include overseeing aspects of product
management, product development and operations and the
execution of M&A. Andrew will also oversee Gamma’s group people
strategy, ensuring that Gamma attracts and retains great talent
while continuing to be a great place to work.

Taking over from Andrew Belshaw, Bill Castell has been appointed
Chief Financial Officer. Bill will report to Andrew Taylor and will join
the Company and the Board of Directors on 1 May 2022. Bill is
currently Chief Financial Officer at OVO Energy, the technology-led
green energy business. Before joining OVO Energy in 2020, Bill
spent three years at Virgin Media which he joined as Deputy Chief
Financial Officer and later became acting Chief Financial Officer.
From 2005 to 2017, Bill was at Barclays Bank where he held a number
of senior finance roles including Chief Financial Officer at Barclays
Corporate Bank and Chief Financial Officer of Barclaycard Europe.

We continue to adhere to the QCA Corporate Governance Code
(2018 edition) (the ‘QCA Code’).

Employees
At 31 December 2021, we had 1,745 employees in the Group based
in seven countries (2020:1,530). During the year I was pleased to
welcome the staff of Mission Labs into the Gamma Group.

We encourage all employees to own shares in the Company. For
our UK based employees, we offered a Sharesave scheme for the
fifth year in a row. Once again, it was pleasing to see the high take-up,
with 402 staff choosing to participate in the scheme (2020: 449).
We also run an “Evergreen SIP” scheme which gives employees a
further opportunity to buy shares in the Company in a tax-efficient
way. We are actively exploring ways in which our non-UK based
employees can own Gamma shares.

Over the last 12 months Gamma has made significant progress in
extending its reporting boundary in line with the Streamlined
Energy and Carbon Reporting (SECR) regulations and has
increased the scope of reporting to include all recent acquisitions
in Europe. Using this extended scope in 2021 Gamma has set its
baseline energy and carbon emissions data which will be used to
support future emissions reduction targets.

I am pleased to announce that Gamma has developed a plan for
carbon reduction which allows us to commit to moving from a
Carbon Neutral business to become a carbon net-zero business
by 2042, supporting both the Paris Treaty’s aims to limit the
temperature increase to 1.5°C globally by 2050 and the UN
Sustainable Development Goal 13: Climate Action.

Current trading and outlook
Gamma will continue to concentrate its efforts and investment to
develop a product set which facilitates flexible working for businesses
of all sizes, building on an already strong reputation for operational
excellence and service quality. We will also partner with organisations
such as Microsoft (Teams) and Amazon (Amazon Connect) to provide
solutions to our Enterprise and Public Sector customers.

Our business is confined to the countries in which we operate. We
therefore are not expecting a significant direct impact on our results
caused by the war in Ukraine. Our sympathies are with all those who
are affected by the conflict, and I am proud of the Gamma family who
are raising funds to support those affected.

We have had a positive start to the year following the pre and post
Christmas lock down periods in most countries and the Board is
positive about the outlook for the Group in 2022 and beyond. We
believe that more and more businesses of all sizes are seeing the
advantages of UCaaS and we expect to see continuous growth in
UCaaS product sales.

Richard Last
Chair

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021The Gamma business

Supporting business
acceleration

Our differentiators

How we create value

Gamma’s financial performance
reinforced by our robust
business model.

Strong Business Model – with high visibility and quality of
earnings through 2021 and beyond.

Our product categories

A developer and provider of
UCaaS, CCaaS, voice, data and
mobile communication services.

We offer
flexible
solutions

We have a
collaborative
culture

We provide
end-to-end
control

We deliver
connected
communications

Unified Communications
Our award-winning range of
Unified Communications
products enables businesses to
raise productivity, boost agility
and increase collaboration.
From messaging and video
calling to instant conference
services, we help reduce costs
and operational complexity
while increasing employee
engagement.

SIP trunking and call
management
With the UK’s leading SIP
trunking service we give
businesses a more versatile,
resilient phone service at less
cost. Gamma SIP trunks come
with powerful business
continuity features plus
exceptional inbound call
management functionality.

We believe we are a truly
different and unique
communications service
provider and it is these five
areas that set us apart from
other businesses:

• Product and network quality

• Channel automation

• Digital platforms

• Commercial agility

• Our people

Opportunities

• New UcaaS products

• New channel development

• Technology acquisitions

• New routes to market

acquisitions

Gamma Communications plc Annual Report and Accounts 2021Gamma is a leading technology-based
provider of communication services to the
business market in Western Europe via our
extensive network of trusted channel partners
and also directly.

The combination of network investment, a
digital-first approach and in-house development
skills has enabled Gamma to develop a
comprehensive portfolio of communications
services with a significant amount of intellectual
property, which has given us a heritage of
disrupting the market with innovative and
market-leading cloud-based services such
as SIP trunking and UCaaS in the UK.

Our product categories

How we sell

We supply a broad range of simplified communications and
software services to small, medium and large sized business
customers, both through our large network of channel partners
and directly.

Proportion of sales

60% UK Indirect

Our primary route to market, the channel is at the
heart of what we do. We provide market-leading
products to 1,000+ channel partners, with an
exceptional service wrap.

24%

UK Direct
Our Direct business supports the requirements
of Enterprises and Public Sector organisations
looking to contract with the network operator.

Mobile
Our business-only mobile
service features flexible tariffs
and powerful bolt-ons. When
combined with Gamma’s Unified
Communications services,
employees can keep working
wherever they are, remaining
‘always-on’ to customers.

16% European

Our European businesses sell both directly and
through the channel consisting of sales in the
Netherlands, Spain and Germany.

Market trends

The future of business communications:

• Move to cloud-based business communications services

• Always available customer contact

• High speed connectivity

Market trends
Page 06

Connectivity
Our high-performance
connectivity products deliver
outstanding speeds combined
with robust security and
resilience measures; from
broadband and Ethernet to
advanced WAN services, we
provide businesses with the
customisable connectivity they
need to grow.

CEO statement
Page 10

Outputs

Addressing multiple indirect,
direct and digital channels,
driving growth opportunities
across all business market
segments.

Shareholders
115%

Total shareholder return
over three years*

Our people
1,745

employees in seven
countries

Customers
Innovative
UCaaS
solutions

Suppliers
£277m

Spent over £277m per
annum

* As at 31 December 2021

s172 statement
Page 30

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021
Market trends

The future of business
communications

Gamma provides business communication services that are flexible,
scalable and secure to meet today’s and tomorrow’s challenges.
Underpinning the business and user trends are a number of technology
and industry directions that support the overall changes in how
businesses operate.

Market trend:
1

The opportunity for UX and CX

to win in the Experience Economy

Gamma’s response
Gamma understands the importance of CX
and UX to differentiate in the Experience
Economy, and has, therefore, significantly
increased our investment in both.

In the last 24 months, we have invested
significantly in both people and tools to
better understand our customer and user
needs; to help us to make more informed
decisions about designing intuitive solutions
to solve customer problems; and in turn, to
build products that empower people to
communicate and work smarter, together.

In 2020, we formed the Gamma CX function,
demonstrating the importance of designing
intended UX and CX as part of the Gamma
product and technology strategy. The team
covers several roles that are essential to
supporting successful software design,
including product owners, business
analysts, UX designers and researchers,
and digital content designers.

In addition to a highly skilled team, we’ve
deployed a range of tools to build our
customer insight. Utilising qualitative and
quantitative data we can better understand
the UX and critically drive improvements in
our product and process design.
We have also built the capability to run

extensive research activities from surveys
through to moderated and unmoderated
testing of products, with an emphasis on
prototype testing. This allows us to build
prototypes quickly and at low cost, so that
we can then test with users to capture early
feedback that can, in turn, be reflected in
our product designs.

Gamma has seen a wide range of benefits
as a result of this approach: analytics have
allowed us to identify customer pain points
and iterate the product design to improve
usability and accessibility; early prototyping
allows us to test user reaction to our products
and refine the designs quickly, at low cost
and without distracting development teams.
We’ve also seen a much greater focus on
data-driven decision making as a result of
research and empirical data, and we’ve seen
cultural benefits of our teams learning new
skills and allowing for increased collaboration.

We are excited to pass on the benefits of
our increasing investment in CX and UX to
our channel partners and users.

Consumer buying behaviours and
expectations around service have changed
drastically over the past few years. They
expect a seamless, easy and intuitive user
experience (UX), and are making decisions
on purchases based on experiences rather
than goods.

This is adding to what has been called the
Experience Economy, which is projected to
be worth $12bn by 2023. More than two
thirds of businesses now compete on the
basis of customer experience (CX) – a
competition that is driving businesses to
transform in order to remain relevant, avoid
commoditisation and take advantage of
the opportunity.

Gamma Communications plc Annual Report and Accounts 2021

Market trend:
2

Hybrid here to stay

The end of the pandemic appears to be in
sight. Yet, the world will be moving on with
lasting change. In a recent survey by the
Office of National Statistics 85% of adults
currently homeworking wanted to use a
"hybrid" approach of both home and office
working in future*. Many organisations, large
and small, will need to adapt to a hybrid
working culture, enabling employees to
continue to benefit from the work life balance
they have come to value, as well as enjoying
time back in the office with colleagues.

Despite many businesses transforming the
way they work quickly, and with some even
reporting a rise in productivity, having a
dispersed workforce split between remote
and office-based leads to new challenges in
how employees collaborate and work.

Businesses need to ensure that those who
prefer to work remotely have the same
experience and opportunities as their
office-based colleagues. In this light, cloud
communications technology will play a vital
role in the way businesses enable their
employees to collaborate and communicate
efficiently, regardless of their location.

Gamma’s response
As one of the leading providers of UCaaS in
the UK and Europe for 20 years, Gamma
is well positioned to support businesses in the
transition to a full hybrid working environment.

Our comprehensive portfolio of
communications solutions and services allows
us to cater for the short and long-term
needs of a variety of businesses, adapting to
their challenges and requirements.

In 2021, Gamma continued to work closely
with Microsoft to deliver enhanced calling
capabilities within Teams. Building on our
position as the UK’s No.1 SIP provider and
the acquisition of Exactive, we were proud
to join the Operator Connect for Microsoft
Teams programme.

Operator Connect, a new operator-managed
programme from Microsoft designed to
enable seamless and integrated PSTN calling
to Teams, allows us to deliver a reliable and
secure service to easily maximise value
from their Microsoft Teams environment.

In addition, Gamma also deepened its
interconnection with Microsoft’s

applications with an enhancement to its
Direct Routing proposition and a new PBX
integration for Microsoft Teams.

Building on the previously released Direct
Routing for Microsoft Teams proposition,
we expanded the solution to automate and
simplify the provisioning experience with
the launch of the Gamma Voice
application. We also launched Horizon for
Microsoft Teams, a bolt-on solution to
Horizon bringing the features of Gamma’s
leading business-grade cloud PBX within
the Microsoft Teams environment.

Our wide range of products to enable
Microsoft Teams calling allows us to
deliver tailored solutions for our customers
and their team, giving them flexibility and
adapting to their business requirements.

The addition of these solutions to our
portfolio, coupled with our Managed Services
solution and our 15 years’ experience
enabling voice solutions for Microsoft
Teams, perfectly positions Gamma to help
our customers navigate the challenges of
hybrid working and to offer our channel
partners different routes to market.

Market trend:
3

Fundamentals are more

important than ever

Gamma’s response
Gamma fully understands the importance
of connectivity to ensure application quality
and efficiency.

Built on the back of our strong network,
our fixed and mobile connectivity products
deliver fast, secure and reliable access, no
matter the operational size. This is supported
by our highly-skilled group of UK-based
support staff and engineers, ready to help
if a problem were to occur.

In 2021, we strengthened our partnership
with Three UK to enhance our Gamma
Mobile service. Gamma Mobile customers
can now benefit from 99% outdoor coverage
and the fastest 5G network in the UK***. The
service allows businesses to give their
employees the capability to seamlessly
work on the move to a similar standard they
would experience in the office.

With 90% of enterprises having at least
one application or part of it in the cloud in
2020**, the need for stable, reliable and
secure connectivity and bandwidth has
never been more important.

Uninterrupted and good quality access, the
fundamental of any cloud-based application,
is now simply expected by business users
and their clients. They require an infrastructure
provider that is able to maintain access to
cloud-based applications, irrespective of
whether that application supports video,
voice or simply document sharing.

Moreover, as many people continue to work
away from the office, whether at home or on
the road, mobile connectivity has grown in
popularity for businesses hoping to deliver
the same experience to their employees,
regardless of location.

Reliability of service, coupled with
consistent, quality support, has become a
key differentiator in the cloud communications
market, as businesses simply can’t afford
any downtime and require a provider that
can support through challenging and
transformational times.

In addition, Gamma also expanded our
Access portfolio to include Single Order
Generic Ethernet Access (SoGEA) broadband
to respond to the changes in the UK telecom
infrastructure due to the PSTN Switch Off.

Customer service also continues to be
fundamental to achieving our mission to
provide straightforward cloud
communication and collaboration services
for business. Our Net Promoter Score (NPS)
results are consistently above industry
average, and we continuously strive to
deliver service excellence.

Moreover, beyond the day-to-day customer
service support, we are proud to support our
customers and partners through challenging
and unprecedented times, as demonstrated
by our Support and Recovery Packages
launched to help channel businesses
weather the COVID-19 storm.

* Business and individual attitudes towards the
future of homeworking, UK: April to May 2021
Office for National Statistics (ons.gov.uk).

** 451 Research.

*** According to Ookla, 2021.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021

Our stories

Our key stories

Mission Labs is
accelerating Gamma’s
ability to take advantage
of the transforming market

Customer demands and behaviours have grown and changed in
recent years. With digital channels becoming more prominent
during the pandemic, customers expect to communicate with
businesses, whenever they want and via the communication
channel of their choice. With a rise in customer interactions taking
place in public forums such as social media platforms, customer
experience has never been more crucial and the latest contact centre
technology can play an important part in the success of an organisation.

Gamma acquired Mission Labs in March 2021, which has brought
the Company leading capabilities in the rapidly evolving markets of
Cloud Contact Centre and Cloud Communications.

Mission Labs has been working with Amazon Web Services (AWS)
since 2016, helping clients to bring the future of business
communications and customer experience with AWS cloud-based
and serverless technologies.

Mission Labs is an approved Amazon Connect Service Delivery
Partner, and an AWS Advanced Consulting Partner, recognising
its successful track record and experience in designing, building
and supporting AWS-based solutions for clients. Mission Labs
works with a large range of AWS services – Amazon Connect in
particular – enabling its team to deliver powerful, client-specific
solutions which improve efficiency, reduce costs and supercharge
customer experience.

Mission Labs and AWS work together to identify opportunities to
help organisations improve customer-centricity, and to leverage
the benefits of the world’s most comprehensive and broadly
adopted cloud platform.

Gamma provides
calling capabilities
for Microsoft Teams

Building on over 15 years’ experience in delivering voice solutions
for Microsoft, Gamma was pleased to have been chosen as one of
a select number of providers in the Operator Connect for Microsoft
Teams programme.

The COVID-19 pandemic accelerated Unified Communications (UC)
technology adoption in 2021 seeing Microsoft Teams grow its user
base to over 270 million monthly active users. However, only a
fraction of those users are leveraging Teams’ calling capabilities.

Microsoft has worked to enable seamless and integrated PSTN
calling to Teams by designing a new operator-managed
programme, Operator Connect.

Gamma’s inclusion in the programme streamlines calling
capabilities for Teams users by bridging the gap between their
Teams environment and Gamma as their operator.

The addition of Operator Connect further enhances Gamma’s
existing Microsoft Teams telephony offering for its customers and
channel partners, with the Company already enabling Teams seats
across the Group via its Microsoft Teams Direct Routing and
managed service offering, Cloud UCX™.

Gamma’s growth in delivering Microsoft Teams telephony was built
on the combination of the acquisition of Exactive in 2020, and
Gamma’s market-leading SIP trunking service.

Market trend 1
page 6

Market trend 2
page 7

Gamma Communications plc Annual Report and Accounts 2021Gamma awarded Best
Lockdown Project/Initiative at
CRN Channel Awards 2021

Gamma’s primary route to market, the channel, is at the heart of
what we do. We provide market-leading products to 1,000+ channel
partners, with an exceptional service wrap.

Demonstrating the Company’s continued loyalty and commitment
to its partners and customers, Gamma was recognised by the CRN
Channel Awards for the Best Lockdown Project/Initiative.

The CRN Channel Awards celebrates the latest technology
innovations and advancements and recognises the ingenuity and
exceptional achievements of the UK channel industry over the year.

The Best Lockdown Project/Initiative award recognised the
innovation and exceptional support that companies have
demonstrated during the pandemic. Gamma’s award entry focused
on the two packages it developed to assist partners and their end
customers during the pandemic.

Gamma launched the Support and Recovery Packages in 2020, to
help channel businesses and customers weather the COVID-19
storm, with a raft of immediate and practical measures to assist
them during the challenging times.

The Packages allowed Gamma partners to hibernate customers
(i.e., temporarily pause their contracts) or to provide homeworking
capability without charge from Gamma.

Gamma was recognised for the project, and hopes that the initiative
took some of the financial burden away from channel partners and
users who may have been suffering the effects of the lockdown.

Gamma celebrates National
Customer Service Week

For the third consecutive year, Gamma celebrated National
Customer Service Week (NCSW) across its UK businesses.

Held between Monday 4 to Friday 8 October, NCSW is a week-long
opportunity to raise awareness of customer service and the vital
role it plays in successful business practice and the growth of the
UK economy.

Throughout the week, Gamma recognised its customer service
heroes and the great work they do for customers and partners with
a series of themes spanning the changing world of work, through to
strategy and leadership.

Providing great customer service is key to Gamma’s mission. We
offer 24/7 support and technical help, and assign customer service
managers to each account giving a consistent point of contact
within Gamma.

Gamma also offers a service scheme to allow customers to choose
the level of service required to match the right support in place
whatever the end customer needs. Our services and support
infrastructures are co-located meaning that end users get through
to the right person to handle the query.

As the world continues to be unpredictable, Gamma will continue to
keep customer satisfaction paramount to its mission.

Market trend 3
page 7

Gamma to deploy
recycled Eco-SIM
across its network of
channel partners and
business mobile
customers

Supporting the Company’s long-term commitment
to safeguarding the environment, Gamma has
expanded its partnership with Thales, a global
technology business, to deploy Eco-SIM across its
network of channel partners and business mobile
customers.

With 4.5 billion SIM cards produced every year –
amassing to 20,000 tons of plastic – Thales’ Eco-SIM,
developed in partnership with Veolia, is made from
100% recycled polystyrene recovered from discarded
refrigerators. This step in the Thales-Gamma
partnership acts as a force for sustainability within
the telecoms market, offering a green plastic supply
flow to Gamma.

Gamma is a certified Carbon Neutral company and
continues to look for ways to build upon its ESG
strategy. Thales’ carbon offsetting programme
ensures its Eco-SIM is certified Carbon Neutral, and
as a result, further supports Gamma’s ESG strategy,
and the adoption of the UN Sustainable Development
Goals announced in January 2020.

Thales has thus far provided SIM cards and related
services to Gamma, delivering SIM applications and
device management services since 2016. The
switch to Eco-SIM provides an opportunity for both
companies to enhance their ecological transformation
and contribution to a circular economy.

Traditional SIM cards consume nearly 20,000 tons
of PVC every year, but these new Eco-SIM will save
nearly 5,000 metric tonnes of virgin plastic every year.

ESG
Page 36

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Chief Executive Officer’s statement

Andrew Taylor
CEO

We have delivered strong results,

and while executing very well against our
short-term business and financial objectives,
we have continued to invest widely across
our business and make significant
progress against our strategic objectives.

Chief Executive Officer’s
overview
Scan to watch a video of our CEO,
Andrew Taylor, summarising our
performance and growth over 2021.

I am pleased to report another excellent set of financial results for
2021 and to highlight the great progress that we have made in the
development and execution of our shorter term operational and
longer term strategic objectives.

• PhoneLine+ which is a cloud-based product designed to enable
partners and end-customers to replace a single telephone line,
which presents a significant market opportunity over the next
2-3 years.

I am very happy to report that the attachment rates to our core
Horizon Cloud PBX are 20% for new sales of Horizon Collaborate
and 10% for Horizon Contact which is very pleasing and making an
increasing contribution to ARPU levels. Our strategy is very much
focused on maintaining and driving higher attachment levels with
both new, and importantly, existing Horizon customers. This will
enable us to grow current ARPU levels, while ensuring that we
provide an opportunity for channel partners to up-sell and
cross-sell additional features and functionality to end-users.

Partnering with global providers
Gamma differs from pure providers of UCaaS software because we
have the capability in each of the countries in which we operate to
send and receive calls from the public telephone network. This
enables us to not only provide the UCaaS product set which is used
by our customers, but we can also provide high quality voice calls.
Our ability to provide both sets of services is important to
customers who need quality and reliability alongside functionality.

Many providers of UCaaS software do not have this capability and
hence they partner with an organisation like Gamma to ensure that
their customers can get the best from their software. Whilst
Gamma works with organisations like 8x8, Vonage and Five9 to
provide these services, we also focus on two partnerships which
have developed strongly during 2021 – Amazon and Microsoft.

Despite the very strong performance, the year was once again
impacted by the pandemic, and I am very pleased with how the
whole Group responded to the challenges and opportunities that
this presented. At some point in the year, each country in which we
operate was in lockdown, and although our overall business
performance was very robust, both our direct and indirect partner
sales efforts were impacted to some degree.

The level of support and engagement from all our staff and key
stakeholders has been excellent throughout, and I want to give my
thanks and gratitude to the entire Gamma team for how they have
responded to what has been a challenging but highly successful year.

Development of our UCaaS suite
I am delighted with the continued investment and progress we have
made throughout 2021, to both expand and strengthen our
technology, platforms, products and services, and delivery
capabilities across Gamma. As our Chair has set out in his report,
we released a number of our in-house developed UCaaS products
and services in 2021 which complement our growing UCaaS
portfolio. Gamma partners and end-customers can now purchase:

• Our core market-leading Cloud PBX product – Horizon

• Horizon Call recording – a fully integrated product with Horizon

• Horizon Collaborate – a fully integrated product to Horizon which
adds a suite of additional features including instant messaging
and video conferencing

• Horizon Contact – also fully integrated with Horizon, this CCaaS

product was designed for informal call centres but has
functionality which will support any user who needs omnichannel
capability (i.e. e-mail, social media, web chat, text, etc.)

Gamma Communications plc Annual Report and Accounts 2021

Revenue

£447.7m +14%

Grew from £393.8m to £447.7m

Gross profit

£228.5m +14%

Grew from £200.8m to £228.5m

Amazon Connect
Amazon Connect is an omnichannel cloud contact centre that
helps larger Enterprises provide customer service at a lower cost.
As part of our acquisition of Mission Labs we have acquired a market
leading technology and software application called SmartAgent.
This is an in-house developed software product which provides our
customers’ contact centre agents with all of the data, information
and reporting that they need to provide excellent levels of
customer experience. We have two revenue streams associated
with this product – software license fees and professional services
associated with the development and implementation of the
product. Current customers include large online retailers and travel
companies, and we see strong demand in many other business sectors.

Unlike pure software companies, Gamma is able to use its network
capability to route calls to and from the agents using Amazon
Connect. This means that not only can Gamma assist businesses
who wish to deploy Amazon Connect to get the most from the
application but we can also provide connection to the PSTN.

This product complements our Horizon Cloud Contact offering
which is aimed at the SME end of the market whereas Smart Agent
is designed for larger businesses.

Microsoft
Gamma has always maintained a strong relationship with Microsoft
to ensure that our products work seamlessly with Microsoft
products, and as a result of the increasing customer demand that
we saw for Microsoft Teams, in February 2020 we acquired Exactive
Holdings to support and strengthen our reputation and capabilities
in this space. Our relationship with Microsoft is important and
strategic to us and is focused on three core areas:

• Microsoft Teams Direct Routing. In October 2020, we launched
Microsoft Teams Direct Routing which is a variant of SIP which
allows Microsoft Teams users to make and receive calls from the
PSTN network (i.e., using phone numbers). We sell this service to
the business market both directly and via our channel partners
and are considered a market leader in this space, with examples of
some very significant Enterprise and Public Sector deployments.

• Microsoft Operator Connect. We were delighted that in September

2021 Microsoft added Gamma to the Operator Connect for
Microsoft Teams programme (and we are presently one of a small
number of partners globally on the programme), which is a new
operator-managed programme designed to enable seamless and
integrated PSTN calling to Teams. Customers using Operator
Connect benefit from an augmented set of services from Gamma
(e.g., Gamma native fraud management and Gamma enhanced
Teams Phone capabilities through our SIP Trunk Call Manager).

• Horizon Cloud PBX and Teams Integration. Some Teams users
require full PBX functionality, and this can now be achieved
because Gamma’s Horizon Cloud PBX product can now be
integrated into Teams. For those customers who need a
complete managed service, we also offer the Exactive Cloud
UCX product.

Business review
I am pleased to report that each of our businesses has performed
strongly throughout 2021.

UK Indirect Business
The UK Indirect Business accounted for 60% of our Group revenue
in 2021, with gross profit up 8% to £143.2m and revenue up by 9%
to £270.2m. Gross margin reduced slightly from 53.5% to 53.0%
due to mix.

Our indirect channel partners have provided Gamma with a robust
and reliable platform for growth, and in the face of a challenging
economic and business environment, they have adapted their
businesses well and delivered strong financial results. They have
focused on providing excellent customer support, and as a result
have delivered strong retention levels, net positive product growth
and very low levels of attrition and bad debt. In addition, their strong
business models have enabled them to invest in order to
strengthen their businesses and maximise growth in what is a
highly attractive marketplace.

Our channel partners continue to benefit greatly from Gamma’s
product development programme, including the successful launch
of those new UCaaS products highlighted earlier, coupled with new
fixed and mobile access products (e.g., SoGEA and Gamma Mobile)
which we launched during 2021. Gamma’s current technology and
product capabilities and our exciting product roadmap, coupled
with our very targeted partner support programme is designed to
strengthen partner capabilities and enable them to compete and
win against the competition in the marketplace. Our partners have
demonstrated real commitment and success in embracing our new
products and successfully up-selling and cross-selling these to
existing customers, while winning new customers in both existing
and new market segments. It has been pleasing to see high and
increasing product attachment levels, and continued strong
engagement from the channel as we drive sales and marketing to
both existing and new end-customers.

We have continued to increase the number of active Gamma
partnerships, while being very focused on expanding the business
that we do with existing channel partners. With those larger more
strategic partners we have been very successful in re-signing new
contracts which are delivering increased rates of growth for
Gamma (opening new product and market segments for both
Gamma and the partner) and ensuring a joined-up approach that
maximises our long-term growth opportunities.

Relationships across the indirect channel have continued to
strengthen, reflecting our overall consistency and loyalty as a
strategic partner, which is evidenced by us receiving a record
number of industry awards in 2021. This included “Best Carrier
Sales Team” at the Global Carrier Awards and winning both “Best
Wholesale Provider” and “Best UCaaS Platform” at the Comms
National Awards.

The immediate and longer-term market opportunity for the channel
and for Gamma is significant and is driven by several structural
growth drivers which Gamma and our channel partners are both
strategically and operationally well positioned to benefit from.
These include:

• An acceleration of the adoption of UCaaS across all markets and

business segments to support remote and flexible working.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Chief Executive Officer’s statement continued

• A rapid roll-out of fibre which will substitute legacy broadband
products and services with new high-speed replacements.

• The wider roll-out and rapid adoption of 5G mobile services which

will be transformational in supporting businesses.

• BT 2025 switch off which will drive a significant opportunity to

provide new cloud-based communication product and services
to businesses of all size.

UK Direct business
The UK Direct Business accounted for 24% of our Group revenue in
2021, with gross profit up 14% to £52.6m and revenue up by 7% to
£104.8m. Gross margin increased from 47.2% to 50.2% as we had
fewer lower margin installations in the year.

Overall, we have delivered a strong financial performance in 2021,
and despite the impact of the pandemic which delayed customer
decision making and new sales during 2020 and H1 2021, our team
delivered a strong sales performance in H2, and we therefore enter
2022 with a high-quality contracted order book. As part of our
growth strategy, a key feature of our performance has been the
high-level of cross-selling and up-selling that we achieved with
existing customers. Our customers are fully benefiting from
Gamma’s broad and growing product portfolio, which includes the
contributions from the acquisitions that we made recently to
extend our UCaaS, CCaaS and overall Microsoft and Amazon
product and service capabilities. In addition, we have been very
pleased with the quality of new customers that we have won during
the period, all of which are procuring multiple products and
services from Gamma.

We have won several multi-year, multi-product contracts, including
those with NFU Mutual (SDWAN), The Automobile Association
(Inbound), Carr’s Group (SDWAN & UCaaS) and CJ Lang & sons
(SDWAN & UCaaS).

In addition, in the Public Sector we have made excellent progress
and were awarded a significant number of contracts across local,
regional, and central Government, including a very large and
strategic UCaaS (Managed Microsoft Teams) deployment for the
DWP. Other notable contract awards included:

• Five new County Councils who contracted for a mix of SIP and UCaaS.

• Seven NHS trusts who contracted for a mix of UCaaS, SIP

and connectivity.

• Three further central Government agencies who contracted

for a mix of SIP and mobile services.

• We have also been awarded over 14,000 mobile connections via
the Public Sector procurement frameworks, demonstrating the
strength of Gamma’s new mobile product within this sector.

As highlighted previously, the acquisition of Exactive in 2020
significantly enhanced Gamma’s Microsoft capabilities, and we are
now one of the largest providers of Microsoft Teams Direct Routing
in the UK. Exactive is now fully integrated as a Microsoft “centre of
excellence” within Gamma, and we are providing services to a broad
set of customers and partners across all business segments, and
as highlighted previously, in October 2021 Gamma’s direct routing
service became available directly from the Microsoft Teams
platform via their Operator Connect service.

We include the results of CircleLoop the digital UCaaS service and
channel which we acquired with Mission Labs in our Direct
business. We now have almost 4,000 customers who are using the
CircleLoop service via our digital platform.

European business
We continue to be pleased with the development and growth of our
European business. The growth was predominantly through the
inclusion of a full year of trading from acquisitions made in 2020,
with gross profit increasing 47% to £32.7m and revenue increasing
by 50% to £72.7m. Gross margin decreased from 46.0% to 45.0%
because of a full year of lower gross margins from Epsilon, the
mobile focused distribution business which we acquired as part of
our acquisition of HFO in Germany. In 2021 our overseas business
represented 16% of our Group revenue and 10% of our Group
adjusted EBITDA.

Gamma Germany
Despite the impact of COVID-19 throughout the year, we have made
very good progress in transforming our German business from a
pure SIP provider to a provider of cloud communications. We are
achieving this through the implementation of a multi-product
strategy and by investing and strengthening our indirect channel
capabilities, including investment in our channel sales and
marketing efforts. This is designed to fully support our partners and
their end-customers in their transition to the cloud and ensure that
we collectively build the strong business, operational and sales and
marketing foundations which are required to maximise what we see
as a significant long-term market opportunity.

As part of our structured Group operating model, our team in Germany
has been fully involved in the planning and implementation of our
broader Group technology and product strategy, and in 2021 we
integrated the German component of GnTel (the Dutch/German
cloud PBX business which we acquired in July 2020) into our German
operations. This now forms an important part of our cloud product
portfolio and our go to market sales and marketing capabilities in
the German market. Although small, this is performing well, and we
have well-defined plans to introduce other Group products which
will enable us to broaden our market and business segment reach.

Our Epsilon mobile distribution business has delivered a very
strong performance throughout 2021. As a part of this we have
continued to focus investment into our IOT (Internet of Things)
business (Fusion IOT) which provides IOT solutions to the SME
business segment. Although early days, the business is performing
well, and we have closed some very encouraging customer wins
and have signed longer-term partnership agreements with
Vodafone Global and Telefonica Spain.

Throughout 2021, and as part of our M&A integration plan, we have
been planning to transition to a full Gamma brand in the German
market. This will be implemented during the first half of 2022, in
addition to launching a reinvigorated wholesale cloud partner
proposition across the marketplace. This proposition is designed
to appeal to IT integrators within the channel who prefer a
wholesale model where they own the end-customer, and where we
believe Gamma can provide a key differentiator in the market.

Gamma Spain
Notwithstanding the more difficult COVID-19 related trading
conditions in Spain throughout 2021, we have been pleased with
the performance of our Spanish business.

Importantly, our cloud business has performed well, and similar to
our cloud growth strategies in our other Gamma markets, we have
continued to strengthen and invest in developing both our product
capabilities and existing and new direct and indirect channels to
market. For example, we have launched a reseller programme which
is targeting PBX resellers, and providing them with the best cloud
communication product, marketing tools and financial support to
succeed in the UCaaS market. Initial partnership contracts were
signed during 2021 and we expect more partners to be onboarded
in 2022. Our efforts are beginning to deliver results and we continue
to see a significant long-term growth opportunity.

Gamma Communications plc Annual Report and Accounts 2021Overall, our cloud and mobile product performance has been
positive, and we delivered strong net growth from both existing and
new channel partners. We established a new channel partnership
with Másmóvil (one of Spain’s largest mobile network operators)
which is strategic and delivered excellent results for both cloud and
mobile sales throughout 2021. On the mobile side, this relationship
enables us to compete very well in the market, while we have
established a wholesale cloud capability that enables Másmóvil to
deliver bundled mobile and cloud products and services directly to
their business customers. A true partnership!

Summary and outlook
I am particularly pleased with how we have performed as a business
in 2021. We have focused on maximising opportunity, while
responding to challenges and mitigating risk. We have delivered
strong results, and while executing very well against our short-term
business and financial objectives we have continued to invest
widely across our business and make significant progress against
our strategic objectives. Importantly, I am absolutely delighted with
our continued focus on supporting our staff, our channel partners,
and our end-customers.

In H2, we launched a second channel programme aimed at
Microsoft partners who are expanding their business by adding
telephony services to their customers (through MS-Teams). This
programme is one of the first in the Spanish market and is
generating a lot of interest in the sector. In addition to this, we
launched Microsoft Teams integration, enabling any Gamma
customers in Spain who are using our cloud PBX or SIP products to
use the Teams application to make and receive calls in a seamless
and easy way. Additionally, we have integrated cloud contact centre
features to our UCaaS product.

The non-cloud part of our Spanish business (Comymedia and VT
Andalucía) has been more severely impacted by COVID-19 and
underperformed against our expectations in 2021. Our sales
performance and overall outlook improved through H2, and we
have taken actions to ensure an improved performance of these
businesses in 2022.

Gamma Netherlands
The COVID-19 pandemic had a more serious impact on the
economy and overall business market in the Netherlands, resulting
in restrictions and lower levels of cloud growth in the market.
Notwithstanding this, we delivered positive net growth across
our key cloud and mobile products.

Our multi-tenant business (Schiphol Connect and Nimsys)
benefited from increased activity at Schiphol airport and from
businesses optimising their way of working. During the year we
signed several large long-term contracts and focused on cross-
selling and up-selling to existing customers, all of which delivered
net new business, improved retention, and an overall stronger
performance for the business.

Throughout the year, and building on our work in 2020, we have
continued to focus on developing and strengthening both our
cloud and overall wholesale partner proposition in the market.
Examples were the launch of Collaboration and voice recording as
part of our Cloud PBX offering, while we also launched Microsoft
Teams Direct Routing to support the increasing demand for
Microsoft services in the market. Looking forward, and as part of
our Group Operating Model, we have an exciting roadmap of new
products and features which we are planning to launch in the
market during 2022.

As well as being focused on strengthening our sales and overall go
to market activities, after making several acquisitions during the
last years, we have made good progress in moving towards a more
simplified and fully integrated operating environment. We have
integrated Dean One, GnTel, Schiphol Connect and Nimsys, and in
Q4, we launched the new Gamma Benelux brand in the market.
Alongside our brand launch, we also introduced a renewed
wholesale partner program which supports our ambitious partners
with dedicated initiatives in marketing, lead generation and training.

In addition to strengthening our cloud products, we also renewed
our long-term partnership contract with T-Mobile, which will enable
us to continue to deliver a strong and competitive retail and wholesale
mobile offering to our mobile dealers and channel partners.

Looking forward, we will stay focused on developing and strengthening
our technology and product capabilities across the Group. We have
created a strong technology and software development capability
and although this is work in progress, we do have an exciting product
roadmap, which will reinforce and further enhance our market
credentials. We have launched several new products and features
during 2021 which have been positively received by the market, and
these are now making a meaningful contribution to our product and
financial performance, and I expect this to continue in 2022. As part
of our Group operating model, we plan to launch these products
across all Gamma markets.

Within our Indirect business, we will continue to evolve and adapt
our partner proposition to support growth opportunities across all
markets, ensuring that our channel partners have the tools to
compete and be successful. Within our Direct business, we have
seen delays to some projects for our Enterprise customers caused
by the global chip shortage; this means that sometimes it takes
longer than we had anticipated for billing to start and this may affect
growth in 2022.

As an important part of our strategy, we will continue to assess
acquisition opportunities that enable us to strengthen our
technology and product capabilities and expand and strengthen
our position in our core UK and European markets. We believe that
scale in these key markets is important, and this will continue to be
a key focus for Gamma during 2022 and beyond. The technology
and product-based acquisitions we have made, have enabled us to
accelerate our strategy and fundamentally strengthen our technology,
product, and software development capabilities across Gamma.
This is a core foundation that will support our strategy to deliver
long-term sustainable growth and long-term shareholder value.

We continue to see the structural changes in the UCaaS market
as very positive and reinforcing our strategy and future growth
opportunities. The awareness and adoption of cloud communication
services, and the shift towards a more flexible and remote way of
working, we believe will support significant growth in the market
and an acceleration towards cloud communications. The significant
benefits of the UCaaS, CCaaS and fixed and mobile access products
that we sell across the UK and Europe have never been more
important, and notwithstanding the risks of possible economic and
business market headwinds, we continue to see a positive business
and long-term market outlook.

As a final point, I would like to personally thank our staff, partners
and customers for their contribution and ongoing support.

Andrew Taylor
Chief Executive Officer

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021
Our strategy

A strategy driven
by an engaging culture

During 2021, we began a five-year strategic review mapping the
competitive and market landscape out to 2026. This has been in
the context of the pandemic and the resulting disruption in the
natural evolution of the market. Strong trends are starting to
emerge, albeit with varying perspectives on the pace of change
we might experience through the period. We will provide more
information during 2022 on the conclusions we have drawn.

Based on the work we have done so far, we don’t see any major
deviation from the 2023 Strategy we presented back in 2019
however the pace of change increased through the pandemic and
we are tracking how that will settle post pandemic, across all the
markets we serve.

The major influencing factors we see include:

• Communications delivered as an application on a desktop or

mobile device and becoming increasingly integrated with other
business tools like CRM and Collaboration.

• Real acceptance of technologies such as video plus growth of

social messaging being used for business interactions.

• Business models adapting to a more even balance between

home, mobile and office working – hybrid working.

• Evolution of fixed and mobile access technologies.

Over time these factors will change the way businesses purchase
and use our services and will accelerate the convergence of IT
and Telecommunications.

Cloud telephony and UCaaS
Evolve our strong cloud telephony
position into the UCaaS market

Relevant KPIs:
2 7 8

Associated risks:
4 5 7

Our focus as stated in 2019
Having established market-leading positions in both the SIP and
Hosted PBX markets, our focus is to build on that position and take
advantage of the fast growing UCaaS market. This requires us to
gain market share for both team collaboration (Instant messaging,
Video conferencing, Screen Share) and Multi-Channel customer
contact products and services. In both cases these need to be
integrated with our core Hosted PBX and SIP offerings, underpinned
by our fixed and mobile network solutions. The pandemic has
accelerated adoption of these technologies and we are aligning our
programmes accordingly.

Achievement
In March 2021, we acquired Mission Labs bringing additional
technology and product capabilities to the Group (Smart Agent and
CircleLoop) as well as adding important software development
capabilities. The integration of Mission Labs has gone well and is
proceeding in line with expectations. We are leveraging Mission
Labs’ relationship with Amazon to expand our offering into the
Enterprise market through the Smart Agent product, which has
generated new customers during the period. The CircleLoop
product (which is a digitally based Cloud PBX product aimed at the
micro business market) is also growing in line with expectations.
Moreover, the Mission Labs team is working well with the existing
Gamma technology and product teams which have collectively
accelerated progress on product and feature development.

In line with our plan, we launched ‘Horizon Contact’ (which is a
Contact Centre as a Service product) and we also integrated
Microsoft Teams to our Horizon Cloud PBX product. These two
integrations demonstrate significant progress in our ability to
become more integral to our customers’ business applications and
processes, a cornerstone of the emerging UCaaS market.

We continued to develop our relationship with Microsoft and
launched Microsoft Teams Direct Routing in March – essentially a
SIP Trunk which works specifically with Teams. We were also added
to Microsoft’s select list of carriers who offer the “Operator Connect”
service which is designed to enable seamless and integrated calling
between Teams and the local telephony infrastructure (known as the
PSTN). This selection demonstrates our strength in having both a
UCaaS offering as well as an ability to provide integration to the PSTN.

Future priorities
Our main strategic priority in 2022 is to begin the programme
to roll out our product portfolio across all Group businesses.
Tangible progress can be achieved during 2022 but this is a
multi-year programme.

Gamma Communications plc Annual Report and Accounts 2021 KPIs, Pages 16-17

1 Revenue

2 Gross profit

3 Gross margin

4 Adjusted EBITDA

Principal risks, Pages 22-25

5 Cash

1 Unplanned service disruption

5 Uncertain competitive landscape

6 Cash generated by operations

2 Data loss and cyber attacks

6 Price erosion

7 EPS

8 Fully diluted adjusted EPS

3 Over-reliance on suppliers

4 Inability to attract and retain

top talent

7 Legal and regulatory

non-compliance

8 Unsuccessful M&A strategies

Fixed and Mobile telecom
Build on our fixed and mobile
telecom strength to differentiate
our proposition from pure OTTs

Relevant KPIs:
2 5 7 8

Associated risks:
5 8

Our focus as stated in 2019
In anticipation of the forecasted market shift from low end ethernet
to high speed broadband our focus is on strengthening our
broadband proposition and adding value into these services. At the
same time, we have to ensure we are competitive in high speed
ethernet services. Whilst the mobile market is relatively flat, we see
significant disruption through the adoption of 5G services and
‘Unlimited’ data bundles. This reinforces our decision in 2018 to
move to a light MVNO model with an appropriate partnership model
that allowed us to exploit this disruption.

Achievement
In November 2019 we announced the partnership agreement
with Three UK that supports a smooth transition from our legacy
operating model onto their 5G-ready network. Whilst some
elements of this programme were disrupted by the first lockdown
in March 2020, we launched the new service in the summer of 2021.

In each country in which we operate we have a mobile offering with
one or more MNOs.

We also work with a number of data providers in each country to be
able to deliver business grade broadband and ethernet products
which support our UCaaS product portfolio.

Future priorities
Our priority in 2022 is to complete the implementation of the new
operating model with Three and the migration of customers to the
new platform. It should be noted that this is largely a background
system process with minimal customer disruption.

Group Expansion
Expand into Europe to gain
continued growth and scale

Relevant KPIs:
2 5 6 7 8

Associated risks:
4 5 8

Our focus as stated in 2019
There are a number of large European markets where the adoption
of Cloud communications services is much lower than the UK. While
each country will have its own unique reasons for this, we believe that
the advent of UCaaS and the shift to desktop and mobile applications
for communication in all forms, will be a new and disruptive driver for
the adoption of cloud-based services (catalysed further by the
pandemic). Our focus is to gain a position in relevant markets through
acquisition and leverage our UK experience to gain significant
market share through organic and inorganic growth.

Achievement
The acquisitions of HFO Telecom, Voz Telecom and GnTel in 2020
significantly increased our market presence in Europe. During 2021
we have developed and started executing our short, medium and
long-term plans to drive growth. During the year we placed an
emphasis on developing an improved proposition to our sales
partners in these countries, as well as designing the operating
model we need to move towards a single product platform across
the Group. We have also continued to assess options to deliver
scale through acquisition and we continue to evaluate a number
of potential targets.

Future priorities
Our primary focus is to continue to execute the organic and
inorganic growth plans with these businesses. In parallel we will
start the introduction of our common product platforms and
establish the supporting group operating model.

Digital Progression
Continue to build on our digital
capabilities to assure agility and
sustain competitiveness

Relevant KPIs:
1 3 6 7 8

Associated risks:
1 5

Our focus as stated in 2019
To ensure that we have straightforward sales, service management
and product user interfaces which align with customer expectations
and differentiate our overall proposition, whilst at the same time
allowing us to optimise our operating model and grow efficiently.

Achievement
The acquisition of Mission Labs and in particular its product
CircleLoop provided a step change in our Digital capabilities. Circle
Loop is a ‘Digital first’ product with full self-service interfaces from
initial enquiry, through provisioning, billing and support and is
designed to address the micro end of the business market. This
acquisition completed our portfolio of route to market channels,
covering the full spectrum from Direct Digital, through Dealer and
Wholesale models to fully managed services for Enterprise.

Future priorities
We now have a comprehensive set of capabilities to design,
develop and take to market well designed, digitally orientated
products and support services. We will continue to utilise these
capabilities to enhance our existing products and move towards
a single product portfolio across all Group businesses.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Key performance indicators

Key performance indicators

The assessment of our KPIs, their link to our strategy, movement
in the year and their progression is described below.

Revenue (£m)

Gross profit (£m)

Gross margin (%)

Adjusted EBITDA (£m)*

£447.7m
+14%

£228.5m
+14%

51.0%
+0.0%

£95.4m
+21%

2021

2020

2019

447.7

2021

228.5

2021

393.8

328.9

2020

2019

200.8

166.5

2020

2019

51.0

2021

51.0

2020

95.4

79.0

50.6

2019

63.5

Definition
Revenue from sales made
to all customers (excluding
intra-Group sales which
eliminate on consolidation).

Definition
Revenue less cost of sales.

Definition
Gross profit as a percentage
of revenue.

Strategic focus
Gamma monitors growth in
revenue as it shows how
successful Gamma has been
in expanding its markets and
growing its customer base.

Strategic focus
Gross profit is the measure
used to evaluate the
performance of the Group as
well as each of the operating
segments.

Strategic focus
Gross margin is a measure of
the Group’s profitability.

Definition
Adjusted earnings before
interest, taxation, depreciation,
gains and losses on disposal of
fixed assets, amortisation and
exceptional items.

Strategic focus
Adjusted EBITDA is the measure
used to evaluate the
performance of the Group as
well as each of the operating
segments, including their
support functions.

Progress
Revenue has grown in the year
due to continued growth in our
key products in the UK as well
as full year trading of
acquisitions in 2020
across Europe.

Progress
Gross profit has continued to
grow as a result of increased
revenue and efficiencies
achieved across the Group.

Outlook
Continued growth as further
adoption of cloud.

Progress
Gross margin is in line with the
prior year.

Progress
Adjusted EBITDA has continued
to grow.

Outlook
Gross margin is expected to
remain consistent as the
product mix across the Group
tends to an equilibrium.

Outlook
Continued growth as further
adoption of cloud.

* Adjusted EBITDA is now being shown
as a KPI rather than EBITDA as it gives
a reader of the accounts a view of the
underlying trading picture which is
comparable year to year.

Gamma Communications plc Annual Report and Accounts 2021Cash (£m)

£52.8m
-2%

2021

2020

2019

Cash generated by
operations (£m)

£89.8m
+27%

52.8

2021

53.9

2020

53.9

2019

54.0

EPS (p)

55.2p
-17%

Fully diluted adjusted EPS (p)

64.0p
+25%

89.8

2021

55.2

2021

64.0

70.3

2020

2019

66.6

2020

51.3

36.1

2019

40.8

Definition
Cash and cash equivalents held
at the end of the year.

Definition
Net cash flows from operating
activities before tax paid.

Definition
Earnings after tax divided by the
full diluted number of shares.

Strategic focus
Cash demonstrates financial
strength and the ability to pay
sustainable dividends to our
shareholders.

Progress
Cash has decreased slightly
despite spending £49.5m on
acquisitions during the year
(note 18).

Strategic focus
Cash generated by operations
is a measure of the quality of
Gamma’s earnings. It provides
financial strength and the ability
to pay sustainable dividends to
our shareholders.

Progress
Cash generated by operations
has continued to grow.

Strategic focus
Long-term growth in EPS
is a fundamental driver to
increasing shareholder value.

Progress
EPS has declined as a result of
an exceptional item relating to
the sale of The Loop in the prior
year (note 8).

Definition
Adjustments to earnings include
in the current year amortisation
arising on business combinations,
change in fair value of acquisitions,
exceptional items and related
tax benefits.

Strategic focus
Fully diluted adjusted EPS is a
measure of how successful we
are in our strategy and
ultimately how Gamma
increases value for
its shareholders.

Progress
Fully diluted adjusted EPS has
continued to grow.

Outlook
The Group expects to increase
the cash balance subject to
any further acquisition
opportunities that may arise.

Outlook
Cash generated by operations
is expected to grow in line with
EBITDA – cash conversion is
expected to remain strong.

Outlook
Expected to grow in the absence
of any unforeseen events.

Outlook
EPS is expected to continue
to grow.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Key performance indicators continued

Performance Metrics

Number of UK hosted seats
(‘000s)

Number of UK SIP Channels
(‘000s)

UK Network Availability
(%)

R&D Spend
(£m)

676
+12%

2021

2020

2019

1,430
+21%

100.000%
+0.0%

£19.6m
+52%

676

2021

1,430

2021

100.000

2021

19.6

601

522

2020

2019

1,185

1,016

2020

2019

99.994

2020

12.9

99.997

2019

11.3

Definition
Number of billed seats at the
end of the year on Horizon
(Cloud PBX) products.

Definition
Number of billed UK SIP
channels at the end of the year.

Definition
Availability of UK strategic
platforms.

Strategic focus
Growth in this metric
demonstrates the ability of
the sales force to win new
customers while also retaining
existing relationships.

Strategic focus
Growth in this metric
demonstrates the ability of the
sales force to win new customers
while also retaining existing
relationships.

Strategic focus
By having a stable, available
network this helps to attract
and retain customers.

Progress
We have achieved growth from
prior year as planned.

Progress
We have continued to grow our
number of SIP channels during
the year.

Progress
The network has continued
to have strong availability
throughout the year.

Definition
The sum of research costs
expensed through the
statement of comprehensive
income and capital expenditure
on development costs in
intangibles during the year.

Strategic focus
New and continued
development on our products
contribute strongly to overall
growth, maintaining high returns
and strengthens our overall
market position.

Progress
We have continued to invest in
research and development.

Outlook
Continued growth.

Outlook
To continue to have strong
availability.

Outlook
Continued investment.

Gamma Communications plc Annual Report and Accounts 2021Recurring Revenue
(%)

89%
-2%

2021

2020

2019

Definition
The percentage of revenue
recognised over time over total
revenue. See note 5 in the
financial statements.

Strategic focus
Recurring revenue gives
an indication of future
performance of the business.

Progress
Recurring revenue remains at
a high level though showing a
slight decline as a result of a full
year of the mobile focused
distribution business which was
acquired as part of the HFO
acquisition in July 2020.

Outlook
Maintain a high proportion
of recurring revenue.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Risk management

Understanding the risks
that affect the Group
This section describes the principal risks that could have a material adverse
impact on the Group and how those risks are identified, evaluated and managed.

How Gamma manages risk
Gamma operates a robust and well-established structure for the
management of risk in each area of its business. This process
includes the identification, evaluation and scoring of risks based on
the likelihood of occurrence, when it may impact Gamma and the
potential impact when it does, alongside the adequacy of the
mitigation or control actions in place. Risks are categorised and
aligned to Gamma’s business priorities to ensure appropriate
senior visibility, evaluation and mitigation exists. An integrated risk
management process provides visibility of risks across the
Company and facilitates consistent data-driven decision making.
Each generic area of risk has clearly assigned accountability within
the Senior Leadership Team (‘SLT’) with reporting lines to the CEO
and ultimately the Board. A centralised risk register is maintained
which includes all identified risks, their scores, prioritisation, the
status of existing controls and action planning.

Risk management happens at multiple levels within the organisation
and all employees are encouraged to consider Company risks
throughout their working routines. The organisation level at which
risk is owned is determined by its severity. This ensures the owner
has appropriate level of authority to decide upon the response to a
risk. Alongside an ongoing education and training programme, the
Company continues to build a risk aware culture.

Gamma continues to grow and reinforce its position in core UK
markets, whilst in parallel executing on strategic acquisitions to
expand its addressable markets internationally, and in 2021 Gamma
conducted a thorough review of its principal risks to ensure they are
representative of the Group with adequate international perspective.

Risk governance
The Board has overall responsibility for the establishment and
oversight of the Group’s risk management framework, for ensuring
that an appropriate risk management culture exists within the
organisation, and for ensuring the effective identification,
assessment and management of individual risks.

To assist in this process, with respect to non-financial risk, the Board
established a Group Risk Committee under the stewardship of
Martin Lea, Senior Independent Non-Executive Director. In addition
to its Chair, the Risk Committee comprises the Company’s Chair,
two other Non-Executive Directors, the CEO, the CFO and the Group
Operations Director. It generally meets quarterly or as otherwise
required and liaises where necessary with other Board committees.

The main tasks of the Risk Committee are to ensure that:

• Management has implemented an appropriate and effective risk

assessment, management and internal control system.

• There is an effective system in place for the identification and

assessment of new and emerging risks.

• The nature and extent of the principal risks faced is understood

and that they are effectively managed and mitigated.

• An appropriate risk management culture exists within the

organisation.

Additional governance is applied to manage the risk of data loss,
which is one of the Company’s principal risks. A subset of the Senior
Leadership Team (SLT) forms the ’Data Protection Committee.’ In
addition to establishing strong governance controls for the
protection of personal data and the business’ GDPR obligations, the

Risk management framework

Group Risk Committee

Data Protection Committee

Executive Directors

Identification

Evaluation

Monitoring

Mitigation

Risk Management Process

Senior Leadership Team

Gamma Communications plc Annual Report and Accounts 2021Committee also oversees Gamma data assets and ensures these are
adequately protected. This Committee is advised by the Data
Protection Officer, Information Security Director and Chief Architect
to ensure all aspects of the data lifecycle are appropriately assessed,
managed and protected.

Gamma utilises certified frameworks for the management of risk
related to information security (ISO 27001), business continuity
(ISO 22301) and environmental management (ISO 14001).

Gamma has a series of policies regarding anti bribery and
corruption, modern slavery and human trafficking, ethical behaviour
and wider social and governance matters; but the Board does not
consider there to be significant risks in these areas. There is also a
whistleblowing policy in place.

The risk management process
Within the Risk Management governance framework, Gamma has a
well-established process for managing risk. The process follows
four simple steps:

Risk response – Once assessed, a risk response option is selected
and implemented which will determine any action that is required to
reduce the risk impact and/or likelihood.

Monitoring, Reporting and Escalation – Every risk is monitored to
keep the relative impact, likelihood and proximity current. Additionally,
the risk owner must review, and where required, update the risk
register on a quarterly basis.

Unpredictable and significant events
Where highly unpredictable, significant, and close proximity risks
(sometimes referred to as black swan events) occur they are
managed through Gammas Risk Management Process and are
closely managed by the relevant team within Gamma. They are
assessed, scored and managed using the integrated framework,
recognising the assessment must be completed at the pace of the
event. An important aspect of an unpredictable risk is that, in hindsight,
it may have been predictable or visible had certain data or knowledge
been available. As such a post risk review occurs to ensure the
Company learns and adjusts its risk framework where appropriate.

Stage 1
Risk identification

Stage 4
Risk
monitoring,
reporting and
escalation

Communication
and consultation

Stage 2
Risk
assessment

Stage 3
Risk response

Identification – All employees are encouraged to consider and
document risks within their working routines and the risk
management process supports this at every organisational level.

Assessment – Risks are assessed by reference to likelihood
(i.e., probability of occurrence), proximity and impact against the
assessment criteria. By measuring risks against consistent criteria,
it allows comparison of risks on a like for like basis and this assessment
also sets out the thresholds which determine at which level a risk
should be owned.

Risk appetite
The Company’s risk appetite is reflected in the way it assesses,
scores, ranks and then manages individual risks.

As part of the annual review of the risk framework Gamma conducted
a review of its risk appetite surrounding its principal risks. Risk
appetite statements have been developing and are owned by the
SLT and approved by the Risk Committee. Gamma appetite
statements are directional and ensure that those managing
operational risks understand Gamma’s desires and willingness to
take risk within the area. The purpose of these statements is to
strengthen risk assessment and allow prioritisation of risk response
activities. This allows efficient use of time and resources when
managing risk, whilst ensuring acceptable levels of risk are taken
to deliver the strategic objectives.

An example of this is demonstrated within the ‘Unplanned service
disruption’ principal risk. This was assessed by the SLT and the
appetite set such that service interruption must be avoided, in
particular across Gamma’s mature products and services where a
large number of customers rely upon them for business critical
operations. Equally, Gamma do recognise that technology failure
cannot be completely avoided and for the deployment of new
products it is also important to counterbalance maintaining highly
available products and services at scale with the pace in which
Gamma takes these to market. Once the risk appetite is defined
and approved by the Risk Committee, this then helps employees
working within Gamma’s development, engineering and operational
teams understand the importance of maintaining high levels of
service availability.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Our principal risks

Gamma’s principal risks
and how they are mitigated

The assessment of the principal areas of risk, their potential impact to achieving Gamma’s strategy, movement in the year and how the
Company seeks to mitigate them are described in the table below. The occurrence of any of these potential risk scenarios could to a
greater or lesser extent potentially adversely result in damage to Gamma’s reputation and/or business performance. The risk impact
considers both the financial impact of the risk, when it may impact Gamma and the likelihood of it occurring.

Unplanned service disruption

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2

Description
Reliable, high-quality business communications services are critical
to Gamma and are the core components of its products and strategy.
Therefore, maintaining very high levels of service availability is central
to Gamma’s credibility, competitive positioning and its financial
performance. This is particularly so as it serves the business market,
and any disruption to Gamma’s service affects the ability for its
customers to provide services.

Potential impact
If Gamma’s products and services perform below our customers’
expectations, then this could have a direct impact on product and
revenue growth through reputational impact and could also result in
significant financial loss.

Mitigating actions
Gamma operates a comprehensive operational governance
framework to manage the availability and performance of its services.
This includes the design and architecture of the network for
resilience, capacity planning, change management and security.

Business continuity planning and rehearsals are routine components
of the governance framework. This governance is subject to external
audit via the ISO 22301 certification.

Regular reviews take place with key suppliers and there is an internal
fortnightly ‘Supplier Management Meeting’ chaired by Gamma’s
procurement team, which seeks to improve supplier performance as
well as address risks as they arise.

There is a mature Incident Management process that is rehearsed on
a regular basis. This capability is available 24x7x365 and ensures the
business can respond immediately to events that may impact the
performance of the services provided to customers.

The Company has established an Emergency Communications
Committee as part of the communications process which is initiated
during any major service incident. This committee ensures that the
Company maintains effective communication both internally and
externally with customers, suppliers and where necessary the media
and regulatory bodies (the latter supported by specialist agencies).
This process is normally rehearsed at least once a year and was last
tested during the heightened cyber security threat in mid-2021.

Gamma recognises that occasional technology failures cannot be
avoided and are more open to this risk when it comes to the deployment
of new products at pace to maintain a competitive advantage.

Data loss and cyber attacks

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2 3 4

Description
By its very nature, Gamma’s 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.

Cyber attacks are constantly evolving, and Gamma recognises that it
could be a target for both sophisticated targeted attackers as well as
nuisance attackers. Gamma may also be targeted based on the
downstream services provided to key sectors within the UK and
European markets or may also be subject to potential breaches of
security within its supply chain.

Gamma holds various types of data and its network carries customer
communications, which heightens the risk of data related attacks.

Potential impact
A breach of security could have a significant impact on the Group’s
reputation and in some cases also impact its commercial position.
Potential fines could also be enforced if the Company was found to
be in breach of its obligations relating to various regulations.

Mitigating actions
Gamma continues to adapt its governance structure to ensure best
practice is followed in the identification and management of information
and cyber security threats. This includes increased frequency and
broadened scope of both routine and bespoke penetration testing;
continuous compliance checks; integrated security behaviours
training, which is mandatory for all employees; dedicated security roles
to track how cyber threats are evolving and are best detected; and
Board visibility of the maturity of the governance structure.

Gamma’s core infrastructure and operations is certified under ISO
27001 for security.

Gamma carefully considers the cost vs benefit when it comes to
investing in controls against cyber attacks, as well as how its peers are
approaching this risk. Targeted investments are made in preventative,
detective and responsive controls but it is accepted that some service
disruption resulting from cyber attacks is possible.

A large proportion of the Gamma workforce has continued to work
remotely in 2021, and Gamma has invested in automated data
controls to limit the chance of data leakage as well as continuing with
an online awareness training package adapted to focus on security
threats relevant to remote working.

The Company is represented in various industry forums to ensure it is
aware of emerging risk, methods employed by malicious actors and
best practice in the identification and mitigation of cyber risk.

The Company also has fraud management applications used to identify
unusual voice traffic patterns quickly with its 24/7 operational monitoring.

Gamma Communications plc Annual Report and Accounts 2021Key to change in risk profile

Risk profile increased year on year

Key to strategy
1 Cloud Telephony and UCaaS

Risk profile no change year on year

2 Fixed and Mobile Telecom

Risk profile decreased year on year

3 Company Expansion

4 Digital Progression

Our strategy
Pages 14-15

Over-reliance on suppliers

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2 3

Description
The business relies on a number of key suppliers to provide elements
of its products and services. For example, access circuits purchased
from other operators to connect to customer premises, and equipment
from various hardware and software suppliers that facilitate the
provision of Gamma’s services.

Potential impact
Failure of one of these suppliers to perform may have an impact on
the Company’s ability to deliver products and services within the UK
and European markets. Due to the nature of the services provided
over-reliance may result in unplanned service interruptions or
inability to provide equipment required to provide services. The latter
has materialised in 2021 with the global shortage of chipsets.

Mitigating actions
Where possible, the business avoids significant reliance on suppliers,
reducing the potential for operational issues or resulting in Gamma’s
inability to react to market and customer developments. Gamma is
more tolerant when it comes to reliance on dominant “tech suppliers”
as their risk profile is lower and working with them is essential in
certain selected market or product segments.

Suppliers of important services are monitored carefully and are
subject to regular performance reviews which include adherence to
Gamma’s information security requirements and broader service
KPls. The Risk Committee reviews the most significant risks and the
status of related mitigation actions quarterly.

Recognising the global shortage of chipsets in the supply chain
during 2021, Gamma invested in over £5m of stock which ensures
that the Company is well positioned to continue to provide product
hardware to its customers. In addition, new hardware options have
also been introduced into the Gamma portfolio so that the Company
can ensure continuity of service to customers and partners should
key stock lines become scarce.

Inability to attract and retain top talent

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2 3 4

Description
The business has grown rapidly over the last few years and so far, has
experienced low staff turnover, and has generally been able to
develop or recruit the number and quality of staff required to support
Gamma’s strategic development.

There is a risk to continued growth, product portfolio expansion and
entry into new markets, if the business cannot attract, develop and
retain people of the required skill and experience.

The COVID-19 pandemic has intensified the market demand for
UCaaS skills and as this market continues to accelerate, it will
become increasingly important to differentiate the Company’s
business and brand to continue to attract new talent to Gamma.

Potential impact
Loss of key individuals or an inability to recruit the required quantity
or quality of people could have an impact on the future growth of the
business or the quality of services provided. For instance, in order for
the business to achieve its strategic priorities, it is dependent upon
recruiting and retaining highly skilled technical development and
operational people with experience of modern technologies and
design principles.

Mitigating actions
Gamma has a well-established reputation for being a good employer.
Gamma encourages internal promotions with external hires in
specialist areas, Gamma recognises the need for strong mitigation
activities including appropriate value and reward propositions
supported by performance management systems. In order to attract
new technology focused skills, the Company has launched a
technology careers webpage, demonstrating the different roles
within Gamma and showcasing its existing talent.

Employee satisfaction is measured formally every six months using
the Gamma Pulse survey. Anonymous feedback is provided through
this platform which has enabled managers to act more swiftly to
reinforce positive trends and tackle any negative sentiment.

Gamma sees the opportunity that flexible working provides as part of
its employee value proposition and in 2021 established a flexible work
framework which will be open to all its employees from 2022.

Additionally, the Company is committed to regularly reviewing the
employee rewards package to ensure that it remains competitive for
existing staff and attractive for new starters. The Company is
committed to its People Agenda, with focus on development and
leadership programmes, succession planning, employee wellbeing,
developing our diversity, charitable giving, as well as effective
employee engagement initiatives.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Our principal risks continued

Uncertain competitive landscape

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2

Description
The lack of a clear view of the competitive landscape and Gamma’s
future positioning within the market could result in Gamma being
unable to identify new entrants or potential competitive threats and
respond accordingly. These threats could include for example, new
market entrants such as software firms, disruptive technologies and
competitive market consolidation.

Potential impact
These factors may impact Gamma’s position in the market due to the
loss of its customers and growing competition may dilute the
addressable market and slow down the rate of business growth. If the
Company does not at least keep pace with the evolving market in
terms of product and service development, then its plans for revenue
growth may be negatively impacted.

Mitigating actions
Gamma is not an innovator of novel products but a “fast follower” and
seeks to address growing markets tailoring products for the target
market quickly. However, in light of the changing competitive
landscape close monitoring is required to remain relevant and
competitive and it is accepted that Gamma will likely need to become
more disruptive and innovative in selected segments going forward.

Gamma aims to provide products and supporting services which
are more attractive to its customers than those of its competitors.
The planning, development and marketing of products and customer
service that Gamma provides are closely aligned to the evolution of
market demand and of relevant technologies.

Market insight is gathered, both through recognised industry and
market experts, and internal analysis. This insight informs decision
making and execution plans across multiple time horizons.

In addition, the Company undertakes a thorough strategic review
every three years and in 2021 Gamma ‘stress-tested’ its UCaaS
strategy considering the market changes and evolving competitive
landscape. This has driven complementary strategies to continue to
grow market share within its UK and European geographies.

Price erosion

Risk Impact:
Change on prior year:
Link to strategy:

High

1 2

Description
Gamma could be exposed to increasing pricing pressure in its existing
markets. This could be due to factors such as market consolidation,
increased competition or the commoditisation of its products.

Whilst Gamma focus’ on its UCaaS strategy, it continues to benefit
from its position within more mature markets within the UK such as
SIP trunking where price erosion could become more prevalent.

Potential impact
Price erosion may not be comparable with Gamma’s cost base as the
Company grows, which may impact margins achieved. This may
ultimately impact Gamma’s profitability and reduce outside
investment interest.

Legal and regulatory non-compliance

Risk Impact:
Change on prior year:
Link to strategy:

Medium

2 3

Description
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 Gamma.

As UCaaS develops and begins to diverge from traditional telephony, each
regulator may take a different view on the level of regulation required and
therefore Gamma may either inadvertently breach local numbering
regulations (resulting in regulatory penalties and reputational damage)
or could be slow to act and lose ground to competitors through over-
compliance with regulation which no longer applies.

As Gamma broadens its routes to market, the territories in which it
operates and its pricing strategies evolve, there could be a greater risk
of anti-competitive behaviour and non-compliance to competition law.

Potential impact
The Company’s activities can be impacted by the decisions of relevant
legislative, regulatory, or judicial bodies both domestically and in other

Mitigating actions
Gamma takes a cautious approach to protect price and margin
on its existing products and services. This is tightly governed by its
pricing committee in the UK. However, it strives to be more creative
and disruptive with pricing models for future or improved products
and services.

Gamma’s strategy is to leverage its skills and experience of operating
communications products at scale in mature markets and penetrate
less mature markets with its modern UCaaS product portfolio. In
addition, it continues to introduce complementary features and
services to its products to add value and protect profitability.

Gamma also strives to reduce operating costs by driving efficiency
activities throughout the business.

non-UK territories within which it operates, the outcomes of which
could put Gamma at a competitive disadvantage in its target markets.

Legal and regulatory non-compliance could lead to significant
reputational damage and resultant fines.

Mitigating actions
Gamma does not seek to influence regulations in every market, but
may choose to do so in selected markets, considering various factors,
such as the market size, our presence, and the regulatory maturity of
that market.

Gamma mitigates this risk by continuing to monitor likely legislative
or regulatory changes within UK and non-UK territories, assessing
their risk and potential impact, and by regularly engaging with
regulators as appropriate.

In addition, Gamma carefully governs its pricing strategies, setting
reasonable thresholds and a governance process that extends across
the Gamma Group. In the UK where Gamma carries a large market share
of Cloud PBX and SIP trunking, a central pricing committee operates to
control and agree pricing limits and incentives.

Furthermore, specific training surrounding competition law and
anti-competitive behaviour is provided to employees with roles
where this risk may occur.

Gamma Communications plc Annual Report and Accounts 2021Unsuccessful M&A strategies

Risk Impact:
Change on prior year:
Link to strategy:

Mitigating actions
Acquisition targets are identified based on Gamma’s strategic
objectives. Giving in depth consideration to what the new company
could contribute to Gamma, such as geographical expansion into
new markets.

Medium

Description
Gamma faces multiple risks surrounding its M&A activity with the
significant risks being:

• an over-reliance on organic growth instead of M&A which could limit

Gamma’s potential for growth;

• disruption to its business through a more aggressive in-organic

strategy or poor integration; and

• potential inappropriate governance or poor due diligence on M&A

leading to the purchase of a business that fails to deliver.

Potential impact
The result of one or more of these risks occurring could limit both
Gamma’s geographical reach as well as the opportunity to improve
shares in its existing markets, which could ultimately result in the loss
of competitiveness.

Acquisition of new businesses, particularly those in different countries,
introduces both financial and operational risk. In order to reduce the
risks associated with acquisitions: pre-purchase, Gamma applies
adequate specialist resource to due diligence, negotiation, and
contractual preparation; post-purchase, adequate resource is applied
to the integration and strategic direction of the acquired business and
bringing it under the main governance control processes.

Gamma also ensures that its SLT responsibilities are aligned to
effectively support the development and growth of the Group.

Gamma recognises that entering markets is a risk that can be
tempered by effective M&A activities.

Emerging risks

In addition to the Principal Risks facing Gamma, the Company also
considers emerging risks, which have different characteristics and
are defined as a risk which is either highly ambiguous and therefore
cannot yet be impact assessed or is a risk that materialises and
evolves rapidly and therefore requires frequent re-assessment to
gauge the potential impact to Gamma.

Russian / Ukraine conflict
Gamma is closely following the conflict between Russia and the
Ukraine and continues to monitor and adjust its risk assessment as
the situation evolves.

Gamma does not have customers in either Russia, the Ukraine or any
other non-EU bordering territories and therefore does not anticipate
any immediate threat to financial performance. Additionally, Gamma
does not anticipate any significant impact to the Company through
the application of sanctions. Direct operational threats have been
assessed as well as potential consequences in Gamma’s upstream
and downstream supply chain.

However, the following areas of risk have been identified and remain
under regular review.

• The increasing cyber threat, where Russian state sponsored attacks

could by targeted at UK or European communications providers and
national infrastructure as a direct response to sanctions.

• The risk of further escalating energy and fuel costs in the medium-

term would subsequently increase Gamma’s costs to power its data
centres and offices.

• Longer-term economic downturn or a period of high inflation may
have a detrimental impact on Gamma’s financial performance.

Gamma’s core network operates within the UK and best practice is
followed in the identification and management of information and
cyber security threats which are constantly evolving. Gamma also
receives intelligence from the National Cyber Security Centre, which
enables the dynamic adaption of cyber controls to help mitigate
targeted threats. As a precautionary measure Gamma has also
brought forward planned cyber security investments to further
strengthen its rapid response capability in preparation for any
large-scale network attack.

Energy supply to Gamma’s UK data centres represents the largest
proportion of the company’s usage and Gamma has multi-year fixed
energy pricing on its UK office facilities and its largest UK data centre.
This helps to contain company exposure to short-term price
escalation, however risks do still remain with energy price increases
to power network equipment located in 3rd party data centres.

Climate change
During 2021 Gamma has made significant progress on the
assessment of climate-related risks, assessing the impact of both
transition and physical risks, both of which are judged to be minimal
at present and more detail of which can be found in Gamma’s Climate
Related Business Risks & Opportunities section on page 42.

The profile and therefore impact of climate-related risks are set to
change as government policy evolves through the transition to a
carbon net-zero economy and Gamma’s physical assets expand to
new geographies.

To support the management of emerging risks in this area, Gamma
has roles dedicated to environmental management and has
established a Group Environmental Management Policy with senior
management responsibilities to oversee related risks.

Adjustments to Gamma’s principal risks
from prior year

Customer Service experience
Gamma’s principal risks were reviewed in 2021 and the risk of
delivering poor customer service recorded within its 2020 Annual
Report was subsumed into the present principal risk relating to
unplanned service disruption. The rationale for this change was

driven by the potential for a greater impact to Gamma’s customer
experience, reputation and revenue growth if Gamma’s products and
service availability were to perform below customer expectation.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Section 172

Our Stakeholders

Maintaining strong stakeholder relationships is essential to Gamma’s
long-term success.

Key areas of interest:

How we engage:

• Financial performance

• Dividends

• Share price appreciation

• Strategy

• Business model

• Behaviours towards
other stakeholders
including in
Environmental, Social
and Governance areas

• Safe working
environment

• Development and

progression

• Competitive
remuneration

• Diversity and inclusion

• Environmental footprint

• Workplace policies

• Collaboration

• Share price

Our principal means of engaging with our shareholders
are through:

• Communications such as trading updates, use of the
Regulatory News Service (“RNS”), Annual Reports and
notices of general meetings.

• 142 one-to-one meetings with shareholders with the CEO

and CFO being available to shareholders or potential
shareholders and regularly meeting with them.

• Two Capital Market Days were run, one talking about
Gamma’s product suite and one to talk about the
European business.

• Attendance at roadshow events organised by the brokers

who provide analyst coverage of the Group.

•

Information on the investor section of our corporate
website: www.gammacommunicationsplc.com.

• Discussions held during the Annual General Meeting (AGM).

• Henrietta Marsh (Independent Non-Executive Director)

is the Workforce Engagement Director.

• During 2021 the Gamma Pulse Survey, which was piloted
in 2020, was rolled out across the Group. It is conducted
on a bi-annual basis and provides valuable insight to
senior management. Results are reported to the Board
who have the opportunity to shape future surveys to
areas of interest.

• Monthly webcasts led by the CEO and other senior

management on Company performance and activities
of the Group.

• As a result of the pandemic, the large majority of the
workforce has worked from home for most of 2021. A
Special COVID-19 Taskforce was arranged to provide
regular communication to staff.

• New processes were set up to ensure that managers
engaged more frequently and to ensure they covered
general employee wellbeing.

•

Innovative solutions

• Gamma Channel Partner Programme.

• Long-term relationships

• 24/7 UK-based technical help.

• Value

• Service

• Product development

• Each channel partner will have a dedicated Business

Development Manager who is responsible for ensuring
that they have what they need from Gamma to build their
own business. Channel partners also have access to the
Senior Management Team.

• Regular in-person or virtual roadshows to showcase new

products and to share the development roadmap.

Shareholders

Shareholders are key beneficiaries
in the value that we create. We are
committed to transparent and open
engagement with them.

Our People

Developing and attracting high-quality
talent is a key driver of our success. As
of 31 December 2021, we have 1,745
employees worldwide.

Customers:
Channel
partners

Gamma’s ethos is to provide a robust
product at a fair price. Where we are
selling via channel partners, we want
our partner to be able to make a fair
margin for the value that they are
adding to the end user.

Gamma Communications plc Annual Report and Accounts 2021What we have done:

Links to other relevant sections:

• Continued strategic investment both organically and through acquisition, bringing new

Our strategy Pages 14 to 15

capabilities, new geographies and new market opportunities to the Group.

• Formed the ESG Committee.

•

In 2020 we appointed a Senior Independent Director who is available to meet with major
shareholders, if such meetings are required.

• Further strengthened internal governance through creation of a Group procurement

team and an internal audit function.

• Gamma continues to comply with the Quoted Companies Alliance Corporate

Governance Code (QCA Code), this was confirmed by the Board on 3 September 2021.

•

Improved disclosure in the Annual Report.

Our business model Pages 4 to 5

Environment, Social and Governance

Pages 36 to 47

•

Invested in our People function, including strengthening the Learning and
Development teams.

Environment, Social and Governance

Pages 36 to 47

• Conducted bi-annual reviews of the employee engagement surveys and completed

the feedback loop on any actions taken by reporting to employees.

• Supported employees to establish appropriate working conditions with appropriate

equipment during the pandemic.

•

Including a “people” section in our monthly Board reports which focuses on key people metrics.

• Rolled out a Whistleblowing facility across all Group companies, using external

contractors, and reporting in the first instance to two Independent Non-Executive
Directors, and communicated its availability to employees who wish to raise concerns.

• Formulated a plan to improve diversity and inclusion.

• Adopted the UN Sustainability Goals as long-term objectives.

• Through the Gamma Channel Partner Programme, we offer a suite of additional training

Our business model Pages 4 to 5

resources – The Gamma Academy. These resources, tools and information are all
accessible online. The programme has been designed to help channel partners reach
into the marketplace by increasing the knowledge base and partner expertise. It also
creates a deeper, more collaborative relationship with Gamma. This programme has also
been rolled out in the Netherlands.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Section 172 continued

Customers:
End users

To provide reliable, innovative
products and services that meet
the needs of the end users.

Key areas of interest:

How we engage:

• Product quality

• We assign customer service managers to each account

• Product availability

• Product cost

giving a consistent point of contact within Gamma.

• We offer 24/7 support through our support team.

• The support infrastructure is co-located, meaning

that end users get through to the right person to handle
the query.

• Gamma offers a service scheme to allow customers to
choose the level of service required to match the right
support in place whatever the end customer needs.

• Social and ethical impact

• We partner with key suppliers to ensure that we have

Suppliers

Developing strong operational
relationships is key to success.

• Payment practices

• Long-term partnerships
to develop innovative
products and solutions

common goals and strategy.

• We ensure responsible procurement, through the Board

approved policy.

• Gamma’s supplier payments policy is to always pay

suppliers on or before the agreed term (which will vary
from contract to contract).

• Engagement with Ofcom both formally and informally.

• Participation in consultation responses as a Group or as a

member of industry bodies.

• We are committed to supporting the communities in
which we are based and are enhancing our charitable
giving plan.

Ofcom’s duties are set out
in the Communications Act
2003.

Its primary duties are:

• To further the interests
of citizens in relation to
communications
matters; and

• To further the interests

of consumers in relevant
markets, where
appropriate, by
promoting competition.

• Environmental and

social impact

•

Improving quality of life

• Protecting people

• Diversity and Inclusion

Regulators

We operate within the requirements
of a regulated industry.

Communities

We have a duty to conduct
business in a responsible way that
aligns with our purpose and values.

Gamma Communications plc Annual Report and Accounts 2021 Our strategy
see pages 14-15

Our business model
see pages 4-5

Environment, Social
and Governance
see pages 36-47

What we have done:

Links to other relevant sections:

• Our UK Direct business unit organises an annual conference for our customers which

Our business model Pages 4 to 5

allows them to stay in touch with the senior team at Gamma as well as to share
knowledge with their peers.

Our strategy Pages 14 to 15

•

In our UK Direct business we have continued to develop our online sales and support
platform in line with our strategic plan.

• During the year we have built our Group procurement function to ensure best practices

Environment, Social and Governance

are applied across the Group.

• Annual approval of the Modern Slavery Statement by the Board.

Pages 36 to 47

• Defend the Channel – we recognise that many channel partners are SMEs who do not

Environment, Social and Governance

always have the resources to engage with regulatory bodies.

Pages 36 to 47

• Give a voice to businesses – regulation is often aimed at protecting the domestic
consumer but with unintended consequences when applied to business users.

• Challenge the cost assumptions of implementation – these can be underestimated.

• Ensure that regulation stays current – to help provide adequate protection for end users.

• Supporting communities via financial donation including a matching scheme for funds

Environment, Social and Governance

raised by employees.

Pages 36 to 47

• Supporting through time donated, where employees are given one day a year to help

support their chosen charity.

• Formulated a plan to improve diversity and inclusion.

• Formed an ESG committee and improved reporting in this area. In 2021 a Charity forum

was set up to add focus to this area.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Section 172 continued

Section 172

The Board of Directors consider, both individually and together, that they have acted in the way
that they consider, in good faith, would be most likely to promote the success of the Group for
the benefit of its members as a whole, having regard to the stakeholders and matters set out
in section 172 (a)-(f) of the Companies Act in the decisions taken during the year.

The Board considers the matters set out in section 172 of the 2006
Act in all its discussions and decision making. That includes:

The likely consequences of any
decision in the long term:
The Directors recognise that the decisions they make today will
affect the Group’s long-term success. During the year the Board
continued to monitor the Group’s strategy, which is discussed
further on pages 14-15, which shows how the Group will increase
value for all our stakeholders. This guides the Board’s decisions
between short and long-term investments.

The interests of the Company’s employees:
The Board recognises that Our People are a key differentiator and
they are always considered as part of the Board’s discussions and
decision making. The Board is committed to the People Agenda,
with focus on development and leadership programmes, succession
planning as well as effective employee engagement initiatives. The
Group has invested in our People function, including strengthening
the Learning and Development teams. Regular employee engagement
surveys are performed across the whole Group with results and
actions being discussed at the Board level. Henrietta Marsh
(Independent Non-Executive Director) is the Workforce Engagement
Director. The Remuneration Committee takes an active interest in
the remuneration of employees at all levels to ensure that the
overall reward is equitable.

The need to foster the Company’s business
relationships with suppliers, customers and others:
The Board understands the importance of fostering good
relationships with its stakeholders. More detail about how it
engages with it stakeholders is on pages 26 to 29. The Board does
also rely on its subcommittees and senior management to develop
relationships and to share the views of the relevant stakeholders.
Board members meet with customers as well as monitoring the
relationship with key customers via the Executive Directors and the
Senior Leadership Team (SLT). The Board additionally actively
monitor the relationships with key suppliers through the Executive
Directors and the SLT.

The impact of the Company’s operations
on the community and the environment:
The Board recognises the importance of its decisions on the
community and the environment. The Gamma Board adopted the
UN Sustainable Development Goals in January 2020 and since that
time Gamma has assessed each goal in depth to understand how
the business is best placed to make a meaningful contribution.
Through the ESG Committee, the Board also ensures that
environmental policies and suitable governance structures are
established to align with Gamma’s committed environmental
targets. In 2021 the Group appointed a Group Sustainability
Director who has responsibility for the Company’s emissions
reporting and carbon reduction planning. Gamma has held
‘Certified Carbon Neutral Company’ status (conferred by Natural
Capital Partners) since 2006 and has committed to become a
carbon net-zero business by 2042.

The desirability of the Company maintaining a
reputation for high standards of business conduct:
The Board intends that Gamma be a positive contributor to society
as a whole, to the UN Sustainable Development Goals, to its
employees, customers, suppliers, shareholders and other
stakeholders, and to the environment. To this end Gamma requires
that all its employees and Directors: a) comply with the law in each
jurisdiction where Gamma operates; b) where specified in a
Company policy, meet a higher standard than basic ‘compliance
with local law’, and c) maintain high ethical standards whenever
representing Gamma or its Group companies. This is set out in the
Ethical Conduct policy which is publicly available on the Group’s
website. There is a whistleblowing facility across all Group
companies, using external contractors, and reporting in the first
instance to two Independent Non-Executive Directors, which
enables employees to raise concerns if they wish.

The need to act fairly as between
members of the Company:
The Board recognises that they have to balance competing
interests in reaching its decisions. Where there are conflicting
interests, the Board will act as equitably and fairly as it is able to
take into account the implication for each stakeholder.

Gamma Communications plc Annual Report and Accounts 2021Decisions made during the year:
The principal decisions taken by the Board during the year, along with how the Directors considered stakeholder interests when taking
into consideration their duties under section 172 of the Companies Act, are set out below.

Principal decision and
stakeholders considered

Dividend
Shareholders, Our People, customers
and suppliers.

Board’s decision making process

Long-term considerations

The Board considers its commitment to a
progressive dividend policy which has seen
the dividend increase by between 10-15%
every year since IPO in 2014. It considers the
financial resources required to execute our
strategy, including organic investment needs
and acquisition opportunities; maintaining
a sufficient level of dividend cover and
equitable treatment of our stakeholders.

Dividends consistent with the Company’s
financial performance without detriment to
the strength of the balance sheet and future
sustainability.

Acquisitions
Shareholders, operating companies,
suppliers, future employees and partners,
and professional advisers.

The Executive Directors provide information
to the Board on potential acquisitions. The
Board consider this information taking the
Group’s strategy as well as the impact on
different shareholders into account. The
acquisition of Mission Labs in March 2021
went through this process.

The Board consider the long-term benefits
of the investment versus the short-term
impact on different stakeholders.

Capital allocation
Shareholders, Our People and customers.

Board Composition –
Executives
Shareholders and Our People.

The Group’s budget, approved by the
Board, sets the allocation of capital to
deliver our growth strategy through
investment in R&D, capital expenditure,
talent and acquisitions. The weighting
of each is determined by our strategic
priorities over the short to medium term.

The role of Deputy CEO was established to
take on a range of strategic and operational
responsibilities to support the development
and growth of the Group. This new role was
offered to Andrew Belshaw (the incumbent
CFO). He will start on 1 May 2022 when the
new CFO arrives in post. A new CFO was
recruited with emphasis being placed on the
diversity of the long list to ensure that
candidates of different ethnicities and both
genders were considered.

Balancing investment for future growth
whilst supporting Our People and
customers in the short term as well as
meeting shareholder expectations.

The role of Deputy CEO helps supports the
strategic growth of the Group in both the
short and long term.

Carbon net-zero
Shareholders, Our People, customers,
suppliers and communities.

The Board considered the time frame to
become net-zero taking into account the
investment requirements along with the
environmental considerations.

Gamma is pleased to announce its
commitment to move from a Carbon Neutral
business to become a carbon net-zero
business by 2042, maintaining carbon
neutral status in the interim period to
achieving net-zero.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Overview
Gamma has performed well during the year increasing revenue by
14% to £447.7m (2020: £393.8m) and gross profit by 14% to £228.5m
(2020: £200.8m). The two UK businesses have in aggregate seen
growth in Revenue of £29.7m (+9%) and Gross Profit of £17.3m
(+10%). The growth in the Revenue of the European Business of
£24.2m from £48.5m to £72.7m is primarily due to a full 12 months
of results of businesses acquired in 2020. Adjusted EBITDA increased
by 21% to £95.4m (2020: £79.0m). Adjusted EPS (FD) increased by
25% to 64.0p (2020: 51.3p).

Revenue and gross profit

UK Indirect

Revenue
Gross Profit
Gross Margin

2021
£m
270.2
143.2
53.0%

2020

£m Increase
+9%
+8%

247.2
132.2
53.5%

Overall, the growth in the UK Indirect Business unit has been strong.
There have been no acquisitions in either year which affected
revenue or gross profit and hence the growth shown in the above
table is entirely organic.

Gross Margin has been broadly consistent with the prior year which
is a change in trend following growth historically. The historical growth
was largely driven by an improving mix of high margin UCaaS
products against lower margin legacy products but this mix has
now stabilised. The revenue from the sale of legacy product is now
negligible and hence the mix is more constant. This change is in line
with our expectations. We do not expect Gross Margin to increase
as the mix of UCaaS and access products stays broadly constant.

UK Direct

Revenue
Gross Profit
Gross Margin

2021
£m
104.8
52.6
50.2%

2020

£m Increase
+7%
+14%

98.1
46.3
47.2%

The UK Direct business continued to grow. There was some inorganic
growth driven by the Mission Labs acquisition in March 2021; this
was in part offset by the disposal of The Loop Manchester Limited
in 2020.

As previously communicated, the growth in revenue for 2021 was
lower than it would have been had sales activity in mid 2020 not
been severely hampered by COVID-19. We won fewer new projects
in 2020 which meant less work started in 2021. This situation has
now reversed and we have seen significant levels of sales activity in
late 2021 and we enter 2022 with a strong pipeline.
Notwithstanding, the global chipset shortage has the potential to
cause some installations to become delayed which will mean that
billing starts later than planned, which may dampen growth slightly.

Financial review

Andrew Belshaw
Chief Financial Officer

Financial performance

Revenue

£447.7m +14%

Grew from £393.8m to £447.7m

Gross profit

£228.5m +14%

Grew from £200.8m to £228.5m

Adjusted EBITDA

£95.4m +21%

Grew from £79.0m to £95.4m

Cash generated by operations

£89.8m +28%

Grew from £70.3m to £89.8m

EPS (fully diluted)

55.2p

Fell to 55.2p from 66.6p

Adjusted EPS (fully diluted)

-17%

64.0p

Grew from 51.3p to 64.0p

+25%

Chief Financial Officer’s
overview
Scan to watch a video of our CFO,
Andrew Belshaw, discussing our
2021 financial performance.

Gamma Communications plc Annual Report and Accounts 2021The gross margin has increased due to mix – first, as a result of
Mission Labs which is a higher margin as a result of being a SaaS
model; and second, as mentioned earlier, fewer new projects
started in the year (the start of a project is lower margin due to low
margin installations and hardware sales).

Europe

Revenue
Gross Profit
Gross Margin

2021
£m
72.7
32.7
45.0%

2020

£m Increase
+50%
+47%

48.5
22.3
46.0%

Our European business saw growth primarily as a result of the
inclusion of a full 12 months of results of the acquisitions made in
2020 – Voz Telecom in Spain (acquired April 2020), HFO in Germany
(July 2020) and Gamma Communications Benelux expanded in July
2020 with the acquisition of gnTel.

Because of acquisitions, the year on year growth is not indicative of
business performance. The revenue in H1 for Europe was £35.4m
and this grew by 5% to £37.3m in the second half. The growth in
revenue was driven by increased commissions earned by our
Epsilon business in Germany (where revenues can fluctuate).
Revenues from UCaaS seat sales grew in all European territories
but the associated traffic revenues were lower – unlike the UK, in
Europe traffic is not bundled into the seat pricing which results in
more fluctuation.

Gross margins have decreased from the prior year as a result of
“high revenue/ low margin” business within the Epsilon subsidiary of
the HFO business which offers mobile connections – which was
acquired in July 2020. The margins on a product by product basis
are consistent with those in the UK.

Operating expenses
Operating expenses grew from £125.1m to £160.2m; when the
exceptional items are eliminated then operating expenses grew
from £144.7m to £160.2m – much of the increase comes from
including a full year’s costs of business acquired in 2020 and also
an increase in our development activity. We break these down
as follows:

2021
£m

2020
£m

2020

£m Growth

Expenses included within cash
generated from operations
– UK Businesses
– European Business
– Central Costs

101.8
23.3
8.0

95.5
18.3
8.0

133.1

121.8

Depreciation and amortisation
– tangible and intangible assets
– right of use assets
– acquisition

14.9
2.7
9.5

14.7
2.2
6.0

+7%
+27%
+0%

+1%
+23%
+58%

Operating expenses (before
exceptionals)
Exceptional items
Operating expenses

27.1

22.9

160.2
–
160.2

144.7
(19.6)
125.1

+11%

+28%

Movements in expenses were driven by:

• The UK Businesses’ operating expenses growing by 7%

(compared to Gross Profit growth of 10%). This growth has been
lower than originally expected as a result of continued lockdowns
in 2021 resulting in unexpected cost savings (for example, travel
and subsistence expenses continue to be significantly lower).
Not all of these savings are expected to continue in the long run
as “normality” returns post COVID. We expect to see our travel
and marketing (event attendance) costs increasing “post Covid”
in 2022. We are also seeing signs of wage inflation being above
historical norms.

• There were two areas of overhead growth which were

disproportionate:

○ We continue to invest in the development and maintenance of
our voice application products and associated software tools
(for example our portal). Our spend in this area during the year
was £19.6m (of which £14.8m was charged to the profit and
loss and £4.8m was capitalised; in 2020 these figures were
£10.2m and £2.7m respectively). The increase is driven by our
desire to develop more of our own technology which included
the acquisition of Mission Labs, which brought more
development costs into our cost base.

○ Share-based payments costs increased from £3.5m to £4.8m
(+£1.3m). This is mainly due to the increasing take up of the
various share schemes which are offered.

○ Aside of the effect of development and share based payments,
the UK business overheads grew by only £0.4m year on year; as
noted above we do not expect to be able to keep overheads
increases to this level in 2022.

• The increase in European costs is reflective of the cost base
growing by acquisitions (that is to say that it is not organic
growth). In 2022 we intend to invest more in sales heads in each
of the three countries which will increase the cost base a little (i.e.
below £1m). The increase in sales heads is expected to increase
the rate of sales of Cloud PBX seats by investing in the sales function.

• Central costs are inline with the prior year. They include the costs

of our M&A programmes (which are not adjusting items).

Depreciation and amortisation on tangible and intangible assets
have increased from £14.7m in 2020 to £14.9m in 2021. This is
slightly below our annual capital spend and may therefore increase
slightly in future years.

Exceptional items
There were no exceptional items in 2021.

In the prior year there were exceptional transactions related to the
disposal of a subsidiary (The Loop Manchester Limited) where an
exceptional gain of £19.5m was recognised relating to the
proceeds on disposal less the book value of the net assets of the
business and a difference between the estimated deferred
consideration and amount paid in relation to Nimsys.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Financial review continued

Alternative performance measures
Our policy for alternative performance measures is set out in note 3.

The tables below reconcile the alternative performance measures used in this document:

2021

Measure
PBT (£m)
PAT* (£m)
EPS (FD) (p)

2020

Measure
PBT (£m)
PAT* (£m)
EPS (FD) (p)

Statutory
Basis
67.2
53.6
55.2

Amortisation
of intangibles
9.5
9.5
9.8

Change in
fair value of
acquisitions
0.5
0.5
0.5

Adjusting tax
items
–
(1.5)
(1.5)

Exceptional

items**

–
–
–

Adjusted
basis
77.2
62.1
64.0

Statutory
basis
75.0
64.2
66.6

Amortisation
of intangibles
6.0
6.0
6.2

Change in
fair value of
acquisitions
0.3
0.3
0.3

Adjusting tax
Items
–
(1.5)
(1.5)

Exceptional

items**
(19.6)
(19.6)
(20.3)

Adjusted
basis
61.7
49.4
51.3

* PAT is the amount attributable to the ordinary equity holders of the Company.
** See note 8 for further details.

We believe that these measures provide a user of the accounts
with important additional information by providing the following
alternative performance metrics:

• Profit before tax is adjusted for exceptional items and it is also

adjusted for the amortisation of intangibles which were created
on acquisition and the change in the fair value of acquisitions.
This enables a user of the accounts to compare performance
irrespective of whether the Group has grown by acquisition
or organically.

• Profit after tax is adjusted in the same way as Profit before tax
but it also considers the tax impact of these items. To exclude
the items without excluding the tax impact would not give a
complete picture.

• Adjusted earnings per share takes into account all of the factors

above and gives users of the accounts information on the
performance of the business that management is more directly
able to influence and on a basis comparable from year to year.

In addition to the above adjustments to statutory measures, we add
back the depreciation and amortisation charged in the year to Profit
from Operations (2021: £68.3m; 2020: £75.7m) to calculate a figure
for EBITDA (2021: £95.4m; 2020: £98.6m) which is commonly
quoted by our peer group internationally and allows users of the
accounts to compare our performance with those of our peers. We
further adjust EBITDA for exceptional items as this gives a reader of
the accounts a view of the trading picture which is comparable from
year to year (adjusted EBITDA: 2021: £95.4m; adjusted EBITDA:
2020: £79.0m).

An adjustment to Cash and Cash equivalents has been presented
because the Group believes that adjusted performance measures
(APMs) provide valuable additional information for users of the
financial statements in assessing the Group’s performance as Net
Cash is a better measure of liquidity.

Cash and Cash equivalents
Borrowings
Net Cash

2021
£m
52.8
(3.3)
49.5

2020
£m
53.9
(5.9)
48.0

Adjusted EBITDA
Adjusted EBITDA grew from £79.0m to £95.4m (21%).

Taxation
The effective tax rate for 2021 was 19% (2019: 14%). The underlying
rate in 2021 applied to trading profits was slightly above the 19%
statutory UK rate due to disallowable expenditure, the increasing
impact of higher taxation rates in European countries and an
upcoming change in tax rates in the UK from 19% to 25%, which is
increasing deferred tax charges in the year. We would expect these
trends to continue and hence to see the effective rate of tax
increase slightly above the UK headline rate in future years.

The rate in 2020 was depressed due to non-taxable income on the
disposal of our subsidiary, The Loop.

Gamma Communications plc Annual Report and Accounts 2021Net Cash and cash flows
The Group has Net Cash of £49.5m (2020: £48.0m) – “Net Cash” is
Cash and Cash Equivalents less Borrowings. The Cash and Cash
equivalents balance at the end of the year was £52.8m, a slight
decrease from the previous year and the Group had borrowings of
£3.3m (2020: £5.9m) which are held by trading subsidiaries outside
of the UK and pre-dated their acquisition by Gamma. We do not
class contingent consideration as debt for the purpose of quoting a
net cash figure.

Cash conversion from trading during the year increased from
previous years. The ratio of adjusted EBITDA to cash generated
from operations was 94% (2020: 89%).

Items which are not directly related to trading were:

• Capital spend was £16.8m, which is an increase from £15.4m in

the comparative period. This is discussed below.

• £49.3m was the total payment for acquisitions net of cash
acquired (2020: £47.7m) of which £40.8m was paid for the
acquisition of Mission Labs, £1.5m was paid in deferred
consideration for the acquisition of Exactive, £2.0m was paid to
acquire a SIP Trunk base from another carrier and £5.0m for the
exercise of options relating to HFO.

• £5.9m was received from the issue of shares (2020: £1.5m).

This significant increase on the prior year was as a result of the
reinvestment in Gamma by former shareholders of Mission Labs
(£2.8m) and HFO (£0.7m). The other share issues relate to
exercise of options held by employees.

• £11.7m was paid as dividends (2020: £10.4m).

Capital spend
Capital spend in 2021 was £16.8m (2020: £15.4m) as follows:

• £9.1m was the spend on maintaining and increasing capacity on
the core network as well as other minor items such as IT and
fixtures and fittings (2020: £9.5m).

• £4.8m was the capitalisation of development costs incurred

during the period (2020: £2.7m) – the increase is due to
development of our own voice applications products (in part
using the capabilities acquired with Mission Labs).

• £2.9m was spent with third-party software vendors for the

software which underpins our Cloud PBX products (2020: £3.2m).

Adjusted EPS (FD) and Statutory EPS (FD)
Adjusted EPS (FD) increased from 51.3p to 64.0p (25%). The growth
in adjusted EPS (FD) has been driven by the continued growth in a
difficult market as well as the acquisitions. Adjusted EPS is EPS as
adjusted for exceptional items and other items as defined in note 3
and a reconciliation to the statutory measure is shown in the table
on p34.

EPS (FD) decreased from 66.6p to 55.2p (-17%). The growth is lower
than the adjusted metric as a result of the exceptional income item
in the prior year relating to the disposal of The Loop.

Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position, are set
out in the Strategic Report. In assessing going concern
management and the Board has considered:

• The principal risks faced by the Group, discussed further in the

Annual Report for the year ended 31 December 2021.

• The financial position of the Group as well as budgets and

financial plans.

• The strong cash position – at 31 December 2021 the Group had
cash and cash equivalents of £52.8m (2020: £53.9m). Net Cash
(being cash and cash equivalents less borrowings) was £49.5m
(2020: £48.0m). All borrowings were acquired with acquisitions
made in the prior year.

• Future cashflows including liquidity and borrowings.

• Sensitivity analysis, which has shown that EBITDA would need to
decrease by 94% for the Group to need additional borrowing
(assuming no mitigating actions had been taken). We consider
this to be highly unlikely.

• The ongoing impact of COVID-19. Whilst this impacted new wins
in 2020 and slowed growth in 2021, the Group has continued to
grow. In the medium term, as a result of COVID-19, the adoption
of cloud services will accelerate and this reinforces our overall
UCaaS strategy.

The Directors are satisfied that the Group has adequate financial
resources to continue in operational existence for the foreseeable
future, a period of at least 12 months from the date of this report.
Accordingly, the going concern basis of accounting continues to
be used in the preparation of the Annual Report for the year ended
31 December 2021.

Dividends
The Board has proposed a final dividend of 8.8p (2020: 7.8p).
This is an increase of 13% and is in line with our progressive
dividend policy.

Subject to shareholder approval, the final dividend is payable on
Thursday 23 June 2022 to shareholders on the register on Friday
3 June 2022.

Andrew Belshaw
Chief Financial Officer

21 March 2022

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021ESG

Environmental,
social and
governance
report

Gamma takes its responsibilities towards the environment
seriously and it is systematically assessing its environmental
impacts and developing programmes to minimise them. The
Company is committed to social responsibility and embeds this
into its policies and practices. Gamma believes that sound
corporate governance is essential and that everyone within the
business has a duty to behave responsibly and ethically.

The ESG Committee oversees the development and activity of
Gamma’s ESG agenda, further details of which can be found on
page 64.

The Gamma Board adopted the UN Sustainable Development
Goals in January 2020 and since that time Gamma has assessed
each goal in depth to understand how the business is best placed
to make a meaningful contribution. Four goals were selected by
Gamma and these goals form the foundation on which to develop
its environmental, social, and ethical policies and will influence how
we do business in the future.

The goals are:

Goal 5: Achieve gender equality and empower all
women and girls

Goal 8: Promote sustained, inclusive and sustainable
economic growth, full and productive employment and
decent work for all

Goal 10: Reduce inequality within and among countries

Goal 13: Take urgent action to combat climate change
and its impacts

Gamma Communications plc
Annual Report and Accounts 2021

During 2021, supported by a specialist third party, Gamma
undertook a materiality exercise of environmental, social and
governance issues, with the aim of understanding the most
impactful sustainability objectives, target areas and high-level
actions that the Company should consider as part of its overall
strategic plan.

This exercise included peer reviews, analysis of current and
emerging regulation, and consultation with internal and external
stakeholders, including shareholders, to understand their views
and priorities. All of these activities enhanced Gamma’s
understanding of current expectations of its stakeholders.

The priorities identified as most material will be used to inform
Gamma’s ESG plans and strategic decision-making moving forwards.

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Employee
engagement

Climate
Change

EDI –
Equality, Diversity
& Inclusion

Privacy &
security

ESG
governance

Sustainability
reporting &
communicating

Ethical
supply chain

Waste and
resources

Renewable
energy

Anti competitive
behaviour

w
o
L

Low

Community
investment

Importance to external stakeholders

High

Environmental

Understanding environmental impact
Gamma recognises the increasing risk climate change poses to our
planet. Although Gamma as a service business has a lower impact
on the environment than many other businesses and many of its
services have a positive impact by reducing the need for travel,
Gamma understands that all companies have a responsibility to act.

Over the last 12 months Gamma has increased the scope of
reporting to include all acquisitions in Europe. Using this extended
scope in 2021 Gamma has set its baseline energy and carbon
emissions data which will be used to support future emissions
reduction targets, more detail of which can be found below.

Gamma is pleased to announce its commitment to move from a
Carbon Neutral business to become a carbon net-zero business by
2042, supporting both the Paris Treaty’s aims to limit the temperature
increase to 1.5°C globally and the UN Sustainable Development
Goal 13: Climate Action.

Gamma has also committed to set near and long-term Company-
wide emission reductions in line with climate science and with the
Science Based Target initiative (SBTi). The Company will seek
validation of its target within the SBTi timeframes.

Our carbon net-zero ambition Page 41

Environmental overview
Scan to watch a video of our Group
Sustainability Director, Sarah Kirton,
talking about our plans to become
Carbon Net-Zero.

Responsibilities
The Board has responsibility for oversight of environmental issues
and also risks related to climate change which are discussed below.
The CEO is responsible for executing strategies that have been
agreed with the Board which maintain the values to which Gamma
has subscribed since its foundation. Through the ESG Committee,
the Board also ensures that environmental policies and suitable
governance structures are established to align with Gamma’s
committed environmental targets.

As part of Gamma’s executive management team, the Group
Operations Director has responsibility for the Company’s
emissions reporting and carbon reduction planning. In addition, at
the end of 2021, Gamma appointed a Group Sustainability Director
responsible for the planning of all aspects of ESG, with specific
responsibility for Gamma’s Group environmental policy and carbon
net-zero commitment.

During 2021 Gamma appointed an Environmental Data Manager to
support the commitment to measure and reduce its carbon
emissions through a clear and science-based carbon net-zero plan.

Gamma has published a Group Environmental Management Policy,
available on the Gamma website, defining its commitment to
reduce its impact on the environment and outlining the controls put
in place to do so.

Measuring Gamma’s impact on the environment
Re-baselining of emissions
A baseline is a quantitative reference providing a basis for
comparison of energy/carbon performance over time. Gamma
specifies the period to which baseline data applies as one year. It
was important for Gamma to reset its energy and carbon emissions
baseline in 2021 for several reasons.

The first and most important reason is that the data presented for
emissions and energy consumption in 2021 relates to activities
across the Gamma Group. While previous disclosures did include
small operations in Hungary, Poland and Germany, the majority of
historical emissions reported derived from UK-based operations
and excluded acquisitions. These have now been included, with the
exception of Mission Labs in the UK that was acquired by Gamma in
March 2021. Mission Labs will be included in emissions calculations
from 2022 onwards as this will be the first full year as a Gamma-
owned company.

The acquisitions of Dean One and gnTel in the Netherlands (now
Gamma Communications Nederland), HFO Telecom in Germany,
and VozTelecom in Spain, supported by strong organic growth in all
markets, have increased the number of employees and floor space in
the business, reflected in the Group’s GHG reporting scope for 2021.

Furthermore, the re-baseline gives the Company an opportunity to
better define the remit on which Scope 3 emissions are reported.

The extent of emissions sources included in Scope 3 calculations
has increased year on year and in 2021 Scope 3 includes IT
equipment, hotel accommodation, and private commuting for the
first time.

The emissions generated by Gamma are reported within three
defined reporting scopes, as per the Greenhouse Gas Protocol.
Primarily used to identify sources of emissions and methodically
address their reduction, this data is also used to manage Gamma’s
carbon offset. All carbon offset projects are validated and verified
to the ‘Carbon Neutral Protocol’ global standard and carry
guarantees of origin.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021ESG continued

Scope

Description

How this applies to Gamma

Scope 1 – Direct
GHG emissions

CO2e emissions that come from sources that
are owned or controlled by an organisation.
Typically, these are emissions generated by
gas boilers and owned or leased cars, vans &
lorries. A telecoms specific example would be
an off-grid generator to power a base station.

Scope 2 – Indirect
GHG emissions

Scope 3 – Other
indirect GHG
emissions

Greenhouse gases released into the
atmosphere from the consumption of
purchased electricity, steam, heat and
cooling. Although the CO2e emissions result
from an organisation’s activities, they occur
at sources it doesn’t own or control. As a
result, they are indirect emissions.

Other emissions resulting from business
activities or sources connected to, but not
directly generated by the business itself for
example business travel, employee
commuting, supplier or distributor activity.

Gas boilers are used for building and water heating within Gamma
office premises.

Air conditioning units are operated in staff premises and data
centres that use refrigerant gases.

Off-grid generators are utilised at Gamma’s critical operational sites.

Gamma has a fleet of vehicles utilised by engineers for the
installation and repair of connectivity and communications services.

Electricity is used within office premises and dedicated data centres.

Gamma consumes electricity which incurs transmission and
distribution losses.

Gamma employees use trains, planes, taxis, ferries and hire cars for
business travel.

Gamma employees commute to and from offices and other areas of work.

Employees often stay in overnight accommodation when travelling.

Many Gamma employees work from home.

Waste and waste water is produced at facilities.

Gamma procures products from suppliers including capital goods.

Gamma utilises third party data centres and Points of Presence
across its UK and European networks.

Emissions are generated through the transportation and distribution
of products required for Gamma’s services.

Energy Performance
Due to ongoing business growth and because of its acquisitions,
Gamma’s total GHG emissions have increased year on year. This
increase is not unexpected, and the Company is in the process of
defining carbon reduction activities to support its carbon net-zero
commitment. Gamma acknowledges that further acquisitions,
coupled with more primary emissions data, will inevitably add to the
total carbon emissions and therefore, Gamma understands that
complementary metrics such as carbon intensity, regularly tracked
over time, are vital barometers of improvements and efficiencies made.

In order to normalise its energy and carbon management
performance the Company has chosen to define its emissions data

in relation to floor space. The largest source of Gamma’s GHG
emissions is derived from the use of electricity for its network,
data centres and offices. As such, tonnes of CO2e per total square
metres of floor space provides a consistent comparison of energy
efficiency and carbon management performance over time.

The carbon emissions intensity ratio data for 2021 reflects a
significant increase in floorspace (42.15%) because of the
acquisitions made to the business. An increase of 24% tCO2e per
sqm in 2021 is associated with Gamma’s acquisitions, an increase
in Scope 3 sources and improved data collection methods.

GHG Emissions Intensity Ratio

UK GHG Emissions (tCO2e)
Non-UK GHG Emissions (tCO2e)
Total GHG Emissions (tCO2e)
Total Floor area (m2)
GHG Emissions per sqm floor space
Total FTE
GHG Emissions per FTE

2018-2019*
1,620
81
1,701
8,964.6
0.190
980
1.74

2020*
2,409
120
2,529
9,174.6
0.276
1,163
2.17

2021
3,630
862
4,493
13,041
0.344
1,631**
2.75

Annual
Change
(%)
+50.71
+618.96
+77.67
+42.15
+24.64***
+40.24
+26.7

* 2018 – 2019 represents 12 months emissions data from July 2018 to June 2019. 2020 and 2021 represents 12 months emissions data from January to December.
** Total Group employees on 31 December 2021 was 1,745. Mission Labs employees (114) removed from this total as not in scope for environmental data reporting in 2021.
*** Reflects the increase in floorspace and emissions due to European acquisitions.

Gamma Communications plc Annual Report and Accounts 2021

Gamma emissions intensity (tCO2e/m2)

Gamma’s emissions by source

Gamma emissions by scope (tCO2e)
Location-based

4,000

Total (location based)

4,493

1,610

Gamma GHG emissions by source

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

2016/17

2017/18

2018/19

2020

2021

Gamma emissions by scope
Gamma’s GHG emissions have been quantified by applying the
most relevant emission factors. GHG emission factors relating to
the 2021 reporting period are predominantly sourced from DEFRA’s
2021 UK GHG Conversion Factors for Company Reporting. For air
travel, Gamma has elected to apply an Aviation Impact Factor (AIF)
of 1.2 for the 2021 GHG assessment as per the requirements of the
updated Carbon Neutral® Protocol.

3,000

2,461

2,330

2,529

2,443

2,000

1,000

1,701

2016/17

2017/18

2018/19

2020

440

2021

Scope 1

Scope 2

Scope 3

* GHG emissions data is location-based
** To calculate 12 months’ emissions for 2020, 18 months’ emissions data
was produced by a specialist third party and then apportioned between
reporting periods.

*** To allow for greater accuracy of GHG emissions reporting, in 2020 Gamma

moved the carbon emissions measurement from biennial to annual and aligned
the reporting period to the Company’s financial year. Emissions recorded
between July 2019 and December 2019 total 1,264 tCO2e. Of these emissions,
58 tCO2e were recorded under Scope 1, 539 tCO2e recorded under Scope 2,
and the total recorded under Scope 3 was 667 tCO2e.

Scope Emissions Source Category
1

Location

Direct emissions from owned, leased or directly
controlled stationary sources that use fossil
fuels or emit fugitive gases
Direct emissions from owned, leased or directly
controlled mobile sources
Emissions from the generation of
purchased electricity, heat, steam
or cooling
Water
Capital Goods
Upstream emissions from purchased electricity
and fuels
Transmission and Distribution (T&D) losses
Waste
Wastewater
Business Travel
Hotel Accommodation
Employee Commuting
Homeworking

tCO2e
87.6

352.3

2,443.2

2.1
15.1
781.2

200.4
6.4
3.9
71.9
20.5
129.9
378.8
4,493.3

Electricity 54%

Water & wastewater <1%

Waste <1%

Refrigerant gas 1%

Capital goods 1%

Business travel 3%

Mains gas & diesel 4%

Staff commuting
5%

Homeworking 15%

Scope 1 vehicles
17%

During 2021, electricity was Gamma’s largest source of emissions
(approximately 54%), followed by Scope 1 vehicles (17%) and
homeworking (15%). All remaining sources account for
approximately 14% of Gamma’s GHG emissions.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Taking climate action
Carbon Neutrality
Gamma has held ’Certified Carbon Neutral Company’ status
(conferred by Natural Capital Partners) since 2006. Over the
years Gamma has invested in a variety of "offset projects" which
have been a combination of environmentally friendly power
generation projects in the developing world and forest
conservation. Following a review of the projects in which Gamma
invests, and in an effort to align the investment with Gamma’s
aim to support the UN Sustainable Development Goals, the
offsetting projects for 2022 include:

• Acre Amazonian Rainforest Conservation Project (Brazil)

which aims to protect 105,000 hectares of rainforest in the
Amazon basin from deforestation. The project works with
communities and local groups to help protect ecosystem
services while providing alternative models of economic
development which avoid destruction of the forest.

• Meru and Nanyuki Community Reforestation Programme

(Kenya) offers hundreds of individual tree planting activities
and enables local communities to improve access to food and
create additional sources of income beyond subsistence
farming, helping to improve the biodiversity of the local area.

•

Improved Water Infrastructure Project (Uganda): this project
provides clean drinking water to small rural communities by
repairing and drilling new boreholes, helping to reduce water
scarcity. Boreholes can be used as water wells by installing a
vertical pipe casing and well screen, which allows water to be
extracted from the ground. By providing clean water,
communities no longer need to purify water through boiling.
This alleviates pressure on local forests, the predominant
source of firewood, and reduces greenhouse gas (GHG)
emissions.

ESG continued

Gamma’s energy usage

Electricity

Annual
Change
(%)
-8.39
-8.39

2020

2018/19

2021
8,542,592 8,011,782 7,339,515
839.71
916.62
36,953 2,008,130 +5334.28***
466.79
8,582,408 8,048,735 9,347,645
716.70

+449.29
+16.14
-18.30

1,067.14
39,816
91.57

1,016.88

877.21

84.98

2018/19
103,026
12.87
35,390
81.39
138,416
16.39

2020
86,881
9.94
26,591
61.16
113,472
12.37

2021
198,411
22.70
175,738
40.85
374,149
28.69

Annual
Change
(%)
128.37
128.37
560.89
-33.21
229.73
131.93

UK (kWh)
UK (kWh / m2)
Non-UK (kWh)
Non-UK (kWh / m2)
Total (kWh)
Total (kWh / m2)

Gas

UK (kWh)
UK (kWh / m2)
Non-UK (kWh)
Non-UK (kWh / m2)
Total (kWh)
Total (kWh / m2)

* 2018–2019 represents 12 months’ gas data from July 2018 to June 2019. 2020
represents 12 months’ emissions data from January 2020 to December 2020.

** For the purposes of measuring energy efficiency trends, electricity and gas

usage between 2018-2019 has been calculated retrospectively using the 2020
reporting boundary.

*** Reflects the increase in emissions due to European acquisitions

In 2021, Gamma used 9,347,645 kWh of electricity and 374,149 kWh
of gas. More than 78% of Gamma’s electricity usage in 2021 was
within the UK, with less than 22% used in non-UK locations.
In 2021, 53% of gas was used within the UK and 47% of gas used
in non-UK locations.

Waste management
As well as producing CO2, like any business, Gamma produces
other waste. The larger waste items are network assets which need
to be retired. These are disposed of in compliance with the Waste
Electric and Electronic Equipment Directive (WEEE Directive). Such
assets are sent to a WEEE certified operator which is engaged to
dispose of the items appropriately in compliance with the
certificates they provide to the Company.

In order to effectively implement the waste hierarchy once waste
has been produced, "office waste" is separated into recyclable and
non-recyclable materials in Gamma staff premises:

UK
Non-UK
Total

Tonnage
36.47
31.28
67.74

tCO2e
diverted
0.69
0.57
1.26

tCO2e
landfill
2.54
2.60
5.14

Total mass estimated diverted from landfill = 83.67%, equal to
0.04 tonnes per FTE.

Key Biodiversity Areas
Gamma’s operational impact on ecology and biodiversity is very
low. At Group level there are three offices within 1km of Key
Biodiversity Areas. Gamma will continue to assess proximity to
KBAs in respect of staff premises and other facilities.

Gamma Communications plc Annual Report and Accounts 2021

Reducing energy consumption
and environmental initiatives
Gamma understands that energy and carbon reduction is
the priority in implementing a science-based net-zero plan.

Emissions reduction projects have been ongoing throughout
2021. Gamma’s commitment to move its small fleet of cars and
vans over to self-gen hybrids is ongoing, with completion
expected in 2023. In line with the reduction activities for the
carbon net-zero plan, Gamma will then target the switch over
to electric vehicles prior to 2030.

Gamma continues to improve the energy efficiency of its
data centres and its technology. Annual capital expenditure
investment ensures that the Company deploys energy efficient
technology and continues to optimise its heating, ventilation and
air-conditioning in key data centres. A rolling programme of
decommissioning ensures that legacy and energy-hungry
infrastructure is replaced.

Gamma has partnered with Thales and announced that it will
switch the Gamma SIM supply with eco-designed card, made
from recycled refrigerators, further reducing its environmental
impact and contributing to a circular economy. You can read
more on page 9.

Gamma’s carbon net-zero ambition
Gamma acutely understands the need to contribute to the climate
challenge with ever more ambitious plans and targets. As such,
following the baselining of GHG emissions in 2021, Gamma is
committed to becoming a carbon net-zero company by 2042.

Net-zero requires a reduction in emissions to a point at which
Gamma can demonstrably show any remaining emissions are
business critical. Net-zero plans can be backed and verified by
science-based targets which quantifies what can be considered
‘residual’, e.g. total reduction =~90%.

Gamma has committed to set near and long-term Company-wide
emission reductions in line with climate science with the Science
Based Target initiative (SBTi) and the Company will seek validation
of its target within the SBTi timeframe of 24 months from commitment.

Gamma has constructed a plan over five, four-year carbon emissions
reduction periods, ensuring the Company’s efforts are consistent
with the need to decarbonise the wider economy at pace.

Goals
• Gamma will commit to reducing internal carbon emissions

through five key reduction periods – the two periods between
2022-2030 will target a 90% reduction of both Scope 1 & Scope
2 emissions, in line with the 1.5°C pathways.

• Gamma will seek to have net-zero plans ratified by external

accreditation (SBTi).

• Gamma is committed to maintaining Carbon Neutral status in the

interim period prior to achieving net-zero.

Gamma Aggregated Emissions Trajectory (Target) (tCO2e)

Stage 1
Baseline &
Planning
(2021-2022)

Stage 2
(2023-2026)
CR Phase 1

Stage 3
(2027-2030)
CR Phase 2 = -62%

Stage 4
(2031-2034)
CR Phase 3 = -71%

Stage 5
(2035-2038)
CR Phase 4 = -81%

Stage 6
(2039-2042)
CR Phase 5 = -90%

Stage 2 & 3 (2023-2030)
Emissions reduction targets in
line with 1.5C pathways:
Scope 1 = -90%
Scope 2 = -90%
Scope 3 = -10%
Total = -62%

Baseline =
4,493 tCO2e

Stage 4, 5 & 6 (2031-2042)
Emissions reduction targets in
line with 1.5C pathways:
Scope 1 = -95%
Scope 2 = -95%
Scope 3 = -82%
Total = -90%

Residual emissions
achieved (SBTi)

5,000

4,000

3,000

2,000

1,000

2021

2022

2023

2024 2025

2026 2027 2028 2029

2030

2031 2032 2033

2034 2035 2036 2037

2038 2039 2040 2041

2042

Scope 1

Scope 2

Scope 3

1.5C aligned emissions pathway

Residual gross emissions

Net Zero Emissions

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Mitigating actions
Gamma has strengthened the governance around potential climate
change impacts, ensuring that the Company submits to the Carbon
Disclosure Project (CDP) annually.

Activity required to support CDP disclosures include identification and
management of transition risks relating to regulation changes,
disclosure requirements and carbon offset costs. Gamma’s
environmental programme of work ensures that its understanding
of the market and emerging regulation is understood and assessed.
Any strategic acquisition will include climate-scenario planning
and emissions assessments to understand the potential impact on
the Company’s net-zero ambition and the risks outlined here.
Any new premises will also be assessed thoroughly in terms of
environmental credentials.

Gamma is committed to reducing its emissions and energy usage,
and the Company will continue to remain Carbon Neutral by
investing in carbon offset initiatives that are validated and verified
to recognised global standards (Verified Carbon Standard (VCS),
the Gold Standard, and Climate, Community and Biodiversity
Standards (CCB).

Gamma has announced a carbon net-zero plan, aiming to be
net-zero by 2042. To support its ambition, the Company has
committed to set near and long-term Company-wide emissions
reductions in line with SBTi, the Business Ambition for 1.5°C and the
UNFCCC Race to Zero campaign. Aligned to SBTi key principles,
Gamma’s net-zero commitment consists of five key emissions
reduction periods, facilitating the setting of interim targets to track
progress. Gamma has committed to cutting emissions in line with
halving emissions by 2030 and is aiming to have its target officially
validated by the SBTi within SBTi guidelines of 24 months.

Gamma’s business continuity planning is certified to the ISO22301
standard and the business can rapidly respond to climate-related
incidents. In the event of extreme weather Gamma has well-
rehearsed procedures to protect all critical business operations.
There are ‘hot standby’ operational sites, and the business can
operate almost entirely remotely with secure, multi-factor
authentication access to the network. Gamma has also installed
back-up generators at key network and customer support sites to
mitigate the risk of power cuts.

Gamma is also proud that one of its biggest contributions to
mitigating climate change is through the products that its
employees and customers utilise. Unified Communication products
enable users to reduce their travel and thus, reduce their own
carbon footprint.

Additionally, there exists an opportunity to extend Gamma’s waste
management processes to customers through the recovery,
re-use, and repair of consumables such as handsets and routers.

ESG continued

Gamma’s 2022 environmental targets
In 2022, Gamma will extend its emissions measurement to include
Mission Labs that was acquired in 2021.

Supported by its Ethical Procurement Policy, Gamma has started to
work with major upstream suppliers to understand the applicable
Scope 3 emissions and this work will continue into 2022 to
understand the greatest opportunity to influence reductions.

Gamma is certified with the ISO14001 for Environmental
Management in the UK and the Company will complete an
assessment to consider extending its scope to include its
European subsidiaries during 2022.

Climate-related business risks and opportunities
As well as working to reduce Gamma’s effect on the environment,
the Board has also considered the business risks which are
associated with climate change.

Working within the Company’s risk management framework and
using the Taskforce on Climate-related Financial Disclosure (TCFD)
scenario-based risk and opportunity assessment criteria, Gamma
has identified potential climate change risks, none of which are
considered of material impact at present. An extensive financial
impact analysis will be completed in 2022.

Transition risks are risks related to the transition to a lower-carbon
economy. These might include risks relating to policy and legal
changes, technology, market and finally reputation.

Physical risks are related to the physical impacts of climate change
in the short term (acute) or longer term (chronic). These risks may
have financial implications for Gamma, such as direct damage to
network assets, or indirect impacts from its supply chain.

Potential impact
The impact of both transition and physical risks to Gamma is
assessed to be minimal at present.

Gamma recognises that current and emerging regulations in both
the UK and Europe are likely to lead to enhanced disclosure
requirements, with additional metrics and monitoring. Gamma’s
expansion strategy, the demand for carbon credits, as well as
potential increases in carbon taxes, could have a negative impact
on its financial performance. Additionally, the Company’s existing
commitment to remain carbon neutral could become prohibitively
costly should carbon offset credits increase significantly in price.

Although Gamma’s energy costs are a small proportion of its costs,
the increasing demand for low carbon energy is likely to drive up
electricity prices, which will impact its operational costs. Given the
material importance of climate change to Gamma’s internal and
external stakeholders, as demonstrated by the results of a materiality
exercise conducted in 2021, Gamma considers that there is a risk of
reputational damage if it does not continue to respond appropriately
to reducing its contribution to global climate change.

Gamma has assessed the physical risks of climate change both in
the short term and longer term to be minimal. There is potential for
disruption to the power supply to Gamma’s data centres during a
prolonged, extreme heatwave, leading to higher consumption and
costs for cooling. Additionally, an acute flooding event would
increase the likelihood of damaged infrastructure both in buildings
(data centres/offices) and below ground level (network equipment).

Longer term, temperature increases in its key locations has been
identified as potentially impacting the cost of cooling offices and data
centres, as well as increasing Gamma’s impact on the environment
through carbon emissions. Wildfires are considered low risk overall
but using climate factors and scenario forecasting, Gamma
appreciates that this risk is heightened in Spain and Morocco.

Gamma Communications plc Annual Report and Accounts 2021Social

Gamma has established processes to consider the welfare
of all of its stakeholders systematically which are set out in
detail below.

Customers
Gamma produces products which allow end users to communicate
easily and reliably.

Gamma’s ethos is to provide a robust product at a fair price. Where
Gamma sells via channel partners the Company wants the partner to
make a fair margin for the value that they are adding to the end user.

The Company has a strong reputation for service and support, and
it invests time engaging with customers across a range of topics to
ensure the Company remains straightforward to deal with. Regular
satisfaction surveys are run across the UK businesses in order to
understand overall customer satisfaction levels and the ‘Likert
Scale’ continues to be used as the method to measure customer
satisfaction. Gamma is pleased to report a 68% CSAT rating in
2021 (2020: 69%) with improved engagement from its partners.
Gamma tracks an annual Net Promoter Score (NPS) and recorded a
positive score of 48 for 2021, which remains well above the industry
sector average.

Gamma continues to provide an online digital learning management
system called the ‘Gamma Academy’ to support channel partners
with their product knowledge and during 2021 a series of
independent knowledge bases have been launched to end users
with the aim of improving knowledge about how they consume
Gamma products and reduce the need for additional support from
channel partners.

Data protection and privacy
Gamma recognises its duty to ensure that any personal data that is
collected is properly protected and that the Company is
transparent and responsible in the way data is handled. Details
regarding Gamma’s privacy policy can be found on the website.

Social overview
Scan to watch a video of our Chief
People Officer, Chris Bradford, talking
about some key People initiatives.

Suppliers
Gamma works with carefully chosen suppliers. The main suppliers
are those who provide equipment (both for the Gamma network and
for onward sale to customers) and other telecoms businesses.

The process of improving and standardising the management of
suppliers is key to Gamma and is constant as the Company strives
for continuous business improvement. Preferred and strategic
suppliers have their performance managed, monitored and
reviewed to ensure the supply relationship always represents best
value to Gamma and to underpin constructive discussion and
resolution of any issues that might arise.

Employees are asked to ensure that any issues relating to the
supplier’s service provision, quality of goods or any other indicator
of performance (positive or negative) are reported to the appropriate
category procurement representative, so accurate performance
records can be maintained and supplier performance managed.

Regular performance reviews take place with key suppliers and
there is also a fortnightly ‘Supplier Management Meeting’ chaired
by Gamma’s procurement team, with inputs from key internal
representatives on behalf of its Commercial, Customer, Network,
Product and Regulatory functional areas. This forum is used to
discuss supplier performance and risks.

To ensure that Gamma’s business is conducted ethically,
sustainably and within the local law, Gamma has implemented an
Ethical Procurement Policy and expects its suppliers to meet the
principles outlined in the Policy.

This policy is designed to support the procurement of goods and
services from all its suppliers that minimise negative and enhance
positive impacts on the environment and society whilst meeting
business needs and maintaining alignment with its values. Gamma
encourages suppliers to require the same of their supply chains.

Gamma requires suppliers to complete an Ethical Procurement
Policy Questionnaire and assesses supplier responses as the
mechanism to assess these risks. The Company audits its supply
chain continuously to identify compliance risks. Failure to complete
the questionnaire or unsatisfactory responses may result in
suppliers being excluded from the Gamma supply chain.

Gamma people
Employee engagement
Employee engagement is fundamental to Gamma’s success at
retaining highly motivated employees and contributes to the
achievement of its strategic objectives.

By engaging with employees, the Company gives employees a
voice to create a culture in which everyone can thrive. Gamma
wants its people to bring their best selves to the working
environment which should be a place where they feel safe,
they belong, and they matter.

The majority of Gamma’s employees continued to work remotely
during 2021, and as seen in the previous year, engaging with staff,
understanding how they are feeling and giving them a voice
remained a high priority.

Gamma’s engagement tool, The Gamma Pulse, is a resource tool
for managers and employees that ensures Gamma not only engages
with its people in real time, but quickly gives insights to enable
actions to be implemented and to communicate results efficiently.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021ESG continued

Gamma Pulse surveys became biannual in 2021. The tool was
introduced to the European subsidiaries during 2021 and the survey
will extend out to the recent UK acquisition, Mission Labs, in 2022.

In September 2021 the Company surveyed 1,539 people, with an
81% participation rate and received 6,800 comments. The survey
results were communicated directly to the CEO, Senior Leadership
Team and the Gamma People Business Partners, and via a webcast
and email communication to all employees. In addition, the results
were explained to the Board.

2021 also saw the launch of an Employee Forum pilot in the UK.
Comprised of nominated employees with a range of diverse roles,
the forum aims to further strengthen the connection between
employees and management through sharing ideas and feedback
in a safe environment. It is the ambition to extend this forum more
widely in 2022.

Employee experience
Gamma is committed to lead with a culture that enables
employees to be their best, to feel connected to the Company, and
contribute to its long-term success. Gamma’s culture is underpinned
by four values – Aim High, Consider Others, Think Differently, and
Stronger Together.

The Company recruits people from a wide variety of backgrounds
which supports one of its values making the Company ‘Stronger
Together’. The experience Gamma employees have within the
Company remains a key focus of Gamma’s People Function agenda
and across the business in general.

Gamma has 12 qualified Mental Health First Aiders working on a
rota system across all UK office locations, sign posting to external
organisations where applicable and offering ‘in-house’ and
‘bite-sized’ training on topics such as managing remotely, dealing
with stress, and work-life balance. The Employee Assistance
Programme has provided employees with access to online
information and advice.

Financial wellbeing is also important to Gamma’s employees and
the Company offers a salary sacrifice pension scheme, life
assurance and income protection. Gamma offers a reward package
which includes: the government cycle to work scheme, childcare
vouchers, as well as access to a health cashback plan. The flexible
holiday trading package offers employees the opportunity to
purchase additional holidays or sell back holidays, with additional
trading windows open during the pandemic. Gamma has also
partnered with Reward Gateway to offer staff a variety of discounts
from retail outlets and access to health and fitness discounts
including gym memberships, saving employees over £38k in 2021.
Gamma offers enhanced adoption, maternity and paternity pay and
shared parental leave.

Wellbeing will continue to be a key focus in 2022 to help support
employees with advice, training and assistance where needed.

Sharing in the success of Gamma’s business growth
As well as providing long-term incentive schemes which offer
options to key employees, Gamma is keen to ensure that all
employees who would like to be shareholders can do so in a
tax-efficient way. In the UK Gamma has an optional Save As You
Earn (‘SAYE’) scheme which allows eligible employees to acquire
shares and a Share Incentive Plan (‘SIP’) to allow employees to buy
shares on a monthly basis. In 2021 34% (2020: 43%, 2019: 47%) of
eligible employees chose to participate in the SAYE scheme, with
options being granted over 155,514 (2020: 345,953, 2019: 377,800)
shares. The Gamma share schemes have been extended to Mission
Labs and there remains a desire to extend the plan out to the
European subsidiaries.

Health and safety
Gamma’s health and safety initiatives evolved in 2021, ensuring
employees had safe offices to return to. The Company’s return plan
focused on a steady increase, stopping at 50% capacity to ensure
social distancing could be supported to at least the end of 2021.
This has allowed employees the flexibility to use an office in which
to collaborate with colleagues safely as well as the ability to
continue to work remotely where possible.

As a service business, Gamma experiences few workplace injuries,
however during the return to the office Gamma experienced an
anticipated increase in very minor accidents and absenteeism
related to COVID-19 infections. Gamma had no fatalities or major
injuries related to work during 2021.

A quarterly report is provided to the Board that outlines accidents,
updates regarding health and safety initiatives, and relevant
metrics such as contact made to the Mental Health First Aiders.

Gamma’s health and safety policy has developed alongside the new
working environment and the Company continues to work with third-
party specialists to ensure its employees are supported and
environments are safe.

Skills and talent
Gamma is focused on attracting, retaining and developing the
critical skills required to support its strategic ambitions.

During 2021 a new induction and onboarding platform was launched
in the UK businesses. This provides a blended learning approach
to equip all new starters in the Company with a foundational
understanding of the Gamma Group, its products, markets and
customers, as well as its way of working, culture and values. The
platform supports the additional role-specific onboarding activity
that already takes place across the business, including interactive
technical product training.

Gamma has extended its learning and development offering during
2021, recognising that the skills and capabilities of its existing
employees need to change with evolving modern technologies.
The Company’s learning and development team has delivered
2,700 hours of technical product training across 186 different
courses to its customer services teams. This is supported by the
Gamma Academy, also available to internal users, on which 2,000
courses have been completed by 760 distinct internal users.

Gamma has also introduced LinkedIn Learning within its
Technology areas, providing employees with access to over 16,000
expert-led courses, enabling continuous growth and development.

Gamma Communications plc Annual Report and Accounts 2021Apprenticeships and Technology Graduate
Programme
The Gamma apprenticeship programme has continued during 2021
with 20 apprentices in various functions (2019: 24, 2020: 15). Most
of Gamma’s apprentices are continuing studies from previous
years, in some cases up to degree level, or existing employees
continuing their professional development through the
apprenticeship model.

Group employee numbers at 31 December 2021

Directors of Gamma
Communications plc
Senior Managers of the Company
(including subsidiary Directors)
Employees

Male

Female

Total

7 (78%)

2 (22%)

26 (96%)

1 (4%)
1,192 (68%) 553 (32%)

27
1,745

Alongside a newly launched Technology Careers Site, Gamma
has been working closely with the Graduate Recruitment Bureau
to onboard 10 graduates by September 2022. The aim of the
programme is to offer graduates experience of four different areas
of technology across a two-year period. Gamma guarantees the
graduate a permanent position at the end of successfully
completing the programme.

Gender pay gap
In 2022 Gamma will continue to assess its gender pay gap and look
at ways to continually support closing the gap between male and
female employees and working to ensure that all employees are
treated fairly.

Group employee numbers at 31 December 2020

Directors of Gamma
Communications plc
Senior Managers of the Company
(including subsidiary Directors)
Employees

Male

Female

Total

8 (80%)

2 (20%)

28 (97%)

1 (3%)
1,057 (69%) 473 (31%)

29
1,530

Whistleblowing Scheme
Gamma has a Whistleblowing Policy and reporting system via an
independent third party available to all employees, workers,
suppliers, customers and other relevant third parties.

The gender pay gap report for the snapshot date of 5 April 2021
shows 1,123 employees within the Gamma Telecoms Holdings Ltd
UK workforce, excluding Mission Labs: 783 men and 340 women.

The approach provides employees with a confidential channel in which
to raise any wrongdoing anonymously. The system is available 24/7
either online or via the telephone with multi-language functionality.

To ensure concerns are treated objectively, wrongdoing reports
initially are sent directly from a third-party provider to Gamma’s
Whistleblowing Officers who are Independent Non-Executives on
the Board. After an initial assessment, the report will either be
delegated to a panel which is made up of representatives of
Gamma’s Senior Leadership Team or the Whistleblowing Officers
may choose to deal with it independently, including obtaining
external advice. Gamma has trained appropriate level employees to
manage the investigation process. Reports of wrongdoing
concerns are reported to the Board on a regular basis.

The Gamma induction programme explains the Whistleblowing
approach to all new starters and Gamma remains committed to
providing awareness and training to existing staff.

Gender
Male
Female

% of Workforce
2021 vs (2020)
69.72 (69.60)
30.28 (30.40)

Below is the data from the UK Gender Pay Gap analysis.

The median pay gap is the difference between the midpoints in the
ranges of hourly earnings of men and women. The mean gender
pay gap is the difference between the average hourly earnings of
men and women.

Pay and Bonus Gap

Pay Gap
Bonus Gap

Mean %
2021 vs (2020)
19.60 (25.45)
59.41 (63.27)

Median %
2021 vs (2020)
19.80 (23.19)
20.07 (26.47)

Proportion of Males and Females receiving bonus

Gender
Male
Female

Pay Quartiles

Quartile
Upper
Upper middle
Lower middle
Lower

% receiving a bonus
2021 vs (2020)
92.66 (94.57)
94.00 (93.56)

Male %
2021 vs (2020)
77.94 (80.53)
75.00 (72.41)
62.99 (61.83)
62.99 (63.60)

Female %
2021 vs (2020)
22.06 (19.47)
25.00 (27.59)
37.01 (38.17)
37.01 (36.40)

Gamma operates in a sector where there is a shortage of
technically skilled females who choose to pursue a career in
telecommunications and technology. As seen across the sector,
male employees continue to make up much of the workforce,
however, we are seeing improvements in the mean figures.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021
ESG continued

2022 Activity
In 2022, Gamma will be focusing on Equality, Diversity and Inclusion.
The Company has partnered with ENEI (Employers Network for
Equality and Inclusion) to complete a benchmarking exercise to
understand the gaps and strengths in its current approach. The
exercise will focus on key areas such as Gamma’s workforce,
strategy, leadership and accountability, recruitment and attraction,
training and development and other employment practices. The
outcomes will be used to set the ED&I strategy moving forwards.
Gamma will also collect demographics data to better understand
its workforce and align its future plans to support and strengthen
its approach to attracting, developing and retaining
underrepresented groups.

As part of Gamma’s goal to impact and inspire young people the
Company has formally partnered with Speakers for Schools and is
designing a nationwide programme to support young people with
understanding the technology industry, raising their confidence
levels, mentoring and providing opportunities for work experience.

Gamma is also targeting talent communities internally and
externally. Internally, the Company will be creating employee
communities, to strengthen inclusion and belonging.

Externally, its Recruitment team has started to build networks
to broaden the Company’s connections with specific groups,
focusing on Women in Technology, apprenticeships, and other
underrepresented groups. This will include participation in hosted
events and the creation of targeted recruitment campaigns to
attract a more diverse talent pool. Gamma’s Senior Leadership
Team has committed that, starting this year, all senior roles at
Gamma must have a diverse shortlist and Gamma will ensure its
partners in executive search are working to deliver this.

Giving something back
As part of the 2021 social plan within Gamma’s ESG strategy,
the Company is committed to supporting the communities in
which it is based and enhancing its charitable giving plan.

Supporting the UN Sustainable Development Goal 8: Decent
work and economic growth, Gamma’s technology teams have
continued to provide remote Hi-Tech Horizons sessions
through an initiative run by the Education Business
Partnership. The initiative aims to engage and inspire the
future workforce, raising awareness of the hi-tech sector and
the opportunities available.

Additionally, Gamma has partnered with Speakers for Schools
to deliver STEM insight to pupils in the North-West of England
during Virtual Work Experience week in April, and Digital Careers
in September. Gamma has a broad range of colleagues that
volunteer to support these events to help inspire students
and provide them with a wider perspective on what their
options are for their future careers and opportunities.

Working in the communities in which the Company operate,
Gammas ‘Direct’ customer business unit has worked with
local authorities in the Manchester and Portsmouth areas to
support their efforts in tackling digital poverty, address
emerging skills gaps and prepare young people for the world
of work in addition to providing employment in the area.

Gamma is committed to maintaining these relationships
as well as building new ones during 2022 and the Company
will endeavour to contribute to the UN Sustainable
Development Goal 10: Reduced Inequalities through the
extension of initiatives.

Gamma has always encouraged charitable initiatives , and
often a worthy cause will find people’s time just as valuable as
any financial donation. Employees can contribute one day a
year to help support their chosen charity or community
support project and Gamma has continued to provide match
funding across a range of charitable events that its staff has
completed during 2021. A Charity Forum exists to support its
employees to raise funds as well as use their charity day.

‘Giving something back’ is important to Gamma and its
employees and is aligned to its “Consider Others” value.
Driven by the Gamma Charity Forum, the Company will
continue to build on its community and charity plan in 2022 to
help make a difference to good causes and local communities.

Gamma Communications plc Annual Report and Accounts 2021Governance

External Certifications
Gamma holds various certifications within its UK business and it is
the intention to apply common standards to its recently acquired
subsidiaries within the UK and Europe. Gamma UK is certified to:

Gammas approach to governance
Gamma understands the importance of having a well-established
governance regime across its business and how fundamental this
is to its continued success. Gamma recognises that different
governance structures are appropriate at different stages of a
company’s development and as a rapidly growing business it is
seeking to keep the maturity of governance structures ahead of the
level that would be deemed appropriate for the size of the business.

•

ISO 27001: Information Security, certified since 2012

ISO22301: Business Continuity Management, certified
since 2013

ISO 14001: Environmental Management, certified since 2013

ISO 9001: Quality Management, certified since 2003

ISO 10008: Electronic Information Management, certified
since 2020

The Board is responsible to the shareholders for the proper
management of the Group and more on Corporate Governance can
be found in the Governance report.

Management oversees the establishment of controls across the
Company which are managed through a combination of internal
frameworks and externally recognised and audited standards.
These controls take the form of Group and local level policies which
determine the requirements for technology protocols such as
access to internal systems, critical processes such as commercial
approval or the management of network change, and the expectations
that Gamma places upon its employees and its stakeholders.
These internal controls align to and inform Gamma’s Corporate
Governance, reported on here, ensuring Board level oversight.

Governance process
Gamma’s risk management framework is closely coupled to
its governance priorities and this connection ensures that
these priorities are owned and managed at a suitable level within
the Company.

In 2021 Gamma built on its internal governance, with investment in
first line capabilities to bolster internal controls and moving internal
governance activity to be managed by a specialist team. The result
of this is an independent review of internal controls, driving a
continuous improvement ethos.

In 2021 Gamma launched a new policy framework to ensure its policies
are owned, defined, implemented, and updated in an effective way.
Specifically, this framework encourages greater consistency in
policy design, clear behavioural guidelines and encourages greater
use of conformance measures. All Group policies are signed off at
the relevant Board subcommittee. All policy is governed by the
internal governance team to drive consistency.

Current Group policies include:

• Anti-bribery and Corruption policy

• Environmental Management policy

• Ethical Conduct policy

• Political Contribution policy

• Risk Management policy

• Share Dealing policy

• Whistleblowing policy

The Company wants to ensure that it continues to empower
employees to challenge boundaries but without taking
inappropriate risk.

• Cyber Essentials, certified since 2019

Group subsidiaries ‘Gamma Benelux’, and ‘HFO’ attained ISO27001
certification in 2021.

In 2022 Gamma will begin to bring its standards under a single
Integrated Management System (IMS), which will ensure greater
consistency in the way in which these standards are managed
across the Gamma Group.

Internal Audit
Gamma’s internal audit structure ensures it reviews a wide range of
capabilities that align to its ISO certifications and Principal Risks.
The output of the audits is shared with the teams subject to the
audit to ensure a culture of continuous improvement is maintained.

Since the introduction of ISO standards within the Company
Gamma has been conducting regular internal audits to assure
ongoing compliance. Since this time the Company has continued
to extend the reach of its internal audit function and is now in its
second year of enhancing this capability, regularly working with an
external partner to provide audit resources when Gamma’s own
internal capability is not considered suitable. In addition, Gamma’s
UK business is regularly and successfully audited by its larger
Enterprise and Public Sector customers.

The Strategic Report was approved by the Board of Directors
on 21 March 2022

Andrew Belshaw
Chief Financial Officer

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Chair’s governance statement

Ensuring good
governance and
compliance

Role of the Board
• Responsible for the overall conduct of the Group’s

business including our long-term success.

• Setting the purpose, values, standards and strategic

objectives.

• Reviewing the Group’s performance.

• Ensuring a positive dialogue with our stakeholders is

maintained.

The Board is responsible for establishing and
maintaining the system of internal controls which has
been in place throughout 2021.

Dear shareholder,
Welcome to the Corporate governance report for the year ended
31 December 2021, which I am pleased to present on behalf of the
Board. 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 Group as a whole.

Corporate Governance Code
The Directors support high standards of corporate governance.
In 2018, the Board of Gamma formally decided to apply the QCA
Code. Gamma adopted this code as it feels it takes key elements
of good governance and applies them in a manner which is
workable for the different needs of growing companies. The
Group’s Corporate Governance Compliance Code document which
was approved on 3 September 2021 is available on the website
www.gammacommunicationsplc.com.

The Board
During the year, we have continued to keep under review the
composition of the Board and its committees to ensure that we have
the right balance of skills, independence, experience and diversity.

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. Please refer to the
Remuneration Committee report for further details around
executive pay and its composition.

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 AGM to communicate
with private and institutional investors and welcomes their
participation. The Chair also visits major shareholders.

Looking ahead
The Group’s commitment to strong corporate governance and
risk management will remain central to the business during 2022
and beyond.

Richard Last
Chair and Independent Non-Executive Director

Gamma Communications plc
Annual Report and Accounts 2021

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
Chair
The Chair is responsible
for the leadership of the Board.

Executive Directors
They are responsible for
running the Company’s
business.

Non-Executive Directors
They bring an independent
perspective to decision making;
they hold senior management
to account; they also support
and mentor the CEO and senior
management.

Richard Last

Chair and Independent Non-Executive Director

Andrew Taylor

Chief Executive Officer

Andrew Belshaw

Chief Financial Officer

Martin Lea

Senior Independent Non-Executive Director

Charlotta Ginman

Independent Non-Executive Director

Henrietta Marsh

Independent Non-Executive Director

Xavier Robert

Independent Non-Executive Director

Wu Long Peng

Non-Independent Non-Executive Director

Board Committees

Audit Committee
The Audit Committee’s role is: to provide effective
governance over Gamma’s financial reporting,
including the adequacy of disclosures made in the
financial statements; to review the performance of the
external auditors; to provide oversight of the Group’s
systems of internal financial control; to review the
internal audit function and to report to the Board on
these matters.

Audit Committee report
See page 60

Nomination Committee
The Nomination Committee assists the Board in
discharging its responsibilities relating to the
composition and make-up of the Board and any
Committees of the Board.

Nomination Committee report
See page 58

Remuneration Committee
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, Chair and other senior executives and, in
consultation with the CEO, for determining the
remuneration packages of senior executive managers.

Remuneration Committee report
See page 66

Risk Committee
The Risk Committee assists the Board in its duty to carry
out a robust assessment of the principal non-financial
risks facing the Company.

Risk Committee report
See page 62

ESG Committee
The main purpose of the Committee is to represent the
Board in defining the Company’s strategy relating to ESG
matters and in reviewing the practices and initiatives of the
Company relating to those matters ensuring they remain
effective and up to date. It oversees the development of the
Group’s ESG strategy and makes recommendations to the
Board. It also oversees the establishment of policies and
codes of practice and their effective implementation.

ESG Committee report
See page 64

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021

Board of Directors

Our highly
experienced Board

Our Board blends industry expertise with public
company experience and the knowledge and skills
of our long-standing shareholders.

Richard Last
Chair and Independent
Non-Executive Director

Andrew Taylor
Chief Executive Officer

Andrew Belshaw
Chief Financial Officer

Martin Lea
Senior Independent
Non-Executive Director

Charlotta Ginman
Independent
Non-Executive Director

Appointed to the Board:
2014

Appointed to the Board:
2018

Appointed to the Board:
2014

Appointed to the Board:
2020

Committee
Membership:
E R

Nationality:
British

Committee
Membership:
R E N R

Nationality:
British

Skills and experience:
A Chartered Accountant by
background, Andrew has
worked in both audit and
corporate finance at Deloitte
LLP 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
in 2007.

Andrew has a degree in
Maths from St John’s
College, Cambridge and
gained an MBA from Warwick
Business School. He is a
Fellow of the Institute of
Chartered Accountants in
England and Wales.

Skills and experience:
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 and was President and
CEO of Invitel from 2004 to
2011. Prior to Invitel, Martin
was Executive Vice President
of Intertek Group plc and
Managing Director of Racal
Telecom. Martin joined
Gamma in June 2014 and is
Chair of the Risk and
ESG Committees.

Martin has a BA first class
(Hons) degree in Business
Studies, and is a Fellow of
the Institute of Directors.

Other roles:
None

Committee
Membership:
A R

Nationality:
Finnish/British

Skills and experience:
Charlotta began her career
at Ernst & Young, where she
qualified as a Chartered
Accountant. She was then
appointed to a series of
senior roles in investment
banking with UBS, Deutsche
Bank and JP Morgan both in
London and Singapore,
where she gained
considerable M&A
transactional experience.

Charlotta has also held senior
roles within Nokia
Corporation, including acting
as CFO of its luxury mobile
phone division Vertu
Corporation Limited.

Other roles:
Charlotta is a Non-Executive
Director and Chair of the
Audit Committee of two
investment trusts, Polar
Capital Technology Trust
PLC and Pacific Asset Trust
PLC, as well as AIM listed
Keywords Studios plc. She is
also a Non-Executive
Director of Unicorn AIM VCT
PLC, a Venture Capital Trust,
and AIM listed Boku Inc.

As three of Charlotta’s roles
are with investment
companies that have only 4-5
meetings a year and the
others are all AIM listed, with
less regulatory burden than a
premium listing, Charlotta
has sufficient time to devote
to each of her roles.

Committee
Membership:
E R

Nationality:
British

Skills and experience:
Andrew has over 20 years’
experience in the
telecommunications
industry, and has a
demonstrable track record
of achievement in previous
roles, both in the UK and
internationally.

Previously, Andrew was Chief
Executive Officer of Nomad
Digital, a provider of IP
connectivity and digital
solutions to the global
transportation sector. In this
role, Andrew was responsible
for establishing Nomad as a
leader in the sector, and when
acquired by Alstom in 2017,
was serving over 50 global
customers from 20
international offices.

Before joining Nomad,
Andrew was Digicel’s
Regional Chief Executive
Officer. In this role, Andrew
had responsibility for all fixed
network services and
business/ ICT solutions
across 26 international
markets.

Prior to this, Andrew was
Chief Executive of Intec
Telecom plc, a global
provider of operational and
business software solutions
to the telecommunications
industry. Intec was acquired
by CSG in 2010.

Other roles:
Non-Executive Director
at Iomart PLC (started
1 August 2021).

None

Committee
Membership:
N E R R

Nationality:
British

Skills and experience:
Richard has over 30 years’
experience in technology
and communication sectors
having worked at board level
for a number of publicly
quoted and private
companies in these
industries.

Richard is a Fellow of the
Institute of Chartered
Accountants in England
and Wales.

Other roles:
Richard is Chair and
Non-Executive Director of
Hyve Group plc, a leading
international exhibition and
conference organisation
listed on the London Stock
Exchange and of AIM-listed
Tribal Group plc, an
education software, systems
and services group. He is
also a Non-Executive
Director of Corero Network
Security plc, an AIM-quoted
IT security solutions provider.

Gamma Communications plc Annual Report and Accounts 2021Henrietta Marsh
Independent
Non-Executive Director

Xavier Robert
Independent
Non-Executive Director

Wu Long Peng
Non-Independent
Non-Executive Director

Appointed to the Board:
2019

Appointed to the Board:
2020

Appointed to the Board:
2014*

Committee
Membership:
R R

Nationality:
French

Skills and experience:
Xavier is a senior private
equity professional with
more than 20 years of
experience in M&A and
investment, deal experience
across Europe and the US.
He is the Chief Investment
Officer of the global private
equity firm Bridgepoint and
sits on the Executive and
Investment Committees.
Previously Xavier was in
charge of technology
investment globally for his
private equity firm.

Other roles:
Xavier is Chairman of
Qualitest, the largest
privately-owned software
testing company. He is also
on the Board of Kyriba, the
#1 software solution for
corporate treasury
management.

Committee
Membership:
A E N R

Nationality:
British

Skills and experience:
Henrietta has more than 30
years’ experience in
investment and financial
services having worked for 3i
Group, Morgan Stanley and
ISIS Equity Partners (now
Living Bridge Equity Partners)
where she founded and
chaired the AIM VCT
Managers Group. She was
formerly a Non-Executive
Director and Chair of the
remuneration committees at
Electric Word plc, Alternative
Networks plc and Dods Group
plc, all of which were traded
on the Alternative Investment
Market (AIM) and discoverIE
Group plc, which is listed on
the London Stock Exchange.

Henrietta has an MA in
Mathematics from
Cambridge University and an
MBA from INSEAD.

Other roles:
Henrietta currently serves as
a Non-Executive Director at
Herald Investment Trust,
which is listed on the London
Stock Exchange. She is a
member of the LSE’s AIM
Advisory Group.

Committee
Membership:
A E N

Nationality:
Singaporean

Skills and experience:
Long Peng has been a
Director of Gamma entities
since 2011. He was the
Executive Director of Kuok
(Singapore) Limited until
2017 and has over 30 years
of experience in finance and
corporate affairs over
various industries.

Long Peng is a Fellow
Member of the Association
of Chartered Certified
Accountants, United
Kingdom and a Member of
the Institute of Singapore
Chartered Accountants.

Long Peng is a “non-
independent non-executive”
as at the time of float he was
the representative of one of
our founder shareholders.
He sits on the Audit
Committee as he is a
Chartered Accountant and
has significant experience as
a CFO of a number of
companies (albeit he is now
retired from executive roles).
The Board feels that it is
better to have Long Peng sit
on the Audit Committee
given his experience and
expertise even though he is
technically “non-independent”.

Other roles:
Long Peng is a Non-Executive
Director and a Member of the
Audit and Risk Committee of
Mapletree Commercial Trust
Management Ltd.

Key to committees
at 31 December 2021

Committee Chair

A Audit
N Nomination
R Risk
R Remuneration
E ESG

Tenure (since listing in 2014)

0-5 years

+5 years

Independence

Independent Non-Executive

Non-Independent Non-Executive 1

Executive

Board gender

Male

Female

* Long Peng was a Director of the

previous holding company from 2011.

At the AGM on 20 May 2021 Alan
Gibbins and Andrews Stone stood
down from the Board.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Senior Leadership Team

Our Senior
Leadership Team
We have a strong and talented leadership team
who support the Board and are responsible for
day-to-day operations within the business.

Gamma Communications plc Annual Report and Accounts 20211 Andrew Taylor
Chief Executive Officer

3 Malcolm Goddard
Group Commercial Director

4 Phil Stubbs
Chief Technical Officer

Biography available on page 50
Board of Directors.

2 Andrew Belshaw
Chief Financial Officer

Biography available on page 50
Board of Directors.

Malcolm joined Gamma in 2005
bringing over 15 years’ experience in
M&A, multi-national 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.

Phil joined Gamma in 2018 to lead the
Company’s technical strategy and
manage the end-to-end design and
development of the Gamma network
and products. He has over 20 years’
experience in delivering high value
solutions within communications
companies, both within network
operators and solution vendors.

Phil spent the early part of his career
in software development at Vodafone
and has degrees in Electronic
Engineering and Mathematics.

5 Chris Wade
Chief Marketing and Products
Officer
Chris joined Gamma in December
2020 from Aptitude Software where
he held the role of Chief Product
Officer. Prior to this Chris held a
number of leadership roles in
strategy, product management and
marketing in several different
operating businesses within The
Sage Group plc, one of the leading
provider of business management
solutions to SMEs globally.

Chris holds a MPhys in Physics from
Jesus College, Oxford.

6 John Murphy
Group Operations Director

7 Chris Bradford
Chief People Officer

John joined Gamma in 2011 bringing
over 15 years of experience
delivering successful customer
service projects and large financial
programmes within the telecoms,
financial services and utilities
industries. Having previously spent
eight years as a change management
consultant, he then took an
operational role for Gamma in 2013
and since that time has worked in
various senior operational roles
before being appointed to Group
Operations Director in 2018.

Chris joined Gamma in 2021 to
lead the Company’s People and
Engagement strategy, having
worked as a Board level HR leader,
and subsequently as a consultant,
on business transformation and
organisation design programmes
for organisations across multiple
sectors and geographies such as
Vodafone, Equinix, Aviva Investors,
the Financial Ombudsman
Association and the British Olympic
Association.

She holds a first class honours degree
in English from Leeds University.

8 Andy Morris
Chief Strategy and Operating
Officer
Andy joined Gamma in 2006 and has
experience in establishing and
running high-quality, customer-
orientated operations. In his
previous roles at Cable & Wireless,
he successfully ran a business unit
responsible for 12 of the entity’s
largest corporate customers
including Marks and Spencer and
Alliance and Leicester. He has also
been involved with a number of
telecom start-ups in Europe.

Andy spent the early part of his
career with GEC Marconi Aerospace
and is an Engineering graduate of
Nottingham Trent University.

9 Daryl Pile
Managing Director – UK Indirect

Daryl joined Gamma in 2003 and has
been central to the development
and execution of our Indirect Sales
strategy which has delivered
sustained revenue and margin
growth every year. With over 25
years of experience, he previously
held a number of senior business
development roles at Telia, Uniworld
and Gamma. Prior to his current
position, Daryl was Director of Public
Sector at Gamma, joining the senior
leadership team in 2015.

Daryl is a graduate of the University
of Surrey with a degree in
Economics.

10 David Macfarlane
Managing Director – UK Direct

David joined Gamma in 2012
following Gamma’s acquisition of his
managed services business
Varidion Limited and now heads up
the UK Direct division.

Prior to this, David was the CTO at
Sirocom and latterly the Group CTO
at Azzurri Communications and has
over 25 years’ experience in creating
and delivering managed services.

11 Gerben Wijbenga
Chief Executive Officer –
Gamma Communications
Benelux
Gerben joined Gamma in August
2020 taking full responsibility for
business activities across the
Netherlands. Gerben worked at KPN
for 10 years. After KPN Gerben was
Directeur Général at Simyo France
and CEO at Ortel Mobile, an ethnic
MVNO with activities in six
countries. Gerben spent time at
Telefonica (Deutschland) and Tele2
(The Netherlands), where he was the
CEO of Blau Mobilfunk and
Managing Director of the Consumer
market, respectively. In his most
recent role, Gerben was CEO at
Lebara Deutschland, a market
leading MVNO based in Düsseldorf.

12 Xavier Casajoana
Chief Executive Officer –
Voz Telecom
Xavier joined Gamma in April 2020
following Gamma’s acquisition of
Voz Telecom.

After more than 10 years in
Information Systems Management,
Xavier joined Worldonline as
Director of Information Systems.
After merging with Tiscali, he
became Director of the Business
Services Division and later held the
role of General Manager for Spain. In
February 2003 he co-founded Voz
Telecom as the CEO.

He has a degree in Computer
Science from the Universitat
Politècnica de Catalunya and a
Masters in Business and Technology
from the Universitat Ramom Llull.

13 Achim Hager
Chief Executive Officer – HFO

Achim joined Gamma in July 2020
following Gamma’s acquisition of
HFO Holding. He founded HFO
Holding in 1998.

After an apprenticeship in the
SchmidtBank, he studied business
Economics.

Achim is member of the supervisory
board of the German Carrier
association Breko and has been
supporting different non-
commercial regional activities
throughout his career.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Corporate governance report

Corporate
governance report

Operation of the Board
The Board comprises of eight Directors, two of whom are Executive
Directors and six of whom are Non-Executive Directors, reflecting a
blend of different experience and backgrounds.

Of the Non-Executive Directors, the Group regards Richard Last,
Martin Lea, Charlotta Ginman, Henrietta Marsh and Xavier Robert
as Independent Non-Executive Directors within the meaning of the
QCA Corporate Governance Code (2018 edition).

The Board is responsible to the shareholders for the proper
management of the Group. It meets regularly, 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 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 for review by the Board are communicated in advance of
formal meetings. All of our Directors are subject to election by
shareholders at the first AGM after their appointment to the Board.
Thereafter, all Directors are subject to re-election by shareholders
at each AGM.

The Chair and Non-Executive Directors have other third-party
commitments including directorships of other companies. The
Company is satisfied that these associated commitments have no
measurable impact on their ability to discharge their
responsibilities effectively.

Board activities

Strategy
• Approved the proposed acquisitions of Mission Labs.

• Reviewed other potential acquisition targets which did not

complete or were ongoing at year end.

• Reviewed the Board composition of Non-Executive Directors.

• Reviewed the Board composition of Executive Directors.

• Discussed 2026 strategy planning.

Operational
• Monitoring the focus of the software development team.

• Reviewing the product launches (e.g. Horizon Contact).

• Discussing the integration plans for the European business units.

• Reviewed operational changes as a result of the COVID-19

pandemic including hybrid working arrangements.

Financial performance
• Monitored 2021 performance against the approved budget.

• Approved the 2020 Annual Report and Accounts and determined

they were fair, balanced and understandable.

• Approved the 2021 half-year results.

• Approved the final dividend for 2020 and 2021 interim dividend.

• Approved the 2022 budget.

• Received reports from the Audit Committee concerning the

overall level of financial governance of the Group.

Board meeting attendance

Board meeting

Audit Committee

Remuneration
Committee

Nomination
Committee

Risk Committee

ESG Committee

Executive Directors
Andrew Taylor
Andrew Belshaw
Non-Executive Directors
Richard Last
Alan Gibbins
Charlotta Ginman
Martin Lea
Henrietta Marsh
Xavier Robert
Andrew Stone
Wu Long Peng

11/11
11/11

11/11
4/5
11/11
11/11
11/11
11/11
4/5
11/11

n/a
n/a

n/a
1/1
4/4
n/a
4/4
n/a
n/a
4/4

n/a
n/a

7/7
n/a
n/a
7/7
7/7
7/7
n/a
n/a

n/a
n/a

3/3
1/1
n/a
3/3
2/3
n/a
1/1
3/3

4/4
4/4

4/4
2/2
1/1
4/4
n/a
4/4
2/2
n/a

4/4
4/4

4/4
n/a
3/3
4/4
4/4
n/a
n/a
4/4

For changes in Committee memberships please see the Committee reports.

Gamma Communications plc Annual Report and Accounts 2021Corporate governance
• Reviewed and approved the Notice of AGM and corporate

governance disclosures.

• Considered the key provisions of the QCA code and its

application to the Company.

• Reviewed and approved the Matters Reserved for the Board and

each of the Committees’ terms of reference.

• Discussed the findings of the Board evaluation and agreed

actions for the following year.

• Chair and Non-Executive Directors met without the Executive

Directors present.

• Review and approval of Group level policies.

Risk
• Reviewed the status of the principal risks and progress with the

implementation of any mitigation plans.

• Received regular reports from Chairs of the Committees on

matters discussed.

• Received updates on regulatory developments.

People and culture
• Discussed talent, diversity and succession planning.

• Reviewed the composition of the Senior Leadership Team in the
UK and equivalent management groups for the overseas entities.

• Reviewed the results of the employee surveys.

• Reviewed updates regarding health and safety within the Group.

• Approved the appointment of Bill Castell as CFO (start May 2022).

• Approved the appointment of Andrew Belshaw (incumbent CFO)

as Deputy CEO (start May 2022).

• Reviewed the Company’s values.

Shareholders
• Reviewed feedback following the virtual investor roadshows and

other institutional shareholder meetings.

• The Chair met with shareholders as requested.

Time commitment
The Executive Directors are expected to devote substantially the
whole of their time, attention and ability to their duties, whereas, as
one would expect, the Non-Executives have a lesser time
commitment. The Non-Executive Directors are required to spend
sufficient time in the business to discharge their responsibilities.
Typically, this is 50-60 days per year for the Chair, 25-30 days per
year for Independent Non-Executives with chair of committee
responsibilities and 16-20 days for Non-Executives. The Chair and
Non-Executive Directors have other third-party commitments
including directorships of other companies. The Company is satisfied
that these associated commitments have no measurable impact on
their ability to discharge their responsibilities effectively. The
Executive Directors are permitted to have third-party commitments
with the permission of the Chair. The CEO has one external
appointment, details of which are included on page 50, the CFO has
no external commitments.

During 2021, 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
attendance 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 their comments to
the Board or the Board Committees in advance of such meetings.

Training and development
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.

The Board ensures that they keep their skills up to date. They are
made aware of accounting, regulatory, governance and GDPR
changes via papers to the Board, presentations and external
documents. An annual review of compliance with the AIM Rules is
also performed.

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.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Risk Committee
The Risk Committee assists the Board in its duty to carry out a
robust assessment of the principal non-financial risks facing the
Company (financial risk is considered by the Audit Committee). Its
main function is to review the risk register prepared and maintained
by management and to re-confirm that the principal risks have
been identified and (where appropriate) mitigated. These are
included on pages 22 to 25.

The purpose of the Committee is to manage rather than eliminate
risk and therefore it cannot provide absolute assurance against any
one risk. The role of the Committee is to review reports from
management to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses identified are promptly remedied. It will also indicate a
need for more extensive monitoring.

ESG Committee
The main purpose of the Committee is to represent the Board in
defining the Company’s strategy relating to ESG matters and in
reviewing the practices and initiatives of the Company relating to
ESG matters ensuring they remain effective and up to date. It
oversees the development of the Group’s ESG strategy and makes
recommendations to the Board regarding it. It also oversees the
establishment of policies and codes of practice and their
effective implementation.

Stakeholder engagement

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 AGM to communicate with
private and institutional investors and welcomes their participation.
All the Non-Executive Directors and, in particular, the Chair and the
Senior Independent Non-Executive Director are available to meet
with major shareholders, if such meetings are required.

Corporate governance report continued

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.

The Nomination Committee concluded that it would be beneficial for
there to be an externally-facilitated Board performance review and
this review (which will complete within 2022) is currently underway in
conjunction with Board Excellence Ltd. The scope includes evaluation
of the performance of the Board, the Board Committees, individual
Directors and of the Chair.

Board Excellence Ltd was selected via a competitive procurement
process. It has no connection with the Company or any Director,
although the Chair has been subject to their review process in
another company.

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 60.

Remuneration Committee
The make-up and workings of the Remuneration Committee,
together with details of the Directors’ remuneration, interest in
options and information on service contracts, are set out in the
Directors’ Remuneration report. No Director is involved in the
decision about their own remuneration.

Nomination Committee
The Nomination Committee assists the Board in discharging its
responsibilities relating to the composition and make-up of the
Board and any Committees of the Board. It is also 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 is 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 has considered the composition of the
Audit Committee and concluded that it is appropriate for Long
Peng Wu to sit on the Committee. Mr Wu is a Non-Independent
Non-Executive Director by virtue of the time he has served on the
Board but he is a Chartered Accountant and has significant
experience in the field of finance as both an executive and non-
executive which makes him an important contributor to the work
of the Audit Committee.

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. When we
recruit senior roles (including Senior Managers and Directors) we
work with agencies who can produce a diverse shortlist. The bonus
criteria of the senior team now contains a requirement that all
shortlists for management roles must be diverse.

Gamma Communications plc Annual Report and Accounts 2021Relations with employees/employee engagement
The Group recognises the 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 through attendance at employee webinars
which take place regularly throughout the year. In addition to this,
there is also a process in place which allows employees to contact
the CEO anonymously if they wish to bring items to the attention of
the Board. There is a designated Non-Executive Director for
engagement with the workforce.

Business relationships
Relationships with suppliers and customers are paramount to the
way that Gamma operates; the Senior Leadership Team and the
CEO engage on a regular basis with major suppliers and customers.

Suppliers
Gamma’s supplier payments policy is to always pay suppliers on or
before the agreed term (which will vary from contact to contract). If
an invoice is fully authorised on the system, it will pull through to the
next available payment run even if this is before the contractual due
date. For the year ended 31 December 2021, the average time
taken to pay invoices was 33 days.

Gamma currently has a small number of suppliers who are paid via a
netting agreement. The terms of these agreements are such that
payment can only be processed once the netting is agreed by both
sides. This can result in the days taken to pay being abnormally high
on some invoices and therefore influencing Gamma’s average days
taken to pay suppliers. Due to Gamma’s dispute policy whereby the
disputed value of an invoice is withheld from payment until resolved,
this can also result in average days taken to pay being influenced.

Any disputes are raised with the supplier directly at the earliest
opportunity. Any valid charges on an invoice are paid, with the
disputed amounts being held back until a credit is received or the
dispute has been resolved.

Customers (and customer satisfaction)
Each customer has a Business Development, Information
Assurance and Customer Development manager and is invited to
our Customer Roadshows, which this year were virtual. These
roadshows discuss the latest industry trends and opportunities for
the channel to target, an update on Gamma’s ever-expanding
UCaaS and Connectivity product portfolio and panel discussions
exploring the future of the Channel and define where the Channel’s
value lies in a digital world.

Signed on behalf of the Board by:

Richard Last
Chair and Independent Non-Executive Director

21 March 2022

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Nomination Committee report

Nomination
Committee report

Nomination Committee
The Committee is responsible for overseeing succession
planning for the Board and senior management and assists
the Board in discharging its responsibilities relating to the
composition and make-up of the Board and any
Committees of the Board.

Dear Shareholder,
On behalf of the Nomination Committee, I am pleased to present
our report for the year ended 31 December 2021. This report sets
out the Committee’s key activities in 2021 as well as the
Committee’s priorities for 2022.

The Committee met three times during 2021. The principal matters
dealt with included the following:

It is primarily responsible for:

• Evaluation of candidates for the CFO role.

• Leading the search process and making recommendations

• Creation of the role of Deputy CEO.

to the Board for the appointment of new Directors.

• Regularly reviewing the Board structure, size and

composition (including the skills, knowledge, independence,
experience and diversity), recommending any necessary
changes and considering plans for orderly succession.

• Making recommendations to the Board about suitable
candidates for the role of Senior Independent Director,
and membership of the ESG, Risk, Audit and
Remuneration Committees in consultation with the
Chairs of the relevant Committees.

Meetings attended:

Richard Last (Chair)
Alan Gibbins1
Martin Lea
Henrietta Marsh
Wu Long Peng
Andrew Stone1

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• Evaluation of potential independent non-executive candidates.

• Recommendation to the Board of changes to the composition of

the ESG and risk committees.

Appointment of CFO
The Chair engaged a leading firm of consultants who specialise in
the recruitment of CFOs into larger listed businesses. Once
appointed, the consultants worked with the Chair, CEO and CFO to
identify a long list of potential candidates. We ensured the long list
of candidates was diverse and the majority of candidates on the
long list were female, which reflects our efforts to make sure we are
recruiting from a wide range of backgrounds and ethnicities.

Following interviews with our consultants, CEO and the CFO, a
short list of candidates was prepared for review by the Chair. The
short listed candidates had further interviews with the Chair, CEO,
CFO, CPO and the Chair of the Audit Committee prior to an offer
being made. In addition the final candidate also met two additional
Independent Non-Executive Directors prior to appointment.

Alan Gibbins and Andrew Stone left the Committee at the time they
stood down from the Board at the AGM on 20 May 2021.

The outcome of this process saw Bill Castell appointed as CFO
to start on 1 May 2022.

Appointment of Deputy CEO
It was decided to create the new post of Deputy CEO. This role
will take on a range of strategic and operational responsibilities
to support the development and growth of the Group. These
responsibilities will include overseeing aspects of product
management, product development and operations and the
execution of M&A. It will also oversee Gamma’s group people
strategy, ensuring that Gamma attracts and retains great talent
while continuing to be a great place to work.

Following conversations between the Chair and the CEO, the
Committee decided to offer this new role to Andrew Belshaw (the
incumbent CFO). He will start on 1 May 2022 when the new CFO
arrives in post.

Gamma Communications plc Annual Report and Accounts 2021Appointments to Board Committees
During 2021 the Committee and Board completed a review of the
composition of the main Board Committees (Audit, Risk, ESG,
Nomination and Remuneration) having regard to skills, experience,
diversity and the time required of each of the Directors in
discharging their responsibilities.

On 3 September 2021, it was decided that Charlotta Ginman should
retire from the ESG Committee and join the Risk Committee. As
Chair of the Audit Committee, it was felt that it was more efficient
for there to be a clear link between the Audit and Risk Committees.

Reappointment of Directors
The reappointment of Directors is subject to their ongoing
commitment to Board activities and satisfactory performance.
All Directors will stand for re-election annually. The Committee has
confirmed to the Board that the contributions made by the Directors
offering themselves for re-election at the AGM continue to benefit
the Board and the Company should support their re-election.

Diversity
Gamma seeks to have a workforce which reflects the world we and
our customers live in, whilst facilitating the delivery of our strategic
goals. The Board and the Committee believe that diversity is a
wider topic than simply gender and in order to achieve the Group’s
future growth aspirations, Gamma will remain committed to building
a pipeline of diverse talent and to regularly review the HR processes,
including recruitment and performance management frameworks.

Succession planning
The Committee has considered not only succession plans for the
Directors but also has had oversight of a deeper review into the
Company’s management structure to identify those with potential
to develop in the longer term into future leaders of the business
taking into account the challenges and opportunities facing the
Company in the medium to long term.

The Board are looking to appoint a new Independent Non-Executive
to sit on the Board and the Audit Committee. Once they are
appointed and have joined the Board, Wu Long Peng will resign at
the appropriate time.

Priorities for 2022
The Committee’s priorities for the coming year will be continued
focus on increasing the diversity within the Board and Senior
Leadership Team and further work on succession planning activities.

Richard Last
Chair Nomination Committee

21 March 2022

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Audit Committee report

Audit Committee
report

Audit Committee
The Committee has written terms of reference,
which are available to view on the Company’s website
www.gammacommunicationsplc.com. The terms of
reference clearly define the Committee’s responsibilities
and duties and were reviewed by the Board during 2021 and
updated accordingly. In addition to the Terms of Reference,
the Committee has developed an annual agenda which
corresponds with the meeting schedule, to ensure all key
responsibilities are completed and managed.

Composition and attendance in 2021
The Committee members are Charlotta Ginman (Chair),
Henrietta Marsh and Wu Long Peng. Alan Gibbins retired from
the Board at the 2021 AGM at which point Charlotta Ginman
took over the chairing of the Audit Committee. The Audit
Committee, as a whole, has competence relevant to the
industry and both Charlotta Ginman and Wu Long Peng
have recent and relevant financial and accounting experience.
More information about the Committee members can be
found on pages 50 and 51. The Committee met four times
during the financial year with all members in attendance
at each meeting.

The meetings have been a mix of physical and remote
attendance, adapting and changing to pandemic guidelines,
working effectively in both scenarios.

Meetings attended:

Charlotta Ginman (Chair)
Alan Gibbins1
Henrietta Marsh
Wu Long Peng

4/4
1/1
4/4
4/4

Alan Gibbins left the Committee at the time he stood down from the
Board at the AGM on 20 May 2021.

Dear Shareholder,
I am pleased to present what is my first Gamma Audit Committee
report for the year ended 31 December 2021, having taken over the
role as Chair in May 2021. This report details the work of the
Committee over the past year, fulfilling our responsibilities to
provide effective governance over the Group’s financial activities.

Significant issues considered by the
Audit Committee during the year

Key reporting issues
During the year and as part of the year end procedures, the
Committee considered the following key financial matters in
relation to the Group’s financial statements and disclosures with
input from both management and the external auditor:

• Revenue recognition – The Audit Committee had a deep dive
session during the year with the Finance team, in an effort to
better understand in particular the revenue recognition practices
around accuracy of volume, timing and pricing as well as
definitions used in the Group’s revenue recognition work.

The Audit Committee considered the information presented and
are happy with the treatment.

•

Impairment Assessment – At the Audit Committee meeting in
September, management presented its annual impairment
assessment work. The Audit Committee challenged the
calculations used, including country specific discount rates. An
update of the work was presented again to the Audit Committee
at the February meeting at which point the Audit Committee
agreed with the underlying assumptions used and
management’s assessment.

• Business combinations – During the year the Audit Committee

reviewed the disclosures in relation to the Mission Labs
acquisition including the applied purchase price allocation and
concluded that the Committee agreed with management’s
treatment of the same.

Furthermore we also spent time talking about management
estimates and judgements in connection with bad debt provisioning
(IFRS 9), the accounting treatment of minority interests (HFO put
option) as well as going concern. We also reviewed issues in relation
to taxation and treasury and cash generating unit groupings.

Internal Audit
Gamma’s outsourced Internal Auditor, PWC, completed their first full
year in accordance with the plan as laid out in 2020. The activities of
the internal audit function are governed by an Internal Audit Charter.
During the year, the Audit Committee received updates on the
results of the internal audit work for the following areas:

• The governance control framework in the UK Direct Business

• Post acquisition key controls reviews for entities in Spain and

Germany

• UK Indirect revenue and billing assurance

The work did not reveal any significant failings in financial reporting
controls but did result in some action plans, with improved
processes and controls now being implemented by management
to enhance the control environment in each area.

The Audit Committee approved the internal audit plan for 2022, which
will focus on the following key financial processes:

• Cost of Sales for UK Indirect Business – Voice

•

IT General Controls for revenue in the UK Indirect Business

• Cyber incident simulation review

The PWC team is headed up by P-O Ahlstrom, who attends all Audit
Committee meetings and with whom I also meet separately on a
regular basis.

Internal Control Framework
Following rapid expansion and a number of acquisitions both in the
UK and Europe during the last few years, and in wake of the
outcome of the BEIS consultation, Gamma is in the process of
designing and documenting a Group-wide fit for purpose internal
control framework that can be utilised both internally, as well as by
the internal and external auditors going forward.

Gamma Communications plc Annual Report and Accounts 2021At the year-end Audit Committee meeting, management presented
a “Management Fraud Assurance” report outlining the fraud risk
areas, the relevant controls in place for the various processes and
business practices adopted for fraud detection and monitoring.
The Audit Committee found this statement useful and reassuring.

Annual Report and Financial Statements
The Board has asked the Committee to confirm that in its opinion
the Annual Report as a whole can be taken as fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s financial position, performance,
business model and strategy. In doing so the Committee has given
consideration to:

• The way the Strategic Report (including the Chair’s statement
and reports of the CEO and CFO) presents the Group and its
business, financial and business model and the metrics
management uses to measure performance.

• Whether suitable accounting policies have been adopted and
have challenged the robustness of significant management
judgements and estimates reflected in the financial results.

• The comprehensive control framework around the production
of the Annual Report, including the verification processes in
place to deal with the factual content.

• The extensive levels of review that are undertaken in the
production process, by both management and advisers.

• The Group’s internal control environment.

The Group uses certain APMs to present its results, that are also
used by management in running the business. These are non-
GAAP measures but are designed to provide the users of the
financial statements with additional useful information on the
ongoing trading performance of the business. An explanation of
the APMs and a reconciliation to the nearest statutory equivalent
measure is provided on page 34.

As a result of the work performed, the Committee has concluded
that the Annual Report for the year ended 31 December 2021,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s
performance, business model and strategy, and it has reported on
these findings to the Board.

Group policies
The following Group policies were formalised by the Audit
Committee during the year:

• Non-audit services policy

• Employment of former auditor’s policy

Furthermore, the Audit Committee reviewed and reapproved the
Group wide Treasury Policy during the year.

External Audit
Audit services
The auditor is appointed by the shareholders to provide an opinion
on financial statements prepared by the Directors. Deloitte LLP, the
Company’s current auditor, were appointed for the first time for the
year ending 31 December 2015. The year ending 31 December
2021 is the second year for Mark Tolley to act as lead partner,

with the previous lead partner Andrew Bond having stepped down
in 2020. In accordance with the FRC’s ethical guidelines, it is
anticipated that the audit will be put out to tender latest during 2024.

The scope of the current annual audit was agreed in advance with
the Committee with a focus on areas of significant audit risk and
the appropriate level of audit materiality. The Committee also had
discussions with the auditor on fees, internal controls over indirect
revenues, accounting policies and areas of critical accounting
estimates and judgements. The auditor attends all meetings of the
Audit Committee and reported to the Audit Committee on the
results of the audit work and highlighted any issue which the audit
work had discovered, or the Committee had previously identified as
significant or material in the context of the financial statements.

There were no adverse matters brought to the Audit Committee’s
attention in respect of the 2021 audit, which were material and
should be brought to shareholders’ attention.

Effectiveness
The Audit Committee monitored and evaluated the effectiveness
of the auditor under the current terms of appointment based on
an assessment of the auditor’s performance, qualification,
knowledge, expertise, results of regulatory reviews and deployed
resources and in light of the ongoing COVID-19 restrictions. The
auditor’s effectiveness was also considered along with other
factors such as audit planning and interpretations of accounting
standards and separate discussions with Management (without the
auditor present) and with the auditor (without Management
present). As Chair of the Committee, I also had discussions with the
audit partner outside the formal meetings throughout the year.

The Committee was satisfied that the audit was effective and that
Deloitte continues to demonstrate the skills and experience
needed to fulfil its duties effectively.

Independence and non-audit fees
A non-audit services policy was formalised during the year, in line
with the FRC ethical standards. Any non-audit services are required
to be pre-approved by the Audit Committee. During the year
Deloitte provided non-audit services to the Company of £51k
(2020: £48k) in relation to the performed interim reporting review.

In order to fulfil the Committee’s responsibility regarding
independence of the auditor, the Committee reviewed the senior
staffing of the audit, the auditor’s arrangements concerning any
conflicts of interest, the extent of any non-audit services, the fact
that no former external auditors have been employed in the
business, and the auditor’s independence statement. The
Committee was satisfied that the auditor remains independent.

For the financial year ending 31 December 2022, the Committee
has recommended to the Board that Deloitte LLP be reappointed
as auditor and the Board will be proposing their reappointment at
the AGM.

Charlotta Ginman, FCA
Chair of the Audit Committee

21 March 2022

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Dear shareholder,
I am pleased to introduce the Risk Committee report for the year
ended 31 December 2021.

We were very pleased to welcome Charlotta Ginman to the
committee towards the end of 2021, as well as being sorry to lose
the services of Alan Gibbins and Andrew Stone as they retired from
the board at the time of the AGM. The Committee now comprises
four of the Company’s Non-Executive Directors, the CEO, CFO and
the Group Operations Director.

Details of our overall risk management governance framework and
processes together with the Group’s principal risks and how we
mitigate them can be found on pages 20 to 25 of the Strategic Report.

Role of the Risk Committee
The Committee is responsible, on behalf of the Board, for ensuring
that management has designed and implemented appropriate risk
management and internal control systems, and for the ongoing
monitoring and review of the effectiveness of those systems. This
includes ensuring that the principal risks facing the Company are
identified and there is a system in place for scanning the environment
for new and emerging risks and responding to unexpected ones. It
also monitors the risk exposure of the Group and is responsible for
agreeing with management how the principal risks will be managed
and mitigated or tolerated. The Committee is further responsible
for reviewing and approving the remit of the risk management
activity and ensuring that it is adequately resourced and independent
and for ensuring that an appropriate and evolving risk awareness
and risk management culture exists throughout the organisation.

Risk Committee report

Risk Committee
report

Risk Committee
The Risk Committee focuses on “non-financial” risks that
are not normally within the remit of the Audit Committee.

It is primarily responsible for ensuring that:

• Management has implemented an appropriate and

effective risk assessment, management and internal
control system.

• There is an effective system in place for the identification

and assessment of new and emerging risks.

• The nature and extent of the principal risks faced

is understood and that they are effectively managed
and mitigated.

• An appropriate risk management culture exists within

the organisation.

Meetings attended

Martin Lea (Chair)
Andrew Belshaw (CFO)
Alan Gibbins1
Charlotta Ginman2
Richard Last
John Murphy (Group Operations Director)
Xavier Robert
Andrew Stone1
Andrew Taylor (CEO)

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1 Alan Gibbins and Andrew Stone left the Committee at the time they

stood down from the Board at the AGM on 20 May 2021.

2 Charlotta Ginman joined the Committee on 3 September 2021.

In addition to the committee members, quarterly meetings
are also normally attended by the Company Secretary, the
Chief People Officer, the Chief Strategy and Operating
Officer, the Group Financial Controller, the Information
Security Director, the General Council and Data Protection
Officer, and Internal Audit representatives from PwC.

Gamma Communications plc Annual Report and Accounts 2021Looking forward
Our Group continues to grow and also in the breadth and
sophistication of services provided as well as the diversity of
geographic markets within which we operate. These factors,
together with ongoing developments in environmental governance
expectations and standards, mean that risk awareness,
identification, assessment and management will continue to be an
important aspect of our overall activity and corporate governance.
The Committee’s focus in the coming year will be on continuing to
improve our effectiveness in the overall approach to risk
management, extending our refreshed risk management
framework and associated processes to incorporate all of our
non-UK subsidiaries, maintaining strong oversight of our cyber
security and data protection activities, overseeing management’s
review of our business continuity strategy policy and practices, as
well as continuing to increase risk and security awareness
throughout the organisation.

Martin Lea
Chair Risk Committee

21 March 2022

Activities of the Risk Committee in 2021
The last year bought with it the continuing challenge of the
COVID-19 pandemic, and its associated risks. Whilst Gamma’s
business and its supply chains generally maintained their resilience
to the short-term economic impacts, the crisis continued to
present challenges with only a partial return of our people to the
office being possible when the government guidelines permitted.
Throughout, looking after the safety and wellbeing of all our
employees, as well as ensuring continuity of service to our
customers, remained our priorities. In addition, following the end of
the “Brexit transition period” 2021 bought with it a number of supply
chain challenges, in particular as a result of the general chip
shortages. The Committee monitored this situation carefully and
were pleased that management’s proactive approach minimised
the impact on our customers.

During the year, based on an independent assessment by our
internal auditors, the Committee oversaw management’s
introduction of a refreshed and revised Group risk management
policy and framework. This has improved the consistency of how
risks are categorised, assessed and qualified as well as
strengthening individual executive ownership of individual or
groups of risks. Later in the year management also undertook an
externally facilitated review of the business’s principle risks as well
as an initial assessment of the Company’s approach to risk appetite
both overall and related to specific principle risks. The resourcing
around our risk and control management activities was
strengthened during the year with the appointment of a dedicated
Risk Manager in February, a Head of Governance in July and a new
Head of Business Continuity in December. The Committee also
continued to support management in further developing general
risk and security awareness throughout the business.

The Committee met four times in 2021, and in addition to the items
above conducted the following regular items of business:

• Reviewing any unexpected and material service incidents or

other corporate risk incidents.

• Reviewing the Company enterprise risk register covering

unplanned service disruption, data loss and cyber attacks,
over-reliance on suppliers, uncompetitive landscape, price
erosion, legal and regulatory non-compliance and unsuccessful
M&A strategies related risks focusing on the higher risk items
and the status of associated mitigation plans.

• Determining how Group acquisitions will be incorporated into the

overall Group risk management and control environment.

• Receiving cyber security assurance and awareness status and

planning updates from the Information Security Director.

• Receiving reports on the activities of the Group data

protection committee.

• Reviewing the appropriateness and adequacy of the Group’s

insurance policies and related cover.

• Reviewing the Risk management and Our principal risks sections

of the Strategic report within the Group’s Annual Report.

• Reviewing the Committee’s terms of reference.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021ESG Committee report

ESG Committee
report

ESG Committee
The ESG Committee is primarily responsible for:

• Overseeing the development of the Group’s ESG

strategy and governance structures and associated
goals and policies.

• Ensuring that management establish appropriate ESG

KPIs and related targets, and for overseeing their
ongoing performance measurement and reporting.

• Monitoring ESG trends and related standards and legislative
requirements and how those are likely to impact on the
Group’s strategy and financial performance.

•

Making sure that the Group is transparent in its reporting
of ESG matters to all its key stakeholders and that an ESG
awareness is promoted throughout the organisation.

The Committee’s terms of reference are available on the
Company’s website.

Meetings attended by committee members in 2021

Martin Lea (Chair)
Andrew Belshaw (CFO)
Charlotta Ginman1
Richard Last
Henrietta Marsh
Andrew Taylor (CEO)
Wu Long Peng

4/4
4/4
3/3
4/4
4/4
4/4
4/4

1 Charlotta Ginman was a member of the Committee until 3 September 2021.

In addition to the Committee members, quarterly meetings
are also normally attended by the Group Operations
Director, the Company Secretary, the Chief People Officer,
the Group Financial Controller, the Group Procurement
Director, and the General Counsel.

Dear shareholder,
I am pleased to introduce the ESG Committee report for the year
ended 31 December 2021.

There has been one change to the composition of the Committee
during the year with Charlotta Ginman ceasing to be a member
from 3 September 2021. The Committee now comprises four of the
Company’s Non-Executive Directors, the CEO, and the CFO.

Details of our Environmental, Social and Governance related
strategy, policies, activities and performance are presented on
pages 36 to 47 of the Strategic Report. In addition, more detailed
disclosures can be found in the ‘ESG Information Hub’ on the
Company’s website.

Role of the ESG Committee
The Committee is responsible, on behalf of the Board, for
overseeing the development of the Group’s ESG strategy and
governance structure and the establishment of related goals and
policies. It also should ensure that appropriate KPIs are established,
together with performance targets across each key area of the ESG
spectrum, and for overseeing their ongoing monitoring and reporting.
In addition, the Committee is responsible for making sure that the
Group is effectively monitoring ESG trends, and in particular the
evolution of standards and legislative requirements, and how those
may impact the Group in terms of strategy and financial performance.
The Committee works in conjunction with the Risk Committee to
oversee the identification and mitigation of risks relating to ESG
matters, and for the identification of related opportunities. It is also
required to ensure that the Group provides appropriate information
and is transparent in its reporting of ESG strategy, policies, activities
and performance to all its key stakeholders. The Committee is
responsible for ensuring that there is an evolving ESG awareness
and culture throughout the organisation.

Activities of the ESG Committee in 2021
The Committee held four quarterly meetings during 2021, in order
to review strategy, risks and opportunities, policy, governance,
reporting and communications developments across all areas of
ESG. In addition, it received regular updates from management
regarding the regulatory environment and the evolution of various
ESG standards. Good progress has been achieved in many areas
but our particular focus in the past year has been on Climate and
the Environment, and this is reflected in the more extensive
disclosures being made for the year ending December 2021.
Another key area of work has been to further strengthen the
governance and ownership around our ESG priorities. During the
past year an ESG Executive Steering Committee was established
comprising members of the Senior Leadership Team and chaired
by John Murphy our Group Operations Director. In addition, an ESG
working group was formed with representation from across the
Group both from within and outside the UK. This together with
regular all staff ESG briefings is helping to increase levels of
awareness and engagement across the Group.

Gamma Communications plc Annual Report and Accounts 2021In addition, during the year management commissioned a specialist
third party to undertake an ESG materiality exercise to help us
prioritise our ESG initiatives. This involved consultation with a broad
set of the Group’s stakeholders, including shareholders and
employees, and has given management and the Committee a clear
sense of the Group’s current position and the way forward.

The year has not only been about structure and prioritisation. There
have been initiatives in all three areas, particularly the Environment.
Our emissions reporting boundary and carbon offset has been
extended to cover our entire Group, including the non-UK
subsidiaries for Scope 1, 2 and 3 emissions and energy data. The
Committee is also pleased to have now approved a carbon net-zero
plan for the Group with a target date of 2042 and will now be able to
monitor the progress against that plan. We have also now included
waste management data for the UK business.

With respect to Social impacts, in our last report we highlighted the
UN Sustainability Goals where we thought Gamma could have the
biggest positive impact, and these included Goals 5 and 10 dealing
with Equality. Consistent with that the Group has identified Equality,
Diversity and Inclusion (ED&I) as a key focus area. Management is
undertaking an ED&I assessment of Gamma which will provide a
clear view of the opportunities and challenges enabling us to
develop a roadmap including the formulation of key metrics. In
addition, we have reviewed our existing ‘giving back’ initiatives with
a view to extending and enhancing these.

In terms of Governance, during the year several new policies have
been developed such as Group Environmental Management and
Group Ethical Conduct Policies which together with updated
versions of previously existing policies are now available on the
Company’s website. The Committee takes responsibility for
ensuring that all policies are subject to annual review.

Engagement with stakeholders
The Committee is responsible for ensuring that the Group provides
appropriate visibility of its ESG credentials to the investment
community, as well as other stakeholders. We are therefore pleased
to report that during the year the Company has been subject to its
first ESG assessments and received positive ratings from CDP and
MSCI as well as an updated assessment and rating from
Sustainalytics. We have also engaged individually with a number of
larger shareholders whose ESG teams have requested meetings.

Looking forward
Looking to the year ahead, the Committee will focus on several areas.
Considering the broad ESG scene, we will continue to develop a set
of core KPI metrics across all aspects using the World Economic
Forum (WEF) International Business Council (IBC) common metrics
as a guide. The Committee will also carefully monitor progress by
the International Sustainability Standards Board (ISSB) in achieving
a harmonised set of ESG disclosure standards.

On the environment, we will focus on commencing the detailed
planning around our carbon net-zero plan. Gamma has committed
to set near- and long-term Company-wide emissions reductions in
line with the Science Based Targets initiative (SBTi) and we will
submit our target for validation within the SBTi guidelines. We will
further improve the extent of our emissions measurement across
the Group and further enhance our disclosures consistent with the
TCFD recommendations. We will review the scope of our ISO 14001
(Environmental Management) UK certification and also plan to
extend certification to our non-UK operating subsidiaries where
that is appropriate.

We will continue to further develop our social programmes relating
to our employees and the broader community, and as part of that
continue to develop metrics and KPIs that will enable us to
objectively and transparently report our performance. In particular
our focus will be on the development of our Group ED&I strategy,
policies and programmes as well as the implementation of a more
structured approach to how we give back to the communities in
which we operate and beyond.

From a governance perspective, we will continue to review
key policies and monitor how they are being implemented as well
as introducing additional policies where gaps in our framework
are identified.

We remain strongly committed to our ESG programmes and the
overarching principles of the UN Sustainable Development Goals.
In order to reinforce this commitment we have also introduced ESG
objectives into the 2022 senior executive bonus scheme. We will
continue to develop Gamma’s credentials as an environmentally
and socially conscious business partner with high standards of
governance and will endeavour to transparently disclose our
progress and performance to all our key stakeholders.

We have observed interest from employees and potential new
recruits in certain ESG matters, for example in our plans for carbon
net-zero and ED&I. In a competitive recruitment market, we believe
our ESG efforts are a point of potential differentiation.

Martin Lea
Chair ESG Committee

21 March 2022

Some larger customers also require detailed questionnaires to be
completed covering ESG matters and the results contribute
directly to their decisions on contract awards. We consider that we
are currently well placed competitively but need to keep investing
in this area.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Remuneration Committee report

Directors’
Remuneration
report

Remuneration Committee
The Committee is primarily responsible for determining and
recommending to the Board the policy for the remuneration
and employment terms of the Executive Directors and the
Chair of the Board and, in consultation with the CEO, for
determining the remuneration packages of other senior
executives, as well as the Company Secretary and the
Group Counsel. The Committee is also responsible for the
review of share incentive plans and performance related
pay schemes and their associated targets, and for making
recommendations, to the Board in connection with them. It
is also responsible for the oversight of employee benefit
structures across the Group.

No Director or other senior executive is involved in any
decisions as to their own remuneration.

The Committee’s terms of reference are reviewed and
approved by the Board annually and are available on the
Company’s website.

Meetings attended

Henrietta Marsh (Chair)
Martin Lea
Richard Last
Xavier Robert

7/7
7/7
7/7
7/7

Directors’ Remuneration report structure
and content
This report for the year ended 31 December 2021 is split
into the following main areas:

Statement by the Chair of the
Remuneration Committee

Remuneration Policy

Annual Report on Remuneration

Page

Dear shareholder,
I am pleased to introduce the Directors’ Remuneration report for
the year ended 31 December 2021.

Performance and approach to COVID-19
This year has been one of continued positive progress at Gamma.
The Chair’s statement (on pages 2 to 3) provides an overview of the
strong financial performance and the strategic steps the Group has
achieved. The highlights include Revenue growth of 14% to
£447.7m, and growth of 25% in Adjusted Profit Before Tax to £77.2m.

These positive results have been achieved against ongoing
volatility in the economy caused by the COVID-19 pandemic.
Gamma has recurring revenues and supplies services for which, in
general, there has been an increasing requirement. It therefore has
experienced ongoing steady growth in revenues rather than a
sharp contraction and bounce back and has not needed to access
any government support schemes relating to COVID-19. Our
continued good growth underpinned a 13% increase in dividend to
shareholders in 2021, maintaining our record of having increased
our dividend every year since IPO in 2014, with a 13% increase
recommended for 2022. In the area of remuneration, we have also
sought to maintain a consistent approach. However, recruitment
markets have become tight and in areas such as development and
sales we are seeing sharp pressure on retention.

Early in the pandemic, the Committee considered the potential
impact of the pandemic on its Senior Leadership Team (SLT)
remuneration and if any steps should be taken to ensure
remuneration remained effective and fair. Overall, the Committee
felt a consistent approach should be taken and it has continued
with this approach in 2021. In particular, the metrics for LTIPs (Total
Shareholder Return (TSR) and adjusted Earnings Per Share (EPS))
have remained unchanged as have the growth targets. In line with
the policy set out in last year’s Annual Report, the LTIPs granted in
2021 to the Executive Directors were at 150% of salary. The share
price at award for the LTIPs represented a 64% increase on that for
the LTIPs issued in 2020 and a 66% increase on the figure in 2019.

A consistent approach has also been adopted to the setting of
metrics and targets for the bonus scheme for 2022. A modest
adjustment has been made through the introduction of a 5%
element relating to ESG objectives. For both the Executive
Directors and the SLT, the targets are designed to increase focus
on diversity when recruiting, to disseminate the ownership of risk
management through the leadership team and to improve
recognition and measurement of Scope 3 emissions.

Executive Director remuneration outcomes in 2021
Based on overachievement against the Executive Directors’
maximum Adjusted Profit before Tax performance targets (relating to
80% of their maximum bonus opportunity), and achievement of 75%
in each case for the CEO’s and CFO’s personal performance
objectives (relating to 20% of their maximum bonus opportunity), the
CEO earned a bonus of 119% of salary (compared to the maximum
potential bonus of 125%) and the CFO earned a bonus of 95% of
salary (compared to a maximum of 100%). 25% of the bonus earned
in both cases is subject to deferral into shares for three years.

Gamma Communications plc Annual Report and Accounts 2021

The three-year performance conditions for the LTIP share option
awards made in 2018 to the Executive Directors, as well as other
senior executives, were exceeded. These options therefore vested
fully in 2021. Both Executive Directors are now shareholders in their
own names and more than meet the shareholding requirements
which the Committee instituted in 2020.

Whether the Policy operated as intended and
exercise of discretion
The Committee considers that the Remuneration Policy has
operated as intended. The share price and earnings performance
over the three years to April 2021 was strong and the upper targets
were comfortably exceeded. This has been appropriately rewarded
with full vesting of the 2018 LTIPs. The bonus scheme has also
operated as intended, incentivising collective effort across the
senior team towards common financial goals as well as bringing
individual focus on specific contributions to the major strategic
goals. The Committee did not exercise discretion in the determination
of the Executive Directors’ remuneration during 2021.

Review of Executive Director remuneration
The Committee is committed to structuring senior executive
remuneration that is competitive, enables the Company to attract,
retain and motivate executives of the calibre required to
successfully further develop and execute the Group’s strategy, and
that rewards good performance. As the Group grows in size,
geographical reach and complexity, we are actively building the
capability and size of our senior team. During the year, we decided
to expand our senior executive capacity and recruited a new CFO
who will join us in May 2022. Andrew Belshaw will be promoted to
Deputy CEO at the same time. We also recruited a replacement
Chief People Officer.

In our recruitment processes, we have typically found we need to
increase base pay remuneration to meet market levels. We will
publish the terms on which our new CFO has been recruited next
year when they are no longer commercially sensitive. In the
meantime, we have increased the base pay of Andrew Belshaw to
£325,000 with effect from the new year reflecting his enlarged
responsibilities and the demonstrated market pay rates for his role.
From our exposure to various potential new recruits, we have
strong evidence this represents good value to the Company.

The pay of the CEO which was reviewed against comparators last
year has been increased by 2.5% in line with the standard increase
for the workforce.

During 2021, the Committee conducted a full review of the bonus
scheme with the assistance of its advisers h2glenfern
Remuneration Advisory. It reviewed the size of opportunities under
the bonus scheme against comparators and decided not to make
any changes. While the Committee continued to feel that the broad
structure continued to be appropriate, it has introduced an element
to be focused on ESG related objectives and the scheme for 2022
has 75% of opportunity related to Adjusted PBT, 20% to personal
objectives, and 5% to ESG objectives. This structure is also being
applied to the senior management.

In respect of the long-term incentives, the Committee decided not
to change the quantum of the awards which stand at 150% of salary
for both the Executive Directors. Having last year introduced a
two-year holding period post vesting and a shareholding requirement
of 200% of salary, in 2021 the Committee decided to introduce
post termination shareholding requirements for Executive
Directors signing new service contracts. The Committee considers
that after these changes, the incentives to support the long-term
progress of the Company are among the best on AIM and that
malus and clawback clauses remain in line with best practice.

The Committee also considered whether to change the metrics for
the LTIP awards which relate to the achievement of TSR and EPS
growth goals over a three-year measurement period from absolute
to relative. Given the Group’s growth profile, its stage of
development and the challenges of identifying a relevant peer
group, the Committee considers that absolute performance goals
remain more relevant than comparative performance measures.

Employee share schemes
In order to continue to strengthen the alignment of our employee
and shareholder interests, the Group operates a Save As You Earn
scheme (“SAYE”) and a Share Incentive Plan (“SIP”) which are open
to all UK employees.

In addition, there is a Company Share Option Plan (“CSOP”) which is
designed to enable the Group to selectively incentivise key high
performing employees. In 2021 awards of 183,643 options were
made to high performing employees under the CSOP.

Under the SAYE scheme, employees who choose to participate are
granted options, at a 20% discount to market price, and then save a
pre-determined sum over a period of three years. The money saved
can then be used by the employee to exercise their options. In 2021
34% (2020: 42%) of all employees chose to participate, with options
being granted over 155,514 (2020: 345,953) shares.

The SIP scheme is evergreen. It allows staff to buy up to £150 of
shares each month out of gross salary (Partnership shares). The
shares need to be held for five years for the employees to keep the
tax benefit. As at 31 December 2021, 48 employees had joined the
scheme.

Employee remuneration
2021 has been another challenging year for employees, the large
majority of whom worked from home or were hybrid working for
most of the year. Given changed working patterns, consultation has
taken placed with employees and managers to find the best mode
of working on a team by team basis and a new hybrid working
contract is in the process of being introduced for some staff and
some new recruits. In the area of remuneration, the Board was
pleased to approve a 2.5% general salary increase at the end of
2021 and it is hoped that this, combined with a hybrid working
approach will be sufficient to deliver good staff retention and
attract new employees. Nevertheless, in certain areas, for example
software development and sales, we are facing significant competition
for staff and we are making ad-hoc higher rises as required.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Engagement with shareholders
The Company regularly consults with institutional shareholders on
strategic matters, including consultation through the Chair of the
Board. At this stage in its development, the Company requires the
flexibility associated with the AIM market to support its continued
strong growth and we have not at this stage adopted the
consultation processes outlined in the Corporate Governance
Code. However, we welcome dialogue with shareholders and the
Directors’ Remuneration report will be put to an advisory vote at the
forthcoming 2022 AGM. The 2020 Directors’ Remuneration report
was approved on an advisory basis at the 2021 AGM with 99.92% of
votes cast in favour.

On behalf of the Committee, I thank you for your support in 2021
and hope that you find this report increasingly helpful and informative.

Henrietta Marsh
Remuneration Committee Chair

21 March 2022

Remuneration Committee report continued

Employees in the Group generally participate in a bonus scheme
that enables them to earn up to and in exceptional circumstances
over 10% of basic salary based on a combination of personal and
Group performance.

During the year, the Group refined its use of ‘Pulse Surveys’ as
described on pages 43 to 44. In the latest six-monthly survey,
employees had the opportunity to comment on their pay and
reward. Comments were reviewed by the central Reward Team and
Senior Leadership to enable actions to be taken where pay was not
deemed to be fair or in line with internal best practice.

Appropriateness of Executive Director
remuneration
In addition to considering the competitiveness of remuneration,
incentivisation and alignment with shareholders, the Committee
also considers appropriateness in the context of the workforce.
The Group is growing strongly and requires increasing numbers of
experienced and skilled staff. Reflecting these pressures, the
median salary for existing employees in the UK increased by 2.5%
for 2022 but the average UK salary, which takes account of the
changing profile of the workforce, increased by 6.3% between 2020
and 2021. The CEO pay ratios increased significantly at all
percentiles as a result of the vesting of the award made to the CEO
in 2018 on recruitment. The total number of employees rose from
1,530 to 1,745.

Chair and Non-Executive Director remuneration
A review of the Chair of the Board’s remuneration was completed in
2021 with the help of the Committee’s advisers h2glenfern
Remuneration Advisory. As a result of the Group’s strong growth,
both organic and inorganic, as well as the requirement in a bigger
Group for clear strategic direction and higher standards of
governance, the role of the Chair of the Board has enlarged. In
recent years, restraint has been shown but consequently the
remuneration has become increasingly uncompetitive. The
Committee therefore decided to increase the Chair of the Board’s
pay to £140,000 with effect from 1 January 2022.

The fees of the committee chairs, the Senior Independent Director
and the Non-Executive Directors were increased by 2.5% with
effect from 1 January 2022 in line with the general Company-wide
salary increase. A fee for the Workforce Engagement director has
been allowed for in the Remuneration Policy if this is necessary to
secure the right new non-executive to take on this role.

Governance disclosure and the year ahead
This report is included in line with the requirements of the QCA
Corporate Governance Code. As a matter of best practice, we are
progressively aligning ourselves to the UK Corporate Governance
Code in the area of remuneration and it is our intention to continue
to increase the scope and content of the report. This year we
have introduced post termination shareholding requirements for
Executive Directors signing new service contracts. We have
also disclosed the comparator group used for benchmarking
exercises in 2020.

Gamma Communications plc Annual Report and Accounts 2021Main activities during 2021
January

Consideration of likely outcome of 2020 bonus scheme

Determination of 2021 bonus scheme financial targets

March

Approval of revisions to LTIP and bonus scheme documentation
Determination of 2020 bonus payments and deferral

Consideration of the impact of employee share schemes on dilution

April

June

July

Recommendation of 2021 LTIP awards to the Board together with performance conditions and targets

Approval of LTIP vesting terms for good leaver

Review of Executive Director and SLT bonus scheme targets in light of acquisition of Mission Labs and retention incentives
for ML staff
Determination of vesting of 2018 LTIPs

Recommendation of CSOP awards to the Board

Review of gender pay gap
Review of bonus scheme against comparators

Review of change of conditions for senior employee
Review of shareholder and proxy agent feedback

Review of terms of reference

Review of employee share schemes against alternatives

Review of expenses policy

Review of competitiveness of Executive Director remuneration

Mid-year review of appropriateness of bonus targets

September
November

Introduction of post-employment shareholding requirements for Executive Directors signing new contracts
Approval of remuneration of new Chief People Officer
Discussion on introduction of a reward framework across the Group

December

Approval of remuneration and service contract of new CFO
Determination of Company-wide pay increase

Approval of Senior Leadership Team pay increases

Determination of Executive Director pay rise

Consideration of bonus targets

Approval of Chair of the Board’s remuneration

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Remuneration Committee report continued

Simplicity
Risk

Examples of how the Committee has addressed provision 40 of the Code in 2021
Clarity

The Committee is committed to transparency and has improved disclosure. For example, this year we have disclosed the
comparator group we use when benchmarking remuneration. We have also provided greater detail in the policy on recruitment.
The structure of the Remuneration Policy is broadly unchanged and is commonly used by premium listed companies.
The Committee recognises the risk of target-based plans and has sought to improve alignment in the coming year by
introducing post termination shareholding requirements. For 2022, in common with many larger businesses, we have
introduced an element in the bonus scheme to incentivise progress in our ESG strategy and applied it to the SLT as well as
the Executive Directors. In the ESG targets, there are specific objectives for the Executive Directors and senior
management which relate to our risk management framework.
A range of possible outcomes for Executive Director remuneration is set out on page 76.

Predictability
Proportionality There is a clear link between individual awards and the delivery of strategy, particularly through the non-financial objectives

Alignment to
culture

of the bonus scheme which are disclosed retrospectively in the Annual Report on Remuneration. The link of remuneration
outcomes to long-term performance is primarily through the LTIP which has stretching targets based on EPS and absolute
share price performance as well as having vesting values which are directly linked with share price performance.
The Gamma core values are encapsulated in the expression ‘Working Smarter, Together.’ The Remuneration Policy is
aligned to our core values, being designed to ensure that successful long-term partnership with shareholders delivers
good rewards to the Executive Directors, the Senior Leadership Team and the workforce as a whole. Feedback from
employees in 2021 has shown that a number of aspects relating to ESG are an important part of the culture, particularly
improving diversity and targets dates for carbon net-zero. The inclusion of ESG targets in the bonus scheme will help
align remuneration with culture.

Comparator group used for Executive Director benchmarking in 2020

Avast plc

Softcat plc

RWS plc

GB Group plc

Computacenter plc

Kainos Group plc

FDM Group (Holdings) plc

Telecom Plus PLC

First Derivatives plc

EMIS Group plc

NCC Group plc

Gamma Communications plc Annual Report and Accounts 2021Remuneration
Policy

This part of the Directors’ Remuneration
report sets out Gamma’s Remuneration Policy
with regard to its Directors.

We believe these policies help the Company to continue to grow
profitably through the successful execution of its strategy as well
as providing alignment between the interests of shareholders and
all employees who can share in the Company’s success.

Consideration of shareholders’ views on
remuneration
The Company welcomes dialogue with its shareholders over
matters of remuneration. The Chair of the Remuneration
Committee is available for contact with institutional investors
concerning the approach to remuneration.

Consideration of pay and employment conditions
elsewhere in the Group
The Committee considers the pay and conditions of employees
throughout the Group when determining the remuneration
arrangements for Directors although no direct comparison metrics
are applied. In particular, the Committee considers the relationship
between general changes to UK employees’ remuneration and
Executive Director reward. Whilst the Committee does not directly
consult with employees as part of the process of determining
executive pay, the Board does receive feedback from employee
surveys that take into account remuneration in general. The
Committee also receives updates from the Chief People Officer.

Summary of policy changes for 2022
Changes to the Remuneration Policy are set out in the
Remuneration Policy Table. A statement of how the Company
intends to implement its Remuneration Policy in 2022 is included in
the Annual Report on Remuneration. On 2 December 2021, we were
pleased to announce that a new Chief Financial Officer, Bill Castell,
is expected to join Gamma in May 2022 at which point Andrew
Belshaw will become Deputy Chief Executive Officer. A summary of
Bill Castell’s remuneration will be included in the 2022 annual report
of remuneration. Remuneration will be in accordance with the
Remuneration Policy.

Purpose
The Group’s Remuneration Policy is designed to ensure that it can
attract, retain and motivate executives and senior management of
the right quality to enable it to fulfil its strategic objectives and
deliver long-term sustainable growth. The retention of key
management and the alignment of management incentives with the
creation of shareholder value is a key objective of this policy. In
addition, the Committee seeks to keep Executive Director
remuneration consistent with the Company’s culture and to take
account of the effects of Executive Directors’ remuneration on the
workforce and other stakeholders.

Strategic rationale for Executive Director
remuneration policies, structures and
performance measures
Setting base salary for Executive Directors at an appropriate level is
key to attracting and retaining high quality management. Therefore,
the Remuneration Committee seeks to ensure that salaries are
market-competitive for comparable companies. In addition to base
salary, there are market competitive benefits and pension
contributions which are at the same level as those available to
eligible employees across the wider workforce. A significant
proportion of total remuneration is performance-based using a
structure which is common among AIM traded and premium listed
companies. The Group’s strategy has four key elements as set out
on pages 14 to 15 and is designed to enable the business to grow
both its profitability and revenues by developing new innovative
communications products and services, and through acquisition.
Reflecting the strategic emphasis on profitability, short-term
performance is incentivised with an annual bonus scheme which is
based on Company financial objectives such as Adjusted PBT as
well as personal performance objectives. The latter typically
support strategic and ESG initiatives.

Long-term performance is incentivised with a performance share
plan (“LTIP”), which is typically based on the achievement of
demanding Total Shareholder Return and Adjusted Earnings Per
Share growth targets. Given the Company’s growth profile, its stage
of development and the challenges of identifying a relevant peer
group, the Committee considers that absolute performance goals
remain more relevant than comparative performance measures.
The Committee retains the discretion to set weightings on the
performance goals or to set different performance measures from
year to year.

In addition, the Company has applied a policy of using share
incentives across the Group. This includes awards to more senior
staff under the Company Share Option Plan (“CSOP”), as well as
both a Save as You Earn (“SAYE”), and a Share Incentive Plan (“SIP“),
the participation in which is open to all UK employees.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ Remuneration report continued

Remuneration Policy table
Purpose and link
to strategy

Operation

Potential remuneration

Performance metric

Change to
policy?

Base salaries are typically reviewed
annually, with any changes effective
from 1 January, but exceptionally
may take place at other times of
the year.

When determining an appropriate
level of base salary, the Committee
considers:

• Group performance;

• the role, responsibilities,
experience and personal
performance of the Director;
and

• the general salary increase for

the workforce.

In addition to the above, salaries are
independently benchmarked from
time to time against comparable
roles at premium listed and AIM
traded companies of a similar size
and complexity.

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
Group’s life assurance and income
protection schemes, which are also
available to all other UK employees.

The Executive Directors (together
with all other eligible staff) may
participate in the Group’s defined
contribution (money purchase)
pension scheme.

Base salary

This is the core element
of pay that reflects the
individual’s role and
position within the Group.

Staying competitive in
the market allows us to
attract and retain high
calibre executives with
the skills and experience
to deliver our strategy.

Benefits

A comprehensive
benefits package is
offered to complement
basic salary to attract
and retain executives.

Pension

Provides a competitive
and appropriate pension
package.

To provide retirement
benefits which, when taken
together with other
elements of the
remuneration package, will
enable the Group to attract
and retain executives.

All employee share plans

Not applicable

The actual base salaries
paid to the Executive
Directors and those set for
the current year are
disclosed in the Annual
Report on Remuneration.

Not applicable

The cost of providing these
benefits varies year on year
depending on the schemes’
premiums. The
Remuneration Committee
monitors the overall cost of
the benefits package.

Only the CFO participates.
Employer contribution of up
to 5.1% of salary per annum
is paid into the scheme or by
means of a cash alternative
(provided there is no
additional cost to the
Company). This is the same
level available to eligible
employees across the wider
workforce.

Executive Directors may participate
in these plans in line with HMRC
guidelines and on the same basis as
other eligible UK employees.

Participation levels are in
accordance with HMRC
limits as amended from
time to time.

Not applicable

Executive Directors are
eligible to participate in all
employee share schemes
which are designed to
encourage share
ownership across the
wider UK workforce.
These currently include
regular Save as You Earn
Option Plans (“SAYE” Plan)
and an evergreen Share
Incentive Plan (“SIP”).

Gamma Communications plc Annual Report and Accounts 2021Purpose and link
to strategy

Annual Bonus

To incentivise the
achievement of the
Group’s annual financial
targets, or other
near-term strategic
objectives.

Operation

Potential remuneration

Performance metric

Policy change?

The Executive Directors and other
senior executives participate in a
discretionary, annual, performance-
related bonus scheme.

The Remuneration Committee at its
discretion may determine that a
proportion of any bonus that it
awards may be deferred into an
allocation of shares or grant of
options each with a three-year
vesting period and governed by the
terms of the Deferred Bonus Plan.

Typically, 25% of any bonus
awarded to the Executive Directors
is deferred into shares.

Other than to the extent deferred,
under the terms of the deferred bonus
plan, bonuses are paid in cash,
based on audited financial results.
The bonus scheme rules include a
clawback and a malus provision.

The maximum bonus
(including any part of the
bonus deferred into share
awards) deliverable under
the plan is up to 125% of
annual base salary in the
case of the CEO and 100%
in the case of the CFO.

However, this
year ESG
objectives have
been introduced
at 5% and Group
financial
objectives
reduced from
80% to 75% with
effect from 2022.

Bonus awards are based on
annual performance against
stretching company financial
targets (e.g. Adjusted Profit
before Tax) and personal
performance objectives for the
individual Directors.

Targets are set by the
Committee at the beginning of
each year with up to 20% of the
maximum bonus opportunity
being based on personal
objectives, from 2022 5% will
be based on ESG related
objectives and the remaining
75% based on Group financial
performance targets. The
Committee has the discretion
to vary targets and weightings
from year to year.

Long-Term Incentive Plan (“LTIP”)

To align the interests of
executives with those of
shareholders; to
motivate and incentivise
delivering sustained
business performance
over the long term; to aid
retention of key
executive talent long
term.

The Executive Directors and other
senior executives 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
(or any other period as the
Committee may decide), 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
clawback and malus 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.

From 2021, LTIP awards to
Executive Directors have been
subject to a two-year post vesting
holding period.

Shareholding guidelines

Encourages Executive
Directors to build a
meaningful shareholding
in Gamma to further align
interests with
shareholders.

Each Executive Director is expected to
build up and maintain a shareholding in
Gamma equivalent to 200% of base
salary. The shareholding includes
beneficially owned shares, vested
LTIPs on an after-tax basis and
bonuses deferred into shares on an
after-tax basis. If an Executive Director
does not meet the guidelines, the
Remuneration Committee may delay
the release of 50% of LTIPs at the end
of the holding period until the
requirement is met. For Executive
Directors who have entered into new
service contracts after July 2021, the
shareholding requirements apply for
two years post cessation.

The Remuneration
Committee would in normal
circumstances expect to
make annual LTIP awards to
the Executive Directors at a
value of up to 150% of base
salary to the CEO and the
CFO, all with a maximum of
200%. In the event of
recruitment only, there is a
limit of 400%.

The vesting of LTIP awards is
conditional upon the successful
achievement of financial
performance conditions over
the performance period, which
are set by the Committee at the
time of the award.

Performance conditions
currently include compound
annual growth in adjusted
earnings per share (“EPS”), and
compound annual growth in
total shareholder return (“TSR”)
with each having equal
weighting i.e. up to a maximum
vesting of 50% of the shares.

In both cases (“TSR” and “EPS”)
the Committee has currently
determined that at this stage of
Gamma’s development and its
market position, absolute
performance measures are
more appropriate than relative
measures.

For future LTIP awards the
Committee will assess what
performance conditions and
associated weightings it
considers appropriate in
supporting the Company’s
strategy and longer-term
objectives.

Not applicable

Yes

Post cessation
shareholding
requirements
introduced for
executives
signing new
contracts.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ Remuneration report continued

Committee discretion, flexibility and judgement in
operating the incentive plans
In line with market practice and the various scheme rules, the
Committee retains discretion relating to operating and
administering the annual bonus and the LTIP. This discretion
includes, but is not limited to:

• Participation in the LTIP is extended to the rest of the Senior

Leadership Team and several other senior managers.

• The pension scheme is operated for all permanent employees

and the Executive Directors receive the same level of
contribution as the majority of other employees other than the
CEO who does not participate.

The Discretionary Annual Bonus Plan:

• The scheme participants.

• The review of and setting of annual performance measures

and targets.

• The determination and calculation of any bonus payment,
including upward or downward adjustment as appropriate.

• The timing of any bonus payments.

• The determination of the proportion of any bonus award that is

deferred into an award under the terms of the deferred bonus plan.

• The determination of the treatment of leavers depending on

the circumstances.

• Overriding Committee discretion.

The LTIP Plan:

• The scheme participants.

• The form and timing of the grant of an award.

• The size of awards made.

• The setting of appropriate performance measures.

• The determination of the treatment of leavers depending on

the circumstances.

• To withhold the release of 50% of any year’s LTIP award for Executive

Directors not meeting the agreed shareholding requirements

• Discretion relating to vesting in the event of a change of control

of the Company.

• The ability to substitute a cash equivalent in place of shares.

• To make appropriate adjustments to awards required in certain
circumstances e.g. Demerger, capitalisation or rights issue, or
other restructuring events.

• To change any performance or other condition applying to an
award, if any event or series of events happen, which results in
the Committee considering it is fair and reasonable to make
such change.

• Overriding Committee discretion.

Differences in Remuneration Policy for employees
and Executive Directors
The principles behind the Remuneration Policy for Executive
Directors are cascaded down through the Group and their aims are
to attract and retain the best staff and to focus their remuneration
on the delivery of long-term sustainable growth by using a mix of
salary, benefits, bonus and longer-term incentives. As a result, no
element of the Executive Director Remuneration Policy is operated
exclusively for Executive Directors other than the two-year post
vesting holding period and the post-employment shareholding policy:

• The annual performance related pay scheme for Executive

Directors is largely the same as that of the rest of the Senior
Leadership Team. In the UK, all are aligned with similar business
objectives. In the European subsidiaries, there are objectives
relating to the subsidiaries’ financial and business performance.

The main difference between pay for Executive Directors and
employees is that, for Executive Directors, the variable element of
total remuneration is greater while the total remuneration opportunity
is also higher to reflect the increased responsibility of the role.

Policy on recruitment
When hiring a new Executive Director, the Committee will consider
the overall remuneration package by reference to the
Remuneration Policy set out in this report. Salary and annual bonus
levels will be set so as to be competitive with comparable roles in
companies in similar sectors, and also taking into account the
experience, seniority and the scope of responsibility of the
appointee coming into the role. New Executive Directors will be able
to participate in the annual bonus scheme on a pro-rated basis for
the portion of the financial year for which they are in post. New
Executive Directors may receive benefits and pension
contributions in line with the Company’s existing policy. LTIP
awards are made on an ongoing basis in line with our policy for
Executive Directors and other senior executives. In the year of
recruitment, a higher award may be made to the new recruit within
the limits of the plan (maximum of 400% of salary) and may be
made with non-standard performance conditions or without
performance conditions and with a shorter vesting period and
without a holding period. Such an award may be spread over the
two years following recruitment.

The approach in respect of compensation for forfeited
remuneration from a previous employer will be considered on a
case-by-case basis taking into account all relevant factors, such as
the form of compensation forfeited, performance achieved or likely
to be achieved, and the proportion of the performance period
remaining. If any compensation for forfeited remuneration is paid,
its value will not exceed 400% of salary when combined with any
one-off LTIP awards.

In the case of an internal appointment, any variable pay element
awarded in respect of a prior role would be allowed to pay out according
to its terms, adjusted if relevant to take account of the appointment.

Change in policy?
Yes. While the overall limit of 400% of salary on recruitment is
unchanged, a policy on compensation for forfeited remuneration
has been introduced and there is greater flexibility on the method
of payment and period over which recruitment awards can be
made. A policy on promotions has been included.

Gamma Communications plc Annual Report and Accounts 2021Long-Term Incentive Plan (“LTIP”): Awards are governed by the rules
of the LTIP scheme at the time of award. In the case of good
leavers, the current plan rules specify that, on exit, awards will be
pro-rated for time served and vest in accordance with the
performance conditions other than in limited circumstances. The
Committee retains discretion to decide to waive in full or in part the
performance conditions if it feels that is appropriate in any
particular circumstances.

Post cessation shareholding requirements: For Executives
Directors who have entered into new service contracts after July
2021, the shareholding requirements, by which an Executive
Director is expected to build up a shareholding (including
beneficially owned shares, vested LTIPs on a post-tax basis and
deferred bonuses on a post-tax basis) of twice salary apply for two
years post cessation.

The Committee retains discretion to consider the termination
terms of any Executive Director, having regard to all the relevant
facts and circumstances available to them at the time.

Change in policy?
Yes. Post cessation shareholding requirements introduced.

Policy on loss of office
The following sets out the Company’s policy in normal
circumstances with regard to exit payments for each remuneration
element for Executive Directors. The Group will pay any amounts it
is required to in accordance with or in settlement of a director’s
statutory employment rights and in accordance with their service
contract. A Director’s service contract may be terminated without
notice and without any further payment or compensation, except
for sums accrued up to the date of termination, on the occurrence
of certain events such as serious dishonesty, gross misconduct,
incompetence, or willful neglect of duty.

Basic salary: This will be paid over the contractual notice period (CEO:
12 months: CFO: 12 months). However, the Company has the discretion
to make a lump sum payment for termination in lieu of notice.

Benefits and Pension contributions: These will normally continue to
be provided over the notice period; however, the Company has the
discretion to make a lump sum payment on termination equal to the
value of the benefits payable during the notice period.

Annual Bonus: The payment of any annual bonus would be entirely
at the discretion of the Remuneration Committee and if made would
be pro-rated to the time of active service in the year that
employment ceased and be subject to the original performance
conditions and policy on deferral. The decision of the Committee, in
such circumstances, would take into consideration the financial
performance of the Company, the performance of the individual,
and the circumstances of the termination of employment.

Policy on Non-Executive Director remuneration
Purpose and link to strategy

Approach to setting fees

Chair and Non-Executive Directors’ fees

To enable Gamma to recruit and retain
Non-Executive Directors of the highest
calibre, at an appropriate cost.

Non-Executive Directors are paid a basic annual fee.
Additional fees may be paid to Non-Executive Directors
who chair the Board, chair a committee and to the SID to
reflect additional responsibilities, as appropriate. The
level of fees for 2021 is shown in the Annual Report on
Remuneration.

Non-Executive Directors’ fees are reviewed annually
with changes effective from 1 January each year.
Non-Executive Directors and the Chair of the Board are
entitled to reimbursement for reasonable expenses
(other than travel to and from the Company’s London
and Newbury offices unless this is by air). The Chair’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 Chair of the Board, the CEO and the CFO. The
Non-Executive Directors are not involved in any
decisions about their own remuneration.

Other items

Non-Executive Directors are not entitled to
receive any compensation for loss of office,
other than fees for their notice period.

They do not participate in the Group’s bonus,
LTIP, employee share plans or pension
arrangements, and do not receive any
employee benefits.

A taxable expense allowance has been
introduced which replaces the Chair’s and
Non-Executives’ previous entitlement to
claim expense to and from the Company’s
London and Newbury offices. The amounts
are set out in the Annual Report on
Remuneration under Implementation of
Remuneration Policy in the financial year 2022.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ Remuneration report continued

Service agreements

Executive Directors
The Executive Directors’ service agreements summary is as
follows:

Key element
Effective date
of contract

CEO Andrew Taylor
CEO Designate –
4 April 2018

CEO – 23 May 2018

CFO Andrew Belshaw
10 October May 2014

Notice period

12 months’ notice given
by either party

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

Illustrations of application of the Remuneration
Policy
The charts below represent estimates under three performance
scenarios (“Minimum”, “Maximum” and “Maximum” assuming a 50%
share price appreciation between award and vesting under the LTIP
scheme) of the potential remuneration outcomes for each
Executive Director resulting from the application of the 2022 base
salaries to awards made in accordance with the proposed policy for
2022. The majority of Executive Directors’ remuneration is
delivered through variable pay elements, which are conditional on
the achievement of stretching targets.

The Remuneration Committee will review the actual remuneration
outcomes taking into account the quality of performance
outcomes and, if appropriate, use its discretion to adjust these,
taking into account Gamma’s performance, the operation of the
remuneration structures and any other relevant factors, to ensure
that the highest variable pay outcomes are only achieved in years
with the highest quality performance.

Non-Executive Director letters of appointment
Non-Executive Directors have letters of appointment (as opposed
to service contracts) and are appointed for a three-year term which
may be extended by mutual agreement. All Non-Executive
Directors are subject to annual re-election by the shareholders.

The scenario charts are based on the proposed policy award levels
and are calculated on the same basis as the single figures of
remuneration (on page 77). The pay scenarios are forward looking
and only serve to illustrate the proposed policy. The scenarios are
based on the current CEO and CFO roles.

The Chair and Non-Executive Directors have notice periods of
three months from either party which do not apply in the case of a
Director not being re-elected by shareholders or retiring from office
under the Articles of Association. Other than fees for this notice
period, the Chair and Non-Executive Directors are not entitled to
any compensation on exit.

Performance scenarios

Base salary (2022)

Benefits (2021 actuals)

Pension (2022 estimate)

The current Non-Executive Directors’ initial appointments
commenced on the following dates:

Bonus

LTIP

Minimum
✓

Maximum1
✓

✓

Nil

✓

125% CEO
100% CFO
150% CEO
150% CFO

Director
Richard Last

Martin Lea

Wu Long Peng

Henrietta Marsh

Charlotta Ginman

Xavier Robert

Date of first appointment
17 June 2014

17 June 2014

6 June 2014

16 April 2019

8 September 2020

1 Maximum scenario assuming 50% share price appreciation.

An “on target” figure is not presented because the incentive
scheme is structured with stretching targets which, if achieved,
results in the executives receiving their maximum remuneration as
depicted in the chart below.

Chief Executive Officer

Chief Financial Officer

Minimum

Maximum

500,000

1,000,000

1,500,000

2,000,000

Minimum

Maximum

Fixed

Annual variable bonus

LTIP

LTIP value with 50% share price growth

Fixed

Annual variable bonus

LTIP

LTIP value with 50% share price growth

500,000

1,000,000

1,500,000

2,000,000

Chief Executive Officer

Chief Financial Officer

Minimum

Maximum

500,000

1,000,000

1,500,000

2,000,000

Minimum

Maximum

500,000

1,000,000

1,500,000

2,000,000

Fixed

Annual variable bonus

LTIP

LTIP value with 50% share price growth

Fixed

Annual variable bonus

LTIP

LTIP value with 50% share price growth

Gamma Communications plc Annual Report and Accounts 2021Annual Report on
Remuneration

This Annual Report on Remuneration sets out information about the remuneration of the Directors of the Company, for the year ended
31 December 2021. The information in this report is unaudited, unless indicated otherwise.

Single total figure of remuneration for Executive Directors (audited)

Director
Andrew Taylor

Andrew Belshaw

Salary
£000s

Benefits
£000s

Annual
bonus
£000s

Long-term
incentive
(“LTIP”)
£000s

Pension
£000s

418
412
269
262

–
–
–
–

496
500
256
248

1,968
–
627
350

–
–
3
6

Year

2021
2020
2021
2020

Total
£000s

2,882
912
1,155
866

Fixed
£000s

Variable
£000s

418
412
272
266

2,464
500
883
598

Annual bonuses are shown on an accrued basis and include both the cash and deferred share element. The value of the LTIP in 2021 relates
to the vesting of the 2018 LTIP awards, and the value has been calculated using the share price on the vesting date of 28 April 2021. Of the
LTIP value of £1,968,000 for the CEO, £1,218,000 is attributable to share price appreciation. Of the LTIP value of £627,000 for the CFO,
£388,000 is attributable to share price appreciation. In 2021, Andrew Belshaw received £8,727 (2020: £6,358) salary in lieu of a contribution
by the Company to his pension of £9,931 (2020: £7,235).

The Directors have no rights under any Company pension schemes that are designated as defined benefit schemes. In addition to the
above, the Company provides life assurance and Group income protection for the Executive Directors.

Annual performance bonus 2021
The maximum annual bonus award opportunity in respect of the year ended 31 December 2021 was 125% of salary for the CEO and 100%
of salary for the CFO. The structure of the bonus and the objectives for the Executive Directors are set out in the table and comments below.

Measure

Adjusted profit before tax1
Personal Objectives

Weighting

Threshold
£m

Maximum
£m

Outcome
£m

% of Bonus Opportunity
Payable

80%
20%

64.0
n/a

74.0
n/a

77.2
n/a

A.Taylor
80%
15%
95%

A.Belshaw
80%
15%
95%

For the purpose of the bonus scheme Adjusted PBT was further adjusted by the Committee to exclude contributions from acquisitions made during the year, as
decided by the Committee at the time the targets were set.

The personal objectives set for 2021 and main achievements were:

CEO:
• Demonstrate significant progress in the integration of the European businesses into the Gamma Group: good progress has been made in
integrating the European businesses into Gamma’s Group Operating Model which includes the operational, technical and product environment.

• Execute the product road map: this has been focused on the core UK businesses and building a platform to launch products across the
Gamma Group. Notable achievements included the development and go to market execution of MSTDR, Collaborate 2.0, UCaaS, CCaaS
and the launch of Gamma’s MVNO.

• Successfully launch our reformulated mobile offering: this was fully achieved.

• Train and develop the Senior Leadership Team: progress was made with the development and strengthening of the SLT. A replacement CPO
was recruited, a full contribution was seen from the CMPO recruited in 2020 and a deputy CEO was appointed through internal promotion.

CFO:
• Continue to improve Group and business level reporting: this has evolved well and investment is underway in a new finance

consolidation system.

• Prepare a roadmap for evolution of our governance structures to premium list standards: progress has been made and recruitment is

underway to further improve governance.

• Continue to develop the finance team to support the UK and European businesses: significant progress was made with the recruitment

of the new CFO who starts in May 2022.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ Remuneration report continued

The deferred bonus award is calculated as 25% of bonuses earned in 2021. The number of shares over which awards will be made will be
determined by the share price on the trading day prior to the date of award. The value of each individual’s award in respect of their bonus
has been determined as follows:

Measure
Andrew Taylor
Andrew Belshaw

Overall bonus outcome

95%
95%

Bonus for 2021
£000s

496
256

Cash-settled
£000s

Value of 2021 deferred
bonus award
£000s

372
192

124
64

Deferred bonus awards will be granted under the Deferred Bonus Plan in April 2022. These awards will not be subject to any further
performance conditions and will vest in full on the third anniversary of the vesting commencement date.

Details on the options granted during 2021 in respect of the deferred bonus for 2020 are below:

Director
Andrew Taylor
Andrew Belshaw

Type of scheme
interest

Nil-cost option
Nil-cost option

Number of
awards

Vesting date

7,616
3,789

31 March 2024
31 March 2024

Face value of
award1
125
62

Exercise price

£0.0025
£0.0025

The face value of the award has been calculated using the closing share price on the day prior to the vesting commencement date, being 31 March 2021.

The Remuneration Committee did not exercise any discretion in determining the bonus awards.

Long-Term Incentive Plan (“LTIP”) – Vesting of 2018 LTIP awards
Details of the share options vesting during the year are set out below:

Director
Andrew Taylor
Andrew Belshaw

Total number of
shares

108,381
34,504

Face value
at grant

750,000
238,769

%
Vesting

100%
100%

Shares Vesting

108,381
34,504

Share price1
£

18.16
18.16

LTIP
value

1,968,199
626,593

1 The long-term incentive figure for the year has been valued using the market value of the shares that vested in 2021 at the vesting date of 28 April 2021.

The 2018 LTIP was subject to a combination of performance conditions based on annual compound growth in total shareholder return
(“TSR”) and annual compound growth in earnings per share (“EPS”) over the three-year period. Details of the performance against these
performance conditions are shown below.

Measure
Annual compound growth in TSR
Annual compound growth in EPS

Weighting

50%
50%

Threshold
performance
(30% vesting)

Target
performance
(100% vesting)

8%
8%

15%
20%

Actual
performance

38.4%
30.3%

% vesting

100%
100%

The Remuneration Committee did not exercise any discretion in determining the achievement of the performance criteria.

Share options awarded during the year ended 31 December 2021 under the LTIP (audited)
During the year ended 31 December 2021 the following LTIP awards were granted. The performance conditions are set out below the table.

2021
Director
Andrew Taylor

Type of scheme

interest Basis of award

Nil-cost option 150% of salary

Andrew Belshaw

Nil-cost option 150% of salary

Number of
awards

Share price at
award

38,253

23,789

£16.40

Vesting date1
April 2024

April 2024

Face value of
award

Exercise price

627,358

390,141

£0.0025

The vesting date is approximately one month from the date of announcement of the Group’s results, which historically has been in March, and is when the
Remuneration Committee determines the extent to which the performance conditions have been satisfied.

2020
Director
Andrew Taylor
Andrew Belshaw

Type of scheme

interest Basis of award

Number of
awards

Share price at
award

Nil-cost option 125% of salary
Nil-cost option 125% of salary

51,507
32,031

£10.00
£10.00

Vesting date

April 2023
April 2023

Face value of
award

Exercise price

515,070
320,310

£0.0025
£0.0025

At the time of making an award the Remuneration Committee sets challenging long-term performance targets to align the interests of the
Directors with shareholders and which, together with continuous employment conditions, must be satisfied before an award vests.

The 2020 and 2021 LTIP awards have a performance period of three years starting from the vesting commencement date. 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.

Gamma Communications plc Annual Report and Accounts 2021Save As You Earn (“SAYE”) Share Scheme
During the year the Executive Directors were eligible to participate in Gamma’s SAYE Scheme which is open to all UK employees.

The Scheme is an HM Revenue & Customs (‘HMRC’) approved scheme open to all staff permanently employed by a Gamma company
in the UK as of the eligibility date. Options under the plan are granted at up to a 20% discount to market value. Executive Directors’
participation is included in the option table below:

Options

Grant date

At 1 Jan
2020

Granted in
2021

Exercised
in 2021

Lapsed in
2021

At 31 Dec
2022

Option
price
(p)

Date
Exercisable

Expiry date

Andrew
Belshaw
Andrew
Taylor

1 July
2019
1 July
2020

2,173

2,250

–

2,173

2,250

828

800

1 July
2022
1 July
2023

31 December
2022
31 December
2023

Market
price on
exercise
(p)

Gain on
exercise

–

Single total figure of remuneration for Non-Executive Directors (audited)

Directors’ Fees

Committee Chair/SID Fees

Taxable Expenses

Total

Director
Richard Last
Alan Gibbins1
Charlotta Ginman2
Martin Lea3
Henrietta Marsh4
Wu Long Peng

Xavier Robert

Andrew Stone

2021

£000s

104

2020

£000s

102

2021

£000s

2020

£000s

2021

£000s

2020

£000s

–

2021

£000s

104

2020

£000s

104

1 The 2021 fee shown is pro-rated as Alan Gibbins and Andrew Stone stood down from the Board at the AGM on 20 May 2021.
2 Charlotta Ginman was appointed Chair of the Audit Committee on 20 May 2021.
3 Martin Lea received a fee for acting as SID. He is also Chair of the ESG Committee and the Risk Committee.
4 Henrietta Marsh is the Chair of the Remuneration Committee.

Statement of Directors’ shareholding and share interests (audited)
Directors’ share interests at 31 December 2021 are set out below:

Executive Directors are required to build up and maintain a shareholding of at least 200% of base salary in Gamma Communications plc
shares. Both Executive Directors meet this requirement.

2021
Executive Director
Andrew Taylor
Andrew Belshaw
Non-Executive Director
Richard Last

Charlotta Ginman
Martin Lea
Henrietta Marsh
Wu Long Peng
Xavier Robert

Percentage of
shareholding
requirement

Number of
beneficially
owned shares

With
performance
measures

Without
performance
measures

Vested but
unexercised

Exercised
during the year

Options

226%
611%

57,173
99,505

53,475

1,000
13,368
2,015
–
3,000

140,724
87,513

31,135
12,212

–

–
–
–
–
–

–

–
–
–
–
–

–
–

–

–
–
–
–
–

108,381
34,504

–

–
–
–
–
–

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021
Directors’ Remuneration report continued

Directors’ share interests at 31 December 2020 are set out below:

2020
Executive Director
Andrew Taylor
Andrew Belshaw
Non-Executive Director
Richard Last
Alan Gibbins
Charlotta Ginman
Martin Lea
Henrietta Marsh
Wu Long Peng
Xavier Robert
Andrew Stone

Percentage of
shareholding
requirement

Number of
beneficially
owned shares

With
performance
measures

Without
performance
measures

Vested but
unexercised

Exercised
during the year

Options

0%
811%

–
129,505

53,475
13,368
1,000
13,368
1,000
–
3,000
425,000

210,852
98,228

23,519
8,423

–
–
–
–
–
–
–
–

–
–

–
–
–
–
–
–
–
–

–
38,140

–
–
–
–
–
–
–
–

Performance graph and table
The Remuneration Committee has chosen to compare the TSR of the Company’s ordinary shares against the AIM 100 Index because
this index consists of the most comparable companies to the Group. The values indicated in the graph show the share price growth plus
re-invested dividends from a £100 hypothetical holding of ordinary shares in Gamma Communications plc from the date of IPO.

£1,800

£1,600

£1,400

£1,200

£1,000

£800

£600

£400

£200

13/10/14

13/10/15

13/10/16

13/10/17

13/10/18

13/10/19

13/10/2 0

13/10/21

31/12/21

Gamma Communications PLC – TSR

AIM 100 – TSR

Chief Executive’s historical remuneration (audited)
The table below sets out the total remuneration of the Chief Executive over the last eight years valued using the methodology applied
to the single total figure remuneration (page 77).

CEO
Andrew Taylor
Andrew Taylor
Andrew Taylor
Andrew Taylor
Bob Falconer
Bob Falconer
Bob Falconer
Bob Falconer
Bob Falconer

2021
2020
2019
20181

2017
2016
2015
2014

Total remuneration

Annual bonus payment
level achieved
(% of maximum opportunity)

LTIP Vesting level achieved
(% of maximum opportunity)

£2,882,813
£911,608
£884,408
£655,990
£1,466,688
£2,243,428
£599,760
£2,320,287
£544,793

95%
97%
96%
100%
100%
100%
100%
100%
100%

100%
N/A
N/A
N/A
92.83%2
100%
N/A3
N/A3
N/A3

1 Bob Falconer retired as CEO on 23 May 2018 and was replaced by Andrew Taylor.
2

92.827% represents the blended rate for the vesting of Bob Falconer’s 2015, 2016 and 2017 LTIP schemes. These schemes achieved performance vesting
percentages of 93.875%, 91.847% and 90.046% respectively.

3 Share options schemes prior to the 2015 LTIP scheme (which vested in 2017) did not have performance conditions attached to them.

Gamma Communications plc Annual Report and Accounts 2021
Percentage change in remuneration of the Director undertaking the role of CEO
The table below outlines the year on year increase in salary, other pay and benefits and annual bonus for the year ended 31 December
2022 for Andrew Taylor in comparison to the wider workforce.

Salary, other pay and benefits
Annual bonus

CEO
% increase/(decrease)

2.5%
(1.0%)

Employee
% increase

6.3%
1.5%

The table below sets out the historical changes in CEO annual increase compared to those granted to the wider workforce as previously reported:

CEO

Employee

% change in base salary

FY17

2.0%

2.7%

FY18

39.1%

3.1%

FY19

2.0%

3.1%

FY20

2.5%

5.3%

FY21

2.5%

6.3%

The 2018 CEO change reflects the appointment of Andrew Taylor to the role of CEO replacing Bob Falconer.

Pay ratio information in relation to the total remuneration of the Director undertaking the role of CEO
The table below sets out the ratio of the total remuneration received by the Group CEO to the total remuneration received by our UK
employees at the median, 25th and 75th percentiles.

Year
2021

Method
Option A

25th percentile pay ratio

50th percentile pay ratio

75th percentile pay ratio

96.7

64.2

43.5

Pay data
Group CEO
UK employees 25th percentile
UK employees 50th percentile
UK employees 75th percentile

Base salary

Total pay and benefits

418,239
27,591
40,148
58,365

2,882,813
29,798
44,869
66,303

“Option A” methodology was selected on the basis that it provides the most robust and statistically accurate means of identifying the
median, lower and upper quartile colleagues.

The Group Chief Executive remuneration is the total single figure remuneration for the year ended 31 December 2021 contained on page 77.

The workforce comparison is based on actual payroll data for the period 1 January 2021 to 31 December 2021.

The total single figure remuneration calculated for each employee includes full-time equivalent base pay, annual bonuses for the 2021
performance year, overtime, benefits, allowances and employer pension contributions.

Part-time workers have been included by calculating the full-time equivalent value of their pay and benefits.

Leavers, joiners and employees on reduced pay (due to sick pay, maternity leave, etc.) have been included on a full year equivalent basis.

Relative importance of spend on pay (audited)
The following table shows the Group’s actual spend on pay for all Group employees relative to dividends and pre-tax profit.

Overall spend on pay, including Executive Directors
Profit before tax
Capital expenditure1
Dividends

2021
£m

96.5
67.2
16.8
11.7

2020
£m

83.3
75.0
15.4
10.4

Change
%

+15.8%
-10.4%
+9.1%
+12.5%

1 Capital expenditure has been included in the above table as it represents a key expenditure, being the Group’s investment in infrastructure to drive future growth.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ Remuneration report continued

Implementation of Remuneration Policy in the financial year 2022
The changes in the Remuneration Policy in 2022 are explained in the Remuneration Committee Chair’s statement on page 66 and set out
in the Remuneration Policy table. The principal changes are the introduction of post-cessation shareholding requirements for Executive
Directors signing new contracts and the introduction of ESG objectives into the bonus scheme.

Executive Directors
The following table summarises the Executive Director remuneration package for 2022.

Director
Andrew Taylor
Andrew Belshaw

Salary
£000s

428
325

Maximum pension
contribution (% of
salary)

Maximum annual
bonus opportunity
(% of salary)

Maximum LTIP
opportunity (% of
salary)

–
5.1%

125%
100%

150%
150%

Benefits

–
–

Salary: With effect from 1 January 2022, the salaries of the CEO was increased by 2.5%, the salary of the CFO was increased by 25%,
reflecting his increased responsibilities as Deputy CEO designate and the market rate for the CFO role as evidenced during the
recruitment process for the new CFO who joins in May 2022 and as explained in the Remuneration Committee Chair’s statement.

Pension and Benefits: There are no changes to these arrangements for the year commencing 1 January 2022.

Annual performance bonus: The maximum annual bonus opportunity remains the same as it was in the prior year. The performance
measures and weightings have been amended with 75% of the maximum potential bonus being based on growth in adjusted PBT, 5% on
ESG related objectives and 20% based on personal objectives. The specific targets for the annual bonus for 2022 will be disclosed in the
2022 Annual Report on Remuneration.

Long-Term Incentive Plan (“LTIP”): It is anticipated that further performance-based share option awards will be made in April 2022. The
Committee will determine the levels, performance conditions, weighting and targets to be applied at the time of the award and will disclose
them in the announcement of the awards and in the 2022 Annual Report.

Non-Executive Directors
With effect from 1 January 2022, the Chair of the Board’s fees were increased from £104,000 to £140,000 as described in the
Remuneration Chair’s statement. The committee chair fees, the SID fee and the Non-Executive Directors’ general fees were increased by
2.5% with effect from the 1 January 2022. An expense allowance has been introduced in 2022 for the Chair and the Non-Executive
Directors which replaces their entitlements in their appointment letters to claim travel expenses (other than airfares and hotels) to and
from the Company’s London and Newbury offices as well as incidental expenses. These expenses are shown in the single figure of
remuneration table but were not significant in 2020 and 2021 due to the pandemic. They were expected to revert to normal levels in 2022.
The expense allowance is subject to tax and national insurance.

The following table summarises the 2022 Non-Executive Director fees.

Director
Richard Last

Charlotta Ginman

Martin Lea

Henrietta Marsh

Wu Long Peng

Xavier Robert

Directors’
Fees
£000s

140

Committee
Chair Fees
£000s

SID Fee
£000s

Expense
allowance
£000s

Total Fees
£000s

–

144

Advisers to the Remuneration Committee
During the year, h2glenfern Remuneration Advisory advised the Committee on certain aspects of the remuneration of the Executive
Directors and the Chair of the Board. Fees of £25,800 exclusive of VAT were paid to h2glenfern Remuneration Advisory. h2glenfern
Remuneration Advisory is a member of the Remuneration Consultants Group and, as such, voluntarily adheres to its Code of Conduct.
The Committee considers the advice that it receives from h2glenfern to be independent.

Statement of Voting
During the 2021 AGM, a motion was set for the shareholders to approve on an advisory only basis the Remuneration Committee report.
99.92% votes were cast in favour of the motion.

This Directors’ Remuneration report will be put to an advisory vote at the forthcoming 2022 AGM. This report was approved by the Board
of Directors on 21 March 2022 and signed on its behalf by:

Henrietta Marsh
Remuneration Committee Chair

21 March 2022

Gamma Communications plc Annual Report and Accounts 2021Directors’ report

The Directors present their Annual Report,
together with the Group’s audited
financial statements for the year ended
31 December 2021.
The Corporate Governance Statement set out on pages 48 to 49
forms part of this report.

Directors
The names of the Directors during the year and up to the date
of signing are disclosed on pages 50 to 51.

Directors’ interest in share capital
The Directors’ interest in share capital is shown within the Annual
Report on Remuneration on page 79.

Details of any significant events since the reporting date are
included in note 36 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.

Directors’ indemnities
The Company has made qualifying third-party indemnity provisions
for the benefit of the Directors of the Company and its subsidiaries
which were made during the year and remain in force at the date of
this report.

Information about the use of financial instruments by the Company
and its subsidiaries is given in note 28 to the financial statements.

Dividends
The Directors recommend a final dividend of 8.8p per ordinary
share (2020: 7.8p) to be paid on Thursday 23 June 2022 to ordinary
shareholders on the register on Friday 3 June 2023 which, together
with the interim dividend of 4.4p (2020: 3.9p), makes a total of 13.2p
for the year (2020: 11.7p).

Capital structure
Details of the authorised and issued share capital of the Company
and options over shares of the Company are set out in notes 31 and
33 to the Group financial statements. Over the period, the Company
had five share incentive schemes by which Directors and
employees may:

(i)

(ii)

be granted options under a Long-Term Incentive Plan (“LTIP”)
to subscribe for nil-cost shares in the Company;

be granted options under the Company Share Option Plan
(“CSOP”);

(iii) be issued shares under a Share Incentive Plan (“SIP”);

(iv)

be granted options under a Save As You Earn plan (“SAYE”);
and

(v) be granted options under the deferred bonus scheme.

The maximum aggregate number of shares which may be issued in
respect of these schemes is limited to 10% of the issued share capital.

In the period the Company has issued equity in connection with
settlement of deferred consideration and options in respect of
historical acquisitions.

Composition of the Group
Details concerning subsidiary undertakings are given in note 17
to the Group financial statements.

Going concern
The financial accounts are prepared on a going concern basis.
Further detail can be found in the Financial review on pages 32 to 35.

Treasury policy
The Group’s treasury policy aims 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 28 sets out the particular risks to which the Group is
exposed, and how these are managed.

Interests in contracts
At no time during the year did any of the Directors have a
material interest in any significant contract with the Company
or any of its subsidiaries.

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.

Energy and carbon emission reporting
Information on energy and carbon emission reporting can be found
on pages 36 to 42.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Directors’ report continued

Political contributions
No political contributions were made in the year (2020: £nil).

Employee engagement
Information relating to how the Group engages with its workforce
can be found on pages 43 to 44.

Applications for employment by disabled persons are always fully
considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled
every effort is made to ensure that their employment with the
Group continues and that appropriate training is arranged. It is the
policy of the Group that the training, career development and
promotion of disabled persons should, as far as possible, be
identical to that of other employees.

Auditors and their independence
A resolution to appoint auditors for the year to 31 December 2022
will be proposed at the AGM. The Company has a policy for approval
by the Audit Committee of non-audit services by the auditor, to
preserve independence. The external auditor, Deloitte LLP, have
expressed their willingness to continue in office as auditor and a
resolution to reappoint them will be proposed at the forthcoming
Annual General Meeting.

Disclosure of information to the auditor
Each of the persons who is a Director at the date of approval of this
Annual Report confirms that:

• so far as the Director is aware, there is no relevant audit

information of which the Company’s auditor is unaware; and

• the Director has taken all the steps that he/she ought to have

taken as a Director in order to make himself/herself 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.

Approved and authorised by the Board.

By order of the Board,

Andrew Belshaw
Chief Financial Officer

21 March 2022

Gamma Communications plc Annual Report and Accounts 2021Statement of Directors’
responsibilities

The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with
International Financial Reporting Standards (“IFRSs”) as adopted by
the United Kingdom and Article 4 of the IAS Regulation and have
elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable
law) including FRS 101 ‘Reduced Disclosure Framework’. Under
company law the Directors must not approve the accounts unless
they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period.

In preparing the parent company financial statements, the
Directors are required to:

• select suitable accounting policies and then apply them

consistently;

• make judgements and accounting estimates that are reasonable

and prudent;

• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and

• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.

In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and
understandable information;

• provide additional disclosures when compliance with the

specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and

• make an assessment of the Company’s ability to continue as

a going concern.

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.

Responsibility statement
We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the

relevant financial reporting framework, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole;

• the Strategic Report includes a fair review of the development

and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks
and uncertainties that they face; and

• the Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position
and performance, business model and strategy.

This responsibility statement was approved by the Board of
Directors and is signed on its behalf by:

Andrew Belshaw
Chief Financial Officer

21 March 2022

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Financial statements

Independent auditor’s report to the members
of Gamma Communications plc

Report on the audit of the financial statements
1. Opinion

In our opinion:

• the financial statements of Gamma Communications plc

(the ‘parent company’) and its subsidiaries (the ‘group’) give
a true and fair view of the state of the group’s and of the
parent company’s affairs as at 31 December 2021 and of
the group’s profit for the year then ended;

• the group financial statements have been properly

prepared in accordance with United Kingdom adopted
international accounting standards and International
Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB);

• the parent company financial statements have been

properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including
Financial Reporting Standard 101 “Reduced Disclosure
Framework”; and

• the financial statements have been prepared in accordance

with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

• the consolidated statement of comprehensive income;

• the consolidated and parent statements of financial position;

• the consolidated and parent company statements of

changes in equity;

• the consolidated statement of cash flows;

• the consolidated related notes 1 to 36; and

• the parent company’s related notes 1 to 11.

The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law, and
United Kingdom adopted international accounting standards and
IFRSs as issued by the IASB. 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, including FRS 101 “Reduced Disclosure Framework”
(United Kingdom Generally Accepted Accounting Practice).

Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section of
our report.

We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial
Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

2. Summary of our audit approach

Key audit
matters

The key audit matter that we identified in the current
year was:

Materiality

Scoping

• Revenue: accuracy of volume and pricing of

indirect usage revenue

Within this report, the key audit matter is identified
as follows:

Similar level of risk

The materiality that we used for the group financial
statements was £3.4m which was determined on the
basis of 5% of profit before tax.

The Group engagement team have performed a full
scope audit for the entire UK group with the
exception of the newly-acquired Mission Labs
Limited, Exactive Holdings Limited (“Exactive”) and
Telsis Communication Services Limited (“Telsis”). The
entities we perform full scope audit procedures over
represent the principal business units and account
for 89% (2020: 91%) of the Group’s revenue, 95%
(2020: 96%) of the Group’s statutory profit before tax
and 80% (2020: 90%) of the Group’s net assets.

The Group engagement team have worked with
component auditors to perform specific audit
procedures over the German subsidiaries HFO
Telecom GmbH and Epsilon Telecommunications
GmbH (together “HFO”) and analytical review
procedures over the remainder of the Group.

Significant
changes in our
approach

In the prior year, we identified a key audit matter
relating to the the valuation of customer contract
intangible assets identified as part of the acquisitions
of HFO and Voz; this is no longer relevant as the
acquisition accounting has been finalised.

3. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the group’s and
parent company’s ability to continue to adopt the going concern
basis of accounting included:

• Understanding the Group’s process for assessing going

concern, and relevant management review controls underpinning
this assessment;

• Assessing the liquidity position of the Group and evaluating cash
forecasts which were prepared for the period up to June 2023;

• Evaluating the historical accuracy of the Group’s forecasts;

• Understanding the relevant assumptions used in the going concern
models, including the Strategic Plan, and challenging them by
comparison to our understanding of the business, external
information and evidence gathered from other audit procedures; and

• Evaluating management’s stress tests and break-even analyses,
and performing our own independent analysis, in order to assess
the sensitivity of the model to the assumptions used.

Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group's and parent company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.

Gamma Communications plc Annual Report and Accounts 20214. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.

4.1. Revenue: accuracy of volume and pricing of indirect usage revenue

Key audit matter
description

Revenue from the Group’s indirect usage customer base, which wholly relates to the UK, is calculated based on the
volume of call traffic and associated call rates. We identified a key audit matter relating to the accuracy of traffic volumes
as well as the accuracy of the pricing within this segment, due to the volume of transactions. Inaccuracies in call rates,
whether due to fraud or error, could result in a material misstatement in revenue.

How the scope
of our audit
responded to the
key audit matter

In 2021 the group’s revenues were £447.7m (2020: £393.8m) of which UK indirect usage revenue represents £78.5m
(2020: £76.4m), as disclosed in note 5 to the financial statements. The group’s revenue recognition principles are disclosed
in note 1.

Working with our specialist IT auditors we tested, and placed reliance on, IT controls relevant to revenue, the most
critical of which was the matching of the call rates input and call data records within the system to calculate the billing for
each transaction.

We have also tested and relied upon a number of other controls relevant to revenue, specifically in relation to rate-change
reviews, the revenue reconciliations performed thereof, and the analysis of monthly revenue trends.

We have tested the volumes and prices involved in indirect usage revenues by tracing a sample of invoice information to call
data records. We recalculated the revenue in relation to the calls by multiplying the appropriate rate against the call minutes.

In addition we performed substantive analytical procedures of total indirect usage revenues for the year based on the
month-on-month trends, movements in minutes, as well as call rate fluctuations.

We also traced a sample of credit notes raised post year end to supporting documentation to test for possible
overstatement of revenue.

Key observations We are satisfied that the UK indirect usage revenue is materially accurate.

5. Our application of materiality
5.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements

Parent company financial statements

Materiality

£3.4m (2020: £2.8m)

Basis for
determining
materiality

5% of profit before tax
(2020: 5% of profit before tax excluding gain
on disposal of The Loop)

£1.2m (2020: £1.4m)

2% (2020: 2%) of net assets

Rationale for the
benchmark applied

We chose this measure as it is the primary statutory
measurement used by the users of the accounts and key
stakeholders to measure the performance of the group.

Net assets has been chosen as the benchmark as it is
considered the most relevant benchmark for an investment
holding company.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021
PBT
£67.2m

PBT
Group materiality

Group materiality £3.4m

Component materiality
range £0.7m to £1.9m

11%

13%

11%

Revenue

Profit
before tax

Net assets

81%

87%

89%

Audit Committee reporting
threshold £0.17m

Full audit scope

Specified audit procedures

Review at Group level

6.2. Our consideration of the control environment
We have taken a controls reliance in relation to revenue. Please see
section 5.1 for a description of our approach. We also performed
design and implementation procedures around controls relating to
the risk of Management override. We took a fully substantive
approach for all other areas of the audit.

6.3. Working with other auditors
The Group audit team engaged component audit team to perform
the audit procedures as set out in section 7.1. The Group audit team
held regular communication with the component auditors in
planning for, and throughout, the audit process. Oversight of the
component auditors included attending internal planning and status
meetings, attending close meetings held with local management,
reviewing relevant audit documentation, and discussing the results
with both management and the component auditors.

7. Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other
information contained within the annual report.

Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.

Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.

We have nothing to report in this regard.

5.2. Performance materiality
We set performance materiality at a level lower than materiality to
reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial
statements as a whole.

Group
financial statements

Parent company
financial statements

Performance
materiality

70% (2020: 70%)
of group materiality

70% (2020: 70%) of parent
company materiality

Basis and
rationale for
determining
performance
materiality

In determining performance materiality,
we considered the following factors:

• our historical knowledge of the group’s business

and our ability to forecast misstatements;

• the quality of the control environment and the
fact that we were able to rely on controls for
revenue;

• the nature of, and low volume and small size of,
corrected and uncorrected misstatements
identified in the previous audits;

• management’s willingness to investigate and

correct misstatements; and

•

low turnover of management or key accounting
personnel.

5.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.17m (2020: £0.14m),
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the
Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.

6. An overview of the scope of our audit
6.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including controls, and assessing the
risks of material misstatement at the Group level. Based on that
assessment, the Group audit team have performed full scope
audits at 4 components (2020: 4), being the four largest trading
entities in the UK. These 4 components represent the principal
business units within the Group and account for 81% (2020: 85%) of
the Group’s revenue, 87% (2020: 96%) of the Group’s statutory
profit before tax and 89% (2020: 90%) of the Group’s net assets.

Specified audit procedures around revenue, cash and trade
receivables have also been performed for HFO by our component
auditors, which has given us a further 8% coverage over revenue.

We also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant
risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit.

Financial statements continuedGamma Communications plc Annual Report and Accounts 20218. Responsibilities of directors
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, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic
alternative but to do so.

9. Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.

10. Extent to which the audit was considered capable

of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud
is detailed below.

10.1. Identifying and assessing potential risks related

to irregularities

In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance with
laws and regulations, we considered the following:

• the nature of the industry and sector, control environment and
business performance including the design of the group’s
remuneration policies, key drivers for directors’ remuneration,
bonus levels and performance targets;

• results of our enquiries of management, internal audit and the

audit committee about their own identification and assessment
of the risks of irregularities;

• any matters we identified having obtained and reviewed the group’s

documentation of their policies and procedures relating to:

○ identifying, evaluating and complying with laws and regulations
and whether they were aware of any instances of non-compliance;

○ detecting and responding to the risks of fraud and whether

they have knowledge of any actual, suspected or alleged fraud;

○ the internal controls established to mitigate risks of fraud or

non-compliance with laws and regulations;

• the matters discussed among the audit engagement team
including component audit teams and relevant internal
specialists, including tax, valuations and IT specialists regarding
how and where fraud might occur in the financial statements and
any potential indicators of fraud.

As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in relation to the accuracy
of UK indirect revenue. In common with all audits under ISAs (UK),
we are also required to perform specific procedures to respond to
the risk of management override.

We also obtained an understanding of the legal and regulatory
frameworks that the group operates in, focusing on provisions of
those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the UK Companies Act and AIM Listing Rules.

In addition, we considered provisions of other laws and regulations
that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the group’s ability to
operate or to avoid a material penalty. These included Ofcom
regulations, Health and Safety regulations, the Telecoms Act and
GDPR compliance.

10.2. Audit response to risks identified
As a result of performing the above, we identified UK indirect
revenue accuracy related to the potential risk of fraud. The key
audit matters section of our report explains the matter in more
detail and also describes the specific procedures we performed in
response to that key audit matters.

In addition to the above our procedures to respond to risks
identified included the following:

• reviewing the financial statement disclosures and testing to

supporting documentation to assess compliance with provisions
of relevant laws and regulations described as having a direct
effect on the financial statements;

• enquiring of management, the audit committee and in-house
legal counsel concerning actual and potential litigation and
claims;

• performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;

• reading minutes of meetings of those charged with governance;

and

•

in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including
internal specialists and significant component audit teams, and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Report on other legal and regulatory requirements
11. Opinions on other matters prescribed

by the Companies Act 2006

In our opinion, based on the work undertaken in the course
of the audit:

• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and

• the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group
and the parent company and their environment obtained in
the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.

12. Matters on which we are required to report by exception
12.1. Adequacy of explanations received and

accounting records

Under the Companies Act 2006 we are required to report to you if,
in our opinion:

• we have not received all the information and explanations we

require for our audit; or

• 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.

We have nothing to report in respect of these matters.

12.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if
in our opinion certain disclosures of directors’ remuneration have
not been made.

We have nothing to report in respect of this matter.

13. Use of our report
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.

Mark Tolley FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, United Kingdom
21 March 2022

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Consolidated statement of profit or loss
For the year ended 31 December 2021

Revenue
Cost of sales
Gross profit
Operating expenses

Earnings before depreciation, amortisation and exceptional items
Exceptional items
Earnings before depreciation and amortisation
Depreciation and amortisation (excluding business combinations)
Depreciation and amortisation arising due to business combinations

Profit from operations
Finance income
Finance expense
Profit before tax
Tax expense
Profit after tax

Attributable to:
Equity holders of Gamma Communications plc
Non-controlling interests

Earnings per share
Basic per Ordinary Share (pence)
Diluted per Ordinary Share (pence)

Adjusted earnings per share is shown in note 12.

All income recognised during the year was generated from continuing operations.

Consolidated statement of comprehensive income
For the year ended 31 December 2021

Profit after tax
Other comprehensive expense
Items that may be reclassified subsequently to the income statement (net of tax effect)

Exchange differences on translation of foreign operations

Total comprehensive income

Attributable to:

Equity holders of Gamma Communications plc
Non-controlling interests

The notes on pages 95 to 126 form part of these financial statements.

Notes
5

7
7

10
10

12
12

2021
£m
447.7
(219.2)
228.5
(160.2)

95.4
–
95.4
(17.6)
(9.5)

68.3
0.1
(1.2)
67.2
(13.2)
54.0

53.6
0.4
54.0

55.9
55.2

2021
£m
54.0

(3.5)
50.5

50.1
0.4
50.5

2020
£m
393.8
(193.0)
200.8
(125.1)

79.0
19.6
98.6
(16.9)
(6.0)

75.7
0.4
(1.1)
75.0
(10.6)
64.4

64.2
0.2
64.4

67.5
66.6

2020
£m
64.4

(0.1)
64.3

64.1
0.2
64.3

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Consolidated statement of financial position
As at 31 December 2021

ASSETS
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax assets
Trade and other receivables

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax asset

Total assets

LIABILITIES
Non-current liabilities
Other payables
Borrowings
Lease liabilities
Provisions
Contract liabilities
Contingent consideration
Put option liability
Deferred tax

Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Contract liabilities
Contingent consideration
Put option liability
Current tax liability

Total liabilities

Net assets

EQUITY
Share capital
Share premium reserve
Other reserves
Retained earnings
Equity attributable to owners of Gamma Communications plc
Non-controlling interests
Written put options over non-controlling interests
Total equity

Notes

2021
£m

2020
£m

14
15
16
30
20

19
20
21

22
24
25
29
23
27
26
30

22
24
25
29
23
27
26

31
32
32
32

32
32

36.8
10.2
129.3
7.0
14.3
197.6

7.9
98.4
52.8
5.1
164.2
361.8

2.0
2.5
9.8
1.1
10.0
3.7
2.3
10.0
41.4

48.1
0.8
2.1
0.9
7.4
2.6
3.4
0.9
66.2
107.6

36.3
11.5
95.3
5.7
14.8
163.6

8.1
93.7
53.9
2.6
158.3
321.9

1.5
4.6
10.8
1.9
8.3
1.2
5.6
9.0
42.9

54.9
1.3
2.3
0.6
7.6
1.8
5.6
0.5
74.6
117.5

254.2

204.4

0.2
14.9
4.5
239.1
258.7
2.2
(6.7)
254.2

0.2
9.0
6.1
197.5
212.8
3.0
(11.4)
204.4

The financial statements on pages 91 to 126 were approved and authorised for issue by the Board of Directors on 21 March 2022 and
were signed on its behalf by:

Andrew Belshaw
Chief Financial Officer

The notes on pages 95 to 126 form part of these financial statements.

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Consolidated statement of cash flows
For the year ended 31 December 2021

Cash flows from operating activities
Profit for the year before tax
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation and reduction in value of intangible assets
Change in fair value of contingent consideration
Share-based payment expense
Interest income
Finance expense
Gain on disposal of subsidiary undertaking

Increase in trade and other receivables
Decrease in inventories
Decrease in trade and other payables
Increase/(decrease) in contract liabilities
(Decrease)/increase in provisions
Cash generated by operations
Taxes paid
Net cash flows from operating activities

Investing activities
Gain on disposal of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Acquisition of subsidiaries net of cash acquired
Disposal of subsidiary net of disposed cash
Net cash used in investing activities

Financing activities
Lease liability repayments
Repayment of borrowings
Interest paid
Share issues
Dividends
Net cash used in financing activities

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

The notes on pages 95 to 126 form part of these financial statements.

Notes

14
15
16
8

10
10
8

14
14
16

25
24

2021
£m

67.2

8.3
2.7
16.1
–
4.8
(0.1)
1.2
–
100.2

(5.4)
0.2
(6.2)
1.5
(0.5)
89.8
(13.3)
76.5

0.1
(9.1)
(7.7)
0.1
(49.3)
–
(65.9)

(3.1)
(2.3)
(0.5)
5.9
(11.7)
(11.7)

(1.1)
53.9
52.8

2020
£m

75.0

9.7
2.2
11.0
(0.1)
3.5
(0.4)
1.1
(19.5)
82.5

(6.1)
0.3
(6.1)
(1.2)
0.9
70.3
(14.1)
56.2

–
(9.5)
(5.9)
0.4
(47.7)
19.4
(43.3)

(2.1)
(1.6)
(0.3)
1.5
(10.4)
(12.9)

–
53.9
53.9

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Consolidated statement of changes in equity
For the year ended 31 December 2021

1 January 2020
Issue of shares
Share-based payment expense
Tax on share-based payment expense:

Current tax
Deferred tax

Non-controlling interests on acquisition of
subsidiary
Equity put rights
Dividend paid1
Transaction with owners

Profit for the year
Other comprehensive expense
Total comprehensive (expense)/income

31 December 2020

1 January 2021
Issue of shares
Share-based payment expense
Tax on share-based payment expense:

Current tax
Deferred tax

Non-controlling interests on acquisition of
subsidiary
Equity put rights
Dividend paid1
Transaction with owners

Profit for the year
Other comprehensive expense
Total comprehensive (expense)/income

Share
capital
£m
0.2
–
–

Share
premium
reserve
£m
6.6
2.4
–

Other
reserves2
£m
4.8
(1.4)
2.8

Retained
earnings
£m
140.9
1.3
–

Written put
options over
non-
controlling
interests
£m
–
–
–

Non-
controlling
interests
£m
–
–
–

Total
£m
152.5
2.3
2.8

1.0
0.5

–
–
(10.4)
(3.8)

64.2
(0.1)
64.1

–
–

–
–
–
1.4

–
(0.1)
(0.1)

1.0
0.5

–
–
(10.4)
(7.6)

64.2
–
64.2

6.1

197.5

212.8

6.1
(2.2)
4.1

–
–

–
–
–
1.9

–
(3.5)
(3.5)

197.5
2.2
–

1.7
(0.7)

1.2
(4.7)
(11.7)
(12.0)

53.6
–
53.6

212.8
5.9
4.1

1.7
(0.7)

1.2
(4.7)
(11.7)
(4.2)

53.6
(3.5)
50.1

–
–

–
–
–
–

–
–
–

0.2

0.2
–
–

–
–

–
–
–
–

–
–
–

–
–

–
–
–
2.4

–
–
–

9.0

9.0
5.9
–

–
–

–
–
–
5.9

–
–
–

Total
equity
£m
152.5
2.3
2.8

1.0
0.5

2.8
(11.4)
(10.4)
(12.4)

64.4
(0.1)
64.3

–
–

–
(11.4)
–
(11.4)

–
–
–

(11.4)

204.4

(11.4)
–
–

204.4
5.9
4.1

–
–

–
4.7
–
4.7

–
–
–

1.7
(0.7)

–
–
(11.7)
(0.7)

54.0
(3.5)
50.5

(6.7)

254.2

–
–

2.8
–
–
2.8

0.2
–
0.2

3.0

3.0
–
–

–
–

(1.2)
–
–
(1.2)

0.4
–
0.4

2.2

31 December 2021

0.2

14.9

4.5

239.1

258.7

1 Refer to note 13.
2 Refer to note 32.

The notes on pages 95 to 126 form part of these financial statements.

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Exemption from audit
For the year ending 31 December 2021 the following UK
subsidiaries will take advantage of the audit exemption under
s479A of the Companies Act 2006.

Subsidiary name
Gamma Europe Holdco Limited
Gamma Group Holdings Limited
Gamma Telecom Holdings Limited
Gamma Telecom Limited
Gamma Business Communications Limited
Gamma Network Solutions Limited
Exactive Limited
Exactive Holdings Limited
Mission Labs Limited
Telsis Communication Services Limited
Telsis Direct Limited
Telsis Services Limited

Company
registration
number
12651762
12648657
04287779
04340834
02998021
06783485
SC285583
SC293070
10040088
09235326
02977905
02304971

For the year ending 31 December 2021, Gamma Communications
Europe B.V. and Gamma Communications Benelux B.V. were entitled
to exemption from preparation of consolidated financial statements
under Section 408 of the Dutch Civil Code (consolidation
exemption for intermediate holding companies).

Dormant companies
For the year ending 31 December 2021 the following dormant UK
subsidiaries will prepare and file individual accounts under s394A
and s448A of the Companies Act 2006.

Subsidiary name
CircleLoop Limited
Exactive Online Limited
Uniworld Bureau Services Limited

Company
registration
number
11056242
SC377506
07136383

Notes to the financial statements
For the year ended 31 December 2021

1. Accounting policies

Basis of preparation
These financial statements are prepared in accordance with the
Companies Act 2006 and International Financial Reporting
Standards (“IFRS”), issued by the International Accounting
Standards Board (“IASB”) as adopted by the United Kingdom (“UK”).
The financial statements are prepared on a going concern basis
and have been prepared on a historical cost basis, except for certain
financial instruments which have been measured at fair value.

The financial statements are presented in Pounds Sterling and,
unless otherwise stated, have been rounded to the nearest
0.1 million (£m).

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 years presented, unless
otherwise stated.

Going concern
The Group continues to adopt the going concern basis of
accounting in preparing the financial statements. Further details
can be found in the Financial review on pages 32 to 35.

Basis of consolidation
The Group financial statements consolidate the financial
statements of Gamma Communications plc (‘the Company’)
and the entities controlled by the Company (its subsidiaries).
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.

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.

Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group’s equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling shareholder’s share of changes in equity since
the date of the combination. Total comprehensive income is
attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.

When the Group loses control of a subsidiary, the gain or loss on
disposal recognised in profit or loss is calculated as the difference
between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), less
liabilities of the subsidiary and any non-controlling interests or
amounts previously recognised in other comprehensive income
in relation to that subsidiary.

The consolidated financial statements consist of the results of the
entities shown in note 17.

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Notes to the financial statements continued
For the year ended 31 December 2021

Business combinations
The acquisition method of accounting is used for the acquisition
of subsidiaries. The cost of the acquisition is measured at the
aggregate fair value of consideration given. Acquisition-related
costs are recognised in the Consolidated statement of profit or
loss as incurred.

At the acquisition date, the acquiree’s identifiable assets, liabilities
and contingent liabilities that meet the conditions for recognition
under IFRS 3 Business Combinations are recognised at their fair
value. Certain assets and liabilities are not recognised at fair value
at the acquisition date as they are accounted for using other
applicable IFRSs. These include deferred tax assets/liabilities.

The interest of the non-controlling shareholders in the acquiree
may initially be measured either at fair value or at the non-
controlling shareholders’ proportion of the net fair value of the
identifiable assets acquired, liabilities and contingent liabilities
assumed. The choice of measurement basis is made on an
acquisition-by-acquisition basis.

If the initial accounting for a business combination is incomplete
by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted
during the measurement period of one year from the acquisition
date to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised as of that date.

Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement measured at fair value at the acquisition date.
Subsequent changes in the fair value of contingent consideration
classified as an asset or liability are accounted for in accordance
with relevant IFRSs.

Put option arrangements
The cash payments related to put options issued by the Group over
the equity of subsidiary companies are accounted for as financial
liabilities when such options may only be settled by exchange of cash.

The amount that may become payable under the option on exercise
is initially recognised within liabilities with a corresponding charge
directly to equity. The charge to equity is recognised separately
as written put options over non-controlling interests, adjacent
to non-controlling interests in the net assets of consolidated
subsidiaries. The Group recognises the cost of writing such put
options, determined as the excess of the fair value on the option
over any consideration paid, as a financing cost.

Such options are subsequently measured at amortised cost, using
the effective interest rate method, in order to accrete the liability
up to the amount payable under the option at the date at which
it first becomes exercisable. The charge arising is recorded as
a financing cost.

Goodwill
Goodwill arises on business combinations and represents the
excess of the cost of acquisition over the Group’s interest in the
fair value of the identifiable assets and liabilities of the acquired
business at the acquisition date.

Goodwill is capitalised as an intangible asset with annual
impairment tests undertaken at 30 September each year with any
impairment in carrying value being charged to the Consolidated
statement of profit or loss. Where the fair value of identifiable
assets, liabilities and contingent liabilities exceeds the fair value of
consideration paid, the excess is credited in full to the Consolidated
statement of profit or loss on the acquisition date.

Goodwill on acquisitions prior to the date of transition to IFRS
have been retained at the previous UK GAAP amounts subject
to impairment testing.

Revenue
Revenue represents the fair value of the consideration received or
receivable for communication services and equipment sales, net of
discounts and sales taxes. One of the Group’s German subsidiaries
also has revenue from the commission earned on the sale of mobile
phone contracts.

Revenue is recognised when the Group has fulfilled its performance
obligations under the relevant customer contract.

The Group sells a number of communications products each of
which typically consists of all or some of four main types of revenue
– voice and data traffic, a subscription or rental, equipment sales
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 in a different pattern to the
revenue recognition described below, appropriate adjustments are
made through contract liabilities and contract assets to account for
revenue when the performance obligations have been met.

The Group has two types of channel partners. For the majority
of the channel partners, the Group receives payment for products
and services from channel partners who onwardly sell to end
users. These channel partners are treated as the principal in
that transaction because the channel partner has the primary
responsibility for providing the products or services to the end
user; carries the inventory risk; is free to establish its own prices
either with or without bundling in other goods or services which are
not supplied by the Group; and bears the credit risk for the amount
receivable from the end user. The Group therefore recognises
revenue based on the transactions with the channel partner and
not the end user.

The Group also has other channel partners that do not meet the
criteria above and hence are not recognised as the principal in the
transaction. For sales relating to these channel partners the Group
recognises revenue based on transactions with the end user and
recognises commission paid to the channel partner as an expense.

Voice and data traffic
Revenue from traffic is recognised at the time the call is made or
data is transferred.

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.

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Subscriptions 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 ethernet,
broadband, UCaaS services and other internet access or voice
services, are recognised as revenue as the service is provided.

A minority of sales of the Cloud PBX product are made under an
‘upfront’ model whereby a channel partner buys the right to use
a service for an unspecified period of time into the future. This is
treated as an option to obtain future services at a discount and the
revenue is spread equally over the estimated future period of usage
of that service.

Equipment sales
Revenue from the sale of peripheral and other equipment is recognised
when control of the asset has transferred to the buyer, normally the
date the equipment is delivered and accepted by the customer.

Installation fees
Revenue from installations which cannot be separated from an
ongoing service contract, i.e. installations with no standalone value
to the customer, are allocated to initial equipment sale (if any) and
ongoing service revenues. The latter element results in a contract
liability which is released over the length of the contract.

Arrangements with multiple deliverables
Where goods and/or services are sold in a bundled transaction,
the total arrangement consideration is allocated to the individual
elements based on their relative fair values. This fair value is based
on amounts charged on a standalone basis, or by using comparable
pricing arrangements observable in the market.

Commission from mobile network operators
Our German business (Epsilon Telecommunications GmbH)
receives commission from mobile network operators in relation
to the activation of SIMs. It recognises the revenue in the month
in which it is activated by the mobile network operators. Annual
commission is recognised on an accruals basis once the
performance obligations can be measured reliably.

Advances made to channel partners
Advances are sometimes made to channel partners as part of
an incentive deal. Where the Group can demonstrate recovery of
the advances through contractual clawback provisions and past
evidence of recovery, they are deferred and recognised over the
period of the contract. Where this is not possible, they are charged
directly to the Consolidated statement of profit or loss.

Incentive deals
Where the Group enters into incentive deals the costs are spread
over the period of the deal and attributes a proportion of revenue
against these costs. Where there is no revenue the credit is shown
against revenue over the period of the deal.

Foreign currency
The consolidated financial statements are presented in Pounds
Sterling, which is the functional currency of the Company.

Foreign currency transactions are translated into the functional
currency at the prevailing rates when the transactions occur.
Foreign currency monetary assets and liabilities are translated at
the rates prevailing 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 European operations are translated
into Pounds Sterling at rates approximating those prevailing when
the transactions took place. The balance sheets of European
operations are translated at the prevailing rate at the reporting
date. Exchange differences arising on translating the opening net
assets at opening rate and the results of European 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 European operation
concerned are reclassified to other comprehensive income and
accumulated in the foreign exchange reserve on consolidation.

Financial instruments
Financial assets and financial liabilities are recognised on the
Consolidated statement of financial position when the Group
becomes party to the contractual provisions of the instrument.
Financial assets are classified as either fair value through profit or
loss, fair value through other comprehensive income, or amortised
cost. Classification and subsequent remeasurement depends on
the Group’s business model for managing the financial asset and
its cash flow characteristics. Assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost.

All financial assets are recognised and derecognised on a trade
date basis, where the purchase or sale of a financial asset is under
a contract whose terms require delivery of the financial asset within
the timeframe of the market concerned.

Financial assets
Trade and other receivables
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as financial assets measured at amortised cost. Trade
receivables do not contain significant financing components
and therefore are initially recognised at their transaction price,
and subsequently treated in line with other financial assets.

Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at
banks and other short-term highly liquid investments with original
maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant
risk of changes in value.

Impairment of financial assets
Except for trade receivables, impairment provisions are recognised
as an expected credit loss provision under the general approach,
being the expected credit loss over the next 12 months. Where
there is a credit risk on a financial asset that has increased
significantly, the impairment provision is measured at the lifetime
expected credit loss. Impairment for trade receivables will be
measured under the simplified approach with an expected credit
loss percentage applied to each ageing category. All financial
assets will be reported net of impairment; when the Group has no
reasonable expectation of recovering a financial asset, the portion
that is not recoverable is derecognised.

Financial liabilities
Trade payables
Trade payables are other financial liabilities initially measured
at fair value and subsequently measured at amortised cost.

Derivatives
Forward exchange contracts are entered into to mitigate foreign
exchange risk. These contracts are derivatives and therefore
measured at fair value through profit or loss. Hedge accounting
has not been applied.

Borrowings
Borrowings represent bank loans, initially measured at net
proceeds and subsequently measured at amortised cost, using
the effective rate method.

Equity instruments
Equity instruments are recorded as the proceeds received, net of
direct issue costs. Gamma Communications plc Ordinary Shares
held by the Group are classified in equity as Own Shares. Gains and
losses arising from changes in fair value are recognised directly in
other comprehensive income, and are not subsequently reclassified
to the Group income statement, including on derecognition.

Offsetting financial instruments
Financial assets and liabilities are offset and presented on a net
basis in the Consolidated statement of financial position, only if the
Group holds an enforceable legal right of set-off for such amounts
and there is an intention to settle on a net basis or to realise an
asset and settle the liability simultaneously. In all other instances
they are presented gross in the Consolidated statement of
financial position.

Measurement
The financial instruments included on the Consolidated statement
of financial position are measured at fair value or amortised cost.
The measurement of this fair value can in some cases be subjective
and can depend on the inputs used in the calculations. The
different valuation methods are called ‘hierarchies’ and are
described below:

• Level 1: Fair values measured using quoted prices (unadjusted)

in active markets for identical assets or liabilities.

• Level 2: Fair values measured using inputs, other than quoted

prices included within Level 1, that are observable for the asset
or liability either directly or indirectly.

• Level 3: Fair values measured using inputs for the asset or liability

that are not based on observable market data.

Dividends
Dividends are accounted for when they become legally payable.
In the case of interim dividends to equity shareholders, this is upon
payment. For final dividends, this is when they are 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. Dividends are disclosed in note 13.

Share-based payment expense
Equity-settled share-based payments awarded to employees are
measured at the fair value of the options at the grant date. The fair
value excludes the effect of non-market based vesting conditions.
The fair value is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of equity instruments that
will eventually vest.

Each year end, the Group revises its estimate of the number of
equity instruments expected to vest as a result of non-market
based vesting conditions. The impact of the revision of the
estimate, if any, is recognised in the Consolidated statement of
comprehensive income so that, ultimately, the cumulative amount
recognised reflects the latest estimates with a corresponding
adjustment to the share option reserve.

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 profit and loss 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 is used where there are market conditions attached
to the share awards.

Hedge accounting
At the inception of the hedge relationship, the Group documents
the relationship between the hedging instrument and the hedged
item, as well as the risk management objective and the strategy for
undertaking the hedge transaction. The Group also documents its
assessment of whether the hedge is expected to be, and has been,
highly effective in offsetting the risk in the hedged item, both at
inception and on an ongoing basis.

Changes in the fair value of hedging instruments that are
designated and qualify as a hedge of a net investment in a foreign
operation (net investment hedges) or a hedge of a future cash flow
attributable to a recognised asset or liability, a highly probable
forecast transaction or a firm commitment (cash flow hedges), and
that prove to be highly effective in relation to the hedged risk, are
recognised in other comprehensive income and a separate reserve
within equity. Gains and losses accumulated in this reserve are
included in the statement of profit or loss on disposal of the
relevant investment or occurrence of the cash flow as appropriate.

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Changes in the fair value of hedging instruments that are
designated and qualify as a hedge of the fair value of a recognised
asset or liability (fair value hedges) are recognised in the statement
of profit or loss. The gain or loss on the hedged item that is
attributable to the hedged risk is recognised in the statement of
profit or loss. This applies even if the hedged item is an available for
sale financial asset or is measured at amortised cost. If a hedging
relationship no longer meets the criteria for hedge accounting, the
cumulative adjustment made to the carrying amount of the hedged
item is amortised to the statement of profit or loss, based on a
recalculated effective interest rate over the residual period to
maturity. In cases where the hedged item has been derecognised,
the cumulative adjustment is released to the statement of profit or
loss immediately.

Current tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from net profit as reported in the Consolidated
statement of profit or loss because it excludes items of income or
expense that are taxable or deductible in other years, it includes
items that are tax deductible but do not affect net profit 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;

Leased assets
Leased assets consist of rental property, cars and fibre networks
where the Group has the right to control the identified asset.

• 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 nor taxable profit; and

A right of use asset and corresponding lease liability are
recognised at commencement of a lease. The right of use asset
is measured at cost, which consists of the initial measurement
of the lease liability, any initial direct costs and any dilapidation or
restoration costs. The right of use asset is depreciated on a
straight-line basis over the shorter of the lease term or the useful
life of the underlying asset. The right of use asset is tested for
impairment if there are any indicators of impairment.

The lease liability is measured at the present value of the lease
payments, discounted at the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability
comprises of fixed or variable payments, amounts expected to be
payable under the residual value guarantee and payments arising
from options reasonably certain to be exercised.

Subsequently, the liability will be reduced for payments made and
increased for the interest applied and it is remeasured to reflect any
reassessment or contract modifications. When the lease liability
is remeasured, the corresponding adjustment is reflected in the
right of use asset or in the Consolidated statement of profit or loss
if the right of use asset is already reduced to zero.

Where lease incentives are received to enter into operating leases,
such incentives are recognised as a liability. The aggregate benefit
of incentives is recognised as a reduction of rental expense on a
straight-line basis, except where another systematic basis is more
representative of the time pattern in which economic benefits from
the leased asset are consumed.

Short term leases of 12 months or less and leases of low value are
expensed to the Consolidated statement of profit or loss.

Where the Group has a contract to use part of a fibre or copper
pathway and does not have substantially all of the capacity
of the asset this is not classified as a lease and payments are
expensed. In some instances, a pathway may have a small
incidental linkage where the Group is using substantially all of the
capacity of a very minor part of the pathway. In this instance the
whole contract is not treated as a lease.

Taxation
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 accounting
for a business combination, the tax effect is included in the
accounting for the business combination.

The tax expense represents the sum of the tax currently payable
and deferred tax.

•

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 statement of financial position date.
Deferred tax is charged or credited in the statement of profit or
loss, 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.

Property, plant and equipment
Property, plant and equipment is stated at costs less accumulated
depreciation and any accumulated impairment losses. Costs
comprise purchase price, any other 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.

Depreciation is calculated by charging equal annual instalments to
the Consolidated profit or loss at the following rates:

Category
Land and buildings
Network assets
Computer equipment
Fixtures and fittings

Depreciation rate
3% – 6% per annum straight line
14% – 25% per annum straight line
15% – 33% per annum straight line
8% – 33% per annum straight line

The charge in respect of periodic depreciation is calculated after
establishing an estimate of the asset’s useful life and the expected
residual value at the end of its life. The useful lives of Group assets
are determined by management at the time the assets are acquired
and reviewed annually for appropriateness. These lives are based
on historical experience with similar assets.

The carrying amounts of property, plant and equipment are reviewed
at each balance sheet date to determine whether there is any
indication of impairment. An impairment loss is recognised when
the carrying value of an asset exceeds its recoverable amount.

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.

Acquired intangible assets
Separately identified intangible assets acquired as part of a
business combination are initially valued at their fair value
(regarded as cost). Intangible assets are subsequently valued at
cost less accumulated amortisation and any impairment losses.
Amortisation is charged on a straight-line basis over the estimated
useful life of the asset. The carrying value of the intangible asset
is reviewed for impairment if events or changes in circumstance
indicate the carrying value may not be recoverable. The expected
useful economic life of the intangible assets represents the best
estimates available and are outlined below:

Category
Customer contracts
Development costs
Brand

Useful Economic Life
Four to ten years
Two to five years
Three to ten years

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 (whether in
respect of new products or enhancement of existing products)
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.

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. These typically include
employee costs incurred and third-party costs.

Judgement 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. Amortisation is charged to the Statement of profit or
loss on a straight-line basis over the estimated useful life from the
date the asset is available for use.

Software
Software is comprised of licences purchased from third parties and
is initially recognised at cost. Amortisation of these assets, on the
same basis as other assets, commences when the assets are ready
for their intended use.

Amortisation is provided on software over the useful economic life
assigned, but no more than five years.

Impairment of non-financial assets
Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate the
carrying amount may not be recoverable. Impairment is reviewed
by assessing the asset’s value in use when compared to its
carrying value.

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.

Inventory
Inventory (which is all finished goods) are valued at the lower of cost
and net realisable value. Cost comprises all purchase costs, 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.

Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event. The amount
recognised as a provision is the best estimate of the cost required
to settle the obligation at the reporting date, after taking account of
the risks and uncertainties surrounding the obligation. Provisions
are disclosed in note 29.

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.

100

Financial statements continuedGamma Communications plc Annual Report and Accounts 20212. Critical accounting estimates and judgements
Preparation of the consolidated financial statements requires the
Group to make certain estimations, assumptions and judgements
regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors,
including best estimates of future events. 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 within the next financial year are
discussed below.

Critical accounting judgements
Critical judgements, apart from those involving estimations, applied
in the preparation of the consolidated financial statements are
discussed below:

(a) Principal vs agent classification of channel partners
The Group receives payment for products and services from
channel partners who onwardly sell to end users. The Group has
considered whether channel partners are acting as a principal
or an agent under the criteria in IFRS 15.

Where a channel partner has the primary responsibility for
providing the products or services to the end user, carries the
inventory risk, is free to establish its own prices and bears the
credit risk for the amount receivable from the end user then the
channel partner is treated as the principal in that transaction. The
Group therefore recognises revenue earned in this way based on
the transactions with the channel partner and not the end user.
For more information on the Group’s revenue please see note 5,
Segment information.

(b) Revenue recognition
Revenue recognition on contracts may involve providing services
over multiple years and involving a number of products. In such
instances, judgement is required to identify the date of transaction
of separable elements of the contract and the fair values which
are assigned to each element. The Group also regularly assesses
customer credit risk inherent in the carrying amounts of
receivables, contract costs and estimated earnings. For more
information on the Group’s revenue recognition policy please see
note 1, Accounting policies.

Key accounting estimates
There are no key accounting estimates that will have a significant
risk of causing a material adjustment within the next financial year.

3. Alternative performance measures
Adjustments to the income statement have been presented
because the Group believes that adjusted performance measures
(APMs) provide valuable additional information for users of the
financial statements in assessing the Group’s performance, also
represents the underlying performance of the Group. These are
also used by the Board and management as key KPIs and one
reason for this is to understand how the business is performing.
Moreover, they provide information on the performance of the
business that management is more directly able to influence and
on a basis comparable from year to year.

The measures are adjusted for the following items:

(a) Depreciation and amortisation
Depreciation and amortisation relate to the assets which were
acquired by the Group. These are omitted from adjusted operating
expenses to allow users of the accounts to compare against other
external data sources.

(b) Depreciation and amortisation arising due to business
combinations
This adjustment is made to improve the comparability between
acquired and organically grown operations, as the latter cannot
recognise internally generated intangible assets. Adjusting for
amortisation provides a more consistent basis for comparison
between the two.

(c) Change in fair value of acquisitions
The change in fair value of deferred consideration and put option
liability is adjusted for to improve the comparability between
acquired and organically grown operations, providing a more
consistent basis for comparison between the two.

(d) Exceptional items
The Group treats certain items which are considered to be one-off
or 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 or 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. Any changes to items that are initially
identified as exceptional in one year will consistently be treated
as exceptional in subsequent periods.

Changes in deferred consideration, reduction of intangible
assets and goodwill, and profit upon disposal of a subsidiary are
considered to be exceptional where of a certain scale as they
are not representative of the primary activities of the Group.

(e) Adjusting tax items
Where movements to tax balances arise and these do not relate to
the underlying trading current year tax charge, these are adjusted
in determining certain APMs as they do not reflect the underlying
performance in that year.

101

The impact of these adjustments is shown in the table below:

2021

Measure
PBT (£m)
PAT* (£m)
EPS (FD) (p)

2020

Measure
PBT (£m)
PAT* (£m)
EPS (FD) (p)

Depreciation
and
amortisation on
business
combinations
9.5
9.5
9.8

Statutory
Basis
67.2
53.6
55.2

Change in fair
value of
acquisitions
0.5
0.5
0.5

Depreciation
and
amortisation on
business
combinations
6.0
6.0
6.2

Statutory
basis
75.0
64.2
66.6

Change in fair
value of
acquisitions
0.3
0.3
0.3

Adjusting tax
items

(1.5)
(1.5)

Exceptional

items**
–
–
–

Adjusted
basis
77.2
62.1
64.0

Adjusting tax
items
–
(1.5)
(1.5)

Exceptional

items**
(19.6)
(19.6)
(20.3)

Adjusted
basis
61.7
49.4
51.3

* Profit after tax (PAT) is the amount attributable to the ordinary equity holders of the Company.
** See note 8 for further details.

In addition to the above we add back the depreciation and amortisation charged in the year to Profit from Operations (2021: £68.3m; 2020:
£75.7m) to calculate a figure for EBITDA (2021: £95.4m; 2020: £98.6m) which is commonly quoted by our peer group internationally and
allows users of the accounts to compare our performance with those of our peers. We further adjust EBITDA for exceptional items as this
gives a reader of the accounts a view of the underlying trading picture which is comparable from year to year (2021: £95.4m; 2020: £79.0m).

An adjustment to cash and cash equivalents has been presented because the Group believes that adjusted performance measures
(APMs) provide valuable additional information for users of the financial statements in assessing the Group’s performance as Net Cash
is a better measure of liquidity.

Cash and cash equivalents
Borrowings
Net Cash

2021
£m
52.8
(3.3)
49.5

2020
£m
53.9
(5.9)
48.0

4. Changes in accounting policies
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that
have been issued but are not yet effective and in some cases have not yet been adopted by the UK:

•

IFRS 17 (including the June 2020 Amendments to IFRS 17) – Insurance Contracts

• Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

• Amendments to IAS 1 – Classification of Liabilities as Current or Non-current

• Amendments to IFRS 3 – Reference to the Conceptual Framework

• Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use

• Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract

• Annual Improvements to IFRS Standards 2018-2020 Cycle – Amendments to IFRS 1 First-time Adoption of International Financial

Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture

• Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies

• Amendments to IAS 8 – Definition of Accounting Estimates

• Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction

The Directors do not expect that adoption of the Standards listed above will have a material impact on the financial statements of the
Group in future periods.

102

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021
5. Segment information
The Group’s main operating segments are outlined below:

UK Indirect – This division sells Gamma’s products to channel partners and contributed 60% (2020: 63%) of the Group’s external revenue.

UK Direct – This division sells Gamma’s products to end users in the SME, Enterprise and Public Sector together with an associated
service wrap. It contributed 24% (2020: 25%) of the Group’s external revenues.

European – This division consists of sales made in Europe by Gamma Communications Benelux B.V. and its subsidiaries in the
Netherlands, by VozTelecom Oigaa360 S.A.U. and its subsidiaries in Spain and by HFO Holding GmbH and its subsidiaries in Germany
contributing 16% (2020: 12%) of the Group’s external revenues.

Central functions – This is not a revenue-generating segment but is made up of the central management team and wider Group costs.

Factors that Management used to identify the Group’s operating 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 and are reported separately to the Board and management
team. Management are in the process of reviewing the go to market segments.

Measurement of operating segment profit or loss, assets and liabilities
The accounting policies of the reportable 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 exceptional items.

Inter-segment sales are priced in line with 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 year.

2021
Segment revenue
Inter-segment revenue
Revenue from external customers

Timing of revenue recognition
At a point in time
Over time (recurring)

Gross profit
Operating expenses

Earnings before depreciation, amortisation
and exceptional items
Exceptional items
Earnings before depreciation and amortisation
Depreciation and amortisation (excluding business
combinations)
Amortisation arising due to business combinations

Profit/(loss) from operations

UK
Indirect
£m
293.6
(23.4)
270.2

17.5
252.7
270.2

143.2
(90.3)

66.7
–
66.7

(12.8)
(1.0)

52.9

UK
Direct
£m
104.8
–
104.8

2.7
102.1
104.8

52.6
(27.6)

27.3
–
27.3

(0.9)
(1.4)

25.0

European
£m
72.7
–
72.7

Central
functions
£m
–
–
–

27.4
45.3
72.7

32.7
(34.3)

9.4
–
9.4

(3.9)
(7.1)

(1.6)

–
–
–

–
(8.0)

(8.0)
–
(8.0)

–
–

(8.0)

Total
£m
471.1
(23.4)
447.7

47.6
400.1
447.7

228.5
(160.2)

95.4
–
95.4

(17.6)
(9.5)

68.3

External revenue of customers has been derived principally in the geographical area of the operating segment and no single customer
contributes more than 10% of revenue.

Additions to non-current assets
Reportable segment assets
Reportable segment liabilities

UK
Indirect
£m
13.3
241.7
56.1

UK
Direct
£m
2.4
18.9
17.0

European
£m
2.7
101.2
34.5

Central
functions
£m
–
–
–

Total
£m
18.4
361.8
107.6

103

2020
Segment revenue
Inter-segment revenue
Revenue from external customers

Timing of revenue recognition
At a point in time
Over time (recurring)

Gross profit
Operating expenses

Earnings before depreciation, amortisation
and exceptional items
Exceptional items
Earnings before depreciation and amortisation
Depreciation and amortisation (excluding business
combinations)
Amortisation arising due to business combinations

Profit/(loss) from operations

UK
Indirect
£m
268.5
(21.3)
247.2

14.7
232.5
247.2

132.2
(87.3)

59.6
–
59.6

(13.6)
(1.1)

44.9

UK
Direct
£m
98.1
–
98.1

4.0
94.1
98.1

46.3
(4.2)

23.4
19.5
42.9

(0.5)
(0.3)

42.1

European
£m
48.5
–
48.5

Central
functions
£m
–
–
–

15.8
32.7
48.5

22.3
(25.6)

4.0
0.1
4.1

(2.8)
(4.6)

(3.3)

–
–
–

–
(8.0)

(8.0)
–
(8.0)

–
–

(8.0)

Total
£m
415.1
(21.3)
393.8

34.5
359.3
393.8

200.8
(125.1)

79.0
19.6
98.6

(16.9)
(6.0)

75.7

External revenue of customers has been derived principally in the geographical area of the operating segment and no single customer
contributes more than 10% of revenue.

Additions to non-current assets
Reportable segment assets
Reportable segment liabilities

UK
Indirect
£m
16.4
199.6
60.1

UK
Direct
£m
0.2
31.1
15.0

European
£m
4.5
90.9
42.1

Central
functions
£m
–
–
–

Total
£m
21.1
321.6
117.2

6. Contract costs
Capitalised contract costs consist of commissions from the UK Direct division which are directly associated with specific customer
contracts and installation costs.

Commissions
Capitalised
Amortised

Installation costs
Capitalised
Amortised

There was no impairment loss in relation to the costs capitalised (2020: £nil).

2021
£m

1.3
2.2

1.6
1.7

2020
£m

1.1
1.6

2.6
2.3

104

Financial statements continuedGamma Communications plc Annual Report and Accounts 20217. Profit on ordinary activities
Profit on ordinary activities is stated after charging/(crediting) the following amounts:

Net foreign exchange
Research costs
Employee costs (note 9)
Depreciation of property, plant and equipment
Depreciation on right of use assets
Amortisation of intangible assets (excluding business combinations)
Amortisation arising due to business combinations
Cost of inventories recognised as an expense
Fees payable to the Group’s auditor

2021
£m
0.7
14.8
96.5
8.3
2.7
6.6
9.5
11.9
0.4

2020
£m
0.1
10.2
83.3
9.7
2.2
5.0
6.0
11.7
0.4

Fees payable to the Group’s auditor for the audit of the Company and the consolidated financial statements totalled £380k (2020: £386k),
which includes £51k (2020: £48k) in respect of the half-year review which is considered a non-audit service.

8. Exceptional items

Contingent consideration adjustment – Nimsys1
Profit upon disposal of subsidiary2
Total exceptional items

1 Contingent consideration due in respect of Nimsys was decreased by £0.1m, this was credited to the statement of comprehensive income.
2 Relates to the sale of The Loop Manchester on 31 December 2020.

9. Employee costs

Employee costs (including Directors) comprise:
Wages and salaries
Defined contribution pension cost
Social security contributions and similar taxes

Share-based payment expense (note 33)

2021
£m
–
–
–

2021
£m

76.9
5.4
9.4
91.7
4.8
96.5

2020
£m
0.1
19.5
19.6

2020
£m

67.3
4.6
7.9
79.8
3.5
83.3

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.

Employee numbers
The average monthly number of Group employees was:

Operational
Selling, administration and distribution

2021
Number
934
737
1,671

2020
Number
786
621
1,407

105

Key management personnel compensation
Key management personnel comprise the Executive Directors and the Senior Leadership Team (listed on pages 52–53).

Salary
Defined contribution pension cost
Social security contributions and similar taxes

Share-based payment expense (note 33)

Remuneration in respect of the Board of Directors is summarised below:

Salaries and fees
Social security contributions and similar taxes

Share-based payment expense (note 33)

2021
£m
4.5
0.1
1.0
5.6
2.8
8.4

2021
£m
1.9
0.3
2.2
1.3
3.5

During the year, the aggregate amount of gains made by the Executive Directors on the exercise of share options was £2.6m (2020:
£0.4m).

The average number of employees in Gamma Communications plc during the financial year was three (2020: none).

During the year, one Executive Director (2020: one) participated in a private money purchase defined contribution pension scheme.

10. Finance income and expense

Finance income
Interest received on bank deposits
Total finance income

Finance expense
Lease liability interest costs
Movements of fair value
Interest on borrowings
Total finance expense

Net finance expense

2021
£m

0.1
0.1

(0.5)
(0.5)
(0.2)
(1.2)

(1.1)

2020
£m
4.0
0.1
0.9
5.0
1.8
6.8

2020
£m
1.8
0.3
2.1
0.8
2.9

2020
£m

0.4
0.4

(0.5)
(0.3)
(0.3)
(1.1)

(0.7)

106

Financial statements continuedGamma Communications plc Annual Report and Accounts 202111. Tax expense

Current tax expense
Current tax on profits for the year
Adjustment in respect of prior year
Overseas tax
Total current tax
Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of prior years
Tax rate change
Total deferred tax (note 30)
Total tax expense

2021
£m

13.4
0.6
1.0
15.0

(1.7)
(0.5)
0.4
(1.8)
13.2

2020
£m

12.1
0.1
0.5
12.7

(2.3)
0.1
0.1
(2.1)
10.6

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:

Profit before income taxes
Expected tax charge based on the standard rate of United Kingdom corporation tax at the
domestic rate of 19% (2020: 19%)
Effects of:
Tax-exempt income1
Tax effect of expenses that are not deductible in determining taxable profit
Effect of different tax rates of subsidiaries operating in other jurisdictions
Tax rate change
Adjusting tax items
Adjustment in respect of prior year
Total tax expense

Includes the gain on the disposal of The Loop Manchester Limited in December 2020.

2021
£m
67.2

12.8

–
0.2
(0.1)
0.4
(0.2)
0.1
13.2

2020
£m
75.0

14.3

(3.7)
–
(0.2)
–
–
0.2
10.6

Deferred tax was calculated based on the tax laws and rates that were enacted or substantively enacted at the balance sheet date.

107

12. Earnings per share

Earnings per Ordinary Share – basic (pence)
Earnings per Ordinary Share – diluted (pence)

The calculation of the basic and diluted earnings per share is based on the following data:

Profit attributable to the ordinary equity holders of the Company

Shares
Weighted average number of Ordinary Shares for basic earnings per share
Effect of dilution resulting from share options
Diluted weighted average number of Ordinary Shares

2021
55.9
55.2

2021
£m
53.6

2020
67.5
66.6

2020
£m
64.2

No.
95,894,913
1,166,725
97,061,638

No.
95,058,880
1,273,867
96,332,747

In 2021, as part of Gamma’s acquisitions certain vendors of Mission Labs reinvested £2.8m (182,086 ordinary shares) and the vendors of
HFO reinvested £0.7m (37,294 ordinary shares). In June 2021 £0.3m of Ordinary Shares (15,844 ordinary shares) were issued as part of the
deferred consideration for the acquisition of Exactive Holdings Limited.

Adjusted earnings per share is detailed below:

Adjusted earnings per Ordinary Share – basic (pence)
Adjusted earnings per Ordinary Share – diluted (pence)

Adjusted profit used in the calculation of adjusted earnings per share is detailed below:

Profit attributable to the ordinary equity holders of the Company
Amortisation arising on business combinations
Movement in fair value on put option liability and deferred consideration
Exceptional items (disposal of subsidiary)
Exceptional items (change in value of deferred consideration)
Adjusting tax items
Adjusted profit after tax for the year

2021
64.8
64.0

2021
£m
53.6
9.5
0.5
–
–
(1.5)
62.1

2020
51.9
51.3

2020
£m
64.2
6.0
0.3
(19.5)
(0.1)
(1.5)
49.4

108

Financial statements continuedGamma Communications plc Annual Report and Accounts 202113. Dividends
The following dividends were paid by the Group to its shareholders:

Final dividends for the year ended 31 December 2019 of 7.0p per ordinary share
Interim dividend for the year ended 31 December 2020 of 3.9p per ordinary share
Final dividends for the year ended 31 December 2020 of 7.8p per ordinary share
Interim dividend for the year ended 31 December 2021 of 4.4p per ordinary share

2021
£m
–
–
7.5
4.2
11.7

2020
£m
6.6
3.8
–
–
10.4

A final dividend of 8.8p will be proposed at the Annual General Meeting but has not been recognised as it requires approval. The total
amount of dividends proposed is 13.2p. The payments of these dividends do not have any tax consequences for the Group.

14. Property, plant and equipment

Cost
At 1 January 2021
Additions
Acquisition of subsidiaries
Disposals
Exchange difference
At 31 December 2021
Depreciation
At 1 January 2021
Charge for the year
Disposals
Exchange difference
At 31 December 2021

Net book value
At 1 January 2021
At 31 December 2021

Land and
buildings
£m

Network
assets
£m

Computer
equipment
£m

Fixtures and
fittings
£m

4.8
–
–
–
(0.3)
4.5

0.1
0.2
–
–
0.3

4.7
4.2

71.9
7.5
–
(0.6)
(0.1)
78.7

44.7
6.1
(0.5)
–
50.3

27.2
28.4

11.6
1.1
0.1
(0.3)
(0.2)
12.3

7.9
1.7
(0.3)
(0.3)
9.0

3.7
3.3

2.0
0.5
–
(0.1)
–
2.4

1.3
0.3
(0.1)
–
1.5

0.7
0.9

Total
£m

90.3
9.1
0.1
(1.0)
(0.6)
97.9

54.0
8.3
(0.9)
(0.3)
61.1

36.3
36.8

Refer to note 24 for information on non-current assets pledged as security by the Group. The property, plant and equipment has been
considered for impairment indicators and there was no impairment in the year.

109

15. Right of use assets

Cost
At 1 January 2021
Reclassification1
Acquisition of subsidiary
Additions
Disposals
At 31 December 2021
Depreciation
At 1 January 2021
Reclassification1
Charge for the year
Disposals
At 31 December 2021

Net book value
At 1 January 2021
At 31 December 2021

Land and
buildings
£m

Other
£m

13.3
1.8
–
1.0
(1.0)
15.1

3.7
0.4
2.3
(0.7)
5.7

9.6
9.4

2.6
(1.8)
0.1
0.6
–
1.5

0.7
(0.4)
0.4
–
0.7

1.9
0.8

1 Management have performed a review of the classification of assets which has resulted in a reclassification of £1.8m.

The Group’s lease commitments are predominantly made up of office premises, other leases for land and buildings, and cars.

Disposals of right of use assets relate to the decision to exercise break clauses for office premises and the expiration of car leases.

No replacement leases have been committed to in the year ended 31 December 2021 (2020: none).

16. Intangible assets

Cost
At 1 January 2021
Additions
Acquisition of subsidiaries
Transfer
Disposals
Exchange difference
At 31 December 2021
Amortisation and impairment
At 1 January 2021
Charge for the year
Transfer
Disposals
Exchange difference
At 31 December 2021

Carrying value
At 1 January 2021
At 31 December 2021

Goodwill
£m

Customer
contracts
£m

Brand
£m

Development
costs
£m

Software
£m

55.0
–
38.7
–
–
(1.9)
91.8

8.8
–
–
–
(0.1)
8.7

46.2
83.1

48.6
–
1.5
–
–
(2.5)
47.6

13.5
7.4
–
–
(0.7)
20.2

35.1
27.4

2.4
–
0.9
–
(1.0)
(0.1)
2.2

0.7
1.3
–
(1.0)
(0.1)
0.9

1.7
1.3

17.6
4.8
5.2
0.8
–
(0.3)
28.1

10.1
4.3
0.4
–
–
14.8

7.5
13.3

16.6
2.9
–
(0.8)
–
(0.2)
18.5

11.8
3.1
(0.4)
–
(0.2)
14.3

4.8
4.2

Amortisation on intangible assets is charged to the consolidated statement of profit or loss and included in operating expenses.

Total
£m

15.9
–
0.1
1.6
(1.0)
16.6

4.4
–
2.7
(0.7)
6.4

11.5
10.2

Total
£m

140.2
7.7
46.3
–
(1.0)
(5.0)
188.2

44.9
16.1
–
(1.0)
(1.1)
58.9

95.3
129.3

110

Financial statements continuedGamma Communications plc Annual Report and Accounts 202116. Intangible assets continued
The carrying amount of goodwill is allocated to the groups of cash generating units (“CGUs”) as follows:

UK Direct
UK Indirect
The Netherlands
Spain
Germany
Total

2021
£m
13.3
40.0
7.3
14.0
8.5
83.1

2020*
£m
13.3
1.3
7.3
15.2
9.1
46.2

* In the current period, the Group revised the approach to impairment testing of goodwill to reflect a change in the level at which goodwill is monitored. This reflects the

ongoing structural changes resulting in the integration of the acquisitions made between 2018-2021 with the monitoring of goodwill performed at a level representing
an aggregation of CGUs, rather than at the individual CGU level.

The carrying value of the Group’s goodwill was tested for impairment at 30 September 2021 and 31 December 2020.

The recoverable amount has been determined on a value-in-use basis on each CGU group, using the Board approved budgets, where
gross margin percentage is assumed to be held principally constant and budgeted revenue and overheads are forecasted to grow. These
budgets are built on the entity’s past experience and are over a five-year period plus terminal value. The long-term growth rates used were
2% (2020: 2%).

We have estimated the pre-tax discount rate using the Group’s WACC. The pre-tax discount is 9.1% (2020: 9.5%). We risk-adjusted the
discount rate for risks specific to each market, adding up to 3% to the WACC as appropriate. The rate used for The Netherlands was 9.4%
(2020: 9.5%), 11.75% for Spain (2020: 11.5%) and 10.0% (2020: 9.5%) for Germany.

When considering the recoverable amount, the break-even point for the assumptions is calculated to understand the sensitivity of the
assumptions. Based on the results of the impairment reviews carried out for each year the recoverable amount is greater than the carrying
amount of goodwill.

Given the recent acquisition date of Voz in April 2020, the company is still in its early integration lifecycle stage with the Group; the
headroom between the recoverable amount (determined based on a value in use model) and the carrying value of the Spain CGU is
modest at £12m (2020: £11m) at the measurement date. We expect the headroom to increase in future periods as the business delivers
its UCaaS growth strategy. We have considered reasonably possible changes in key assumptions that could cause an impairment at
31 December 2021, and have identified two key assumptions relating to the cash flows in years 1 to 5, being:

(1) The Group’s value in use cash flows assumes a double-digit revenue CAGR over the five-year period. A decrease in the forecast

revenue CAGR by 4% (2020: 3%) over this period, would see the headroom reduced to nil.

(2) To break even, the EBITDA margin percentage achieved in year 5 and terminal years would need to reduce by 9% (2020: 5%).

Customer contracts include the following material balances at 31 December 2021:

• Gamma Communications Benelux B.V. and its subsidiaries, £7.0m (2020: £8.6m) carrying value with seven years of amortisation remaining.

• VozTelecom Oigaa360 S.A.U. and its subsidiaries, £4.3m (2020: £6.0m) carrying value with four years of amortisation remaining.

• HFO Holding GmbH and its subsidiaries, £7.2m (2020: £10.2m) carrying value with four years of amortisation remaining.

Development cost includes technology acquired on acquisition of Mission Labs, £4.2m (2020: n/a) carrying value with seven years
of amortisation remaining.

111

17. Subsidiaries
The Company’s subsidiaries at 31 December 2021 are detailed below.

Name
CircleLoop Limited
ComyMedia Proyectos y Servicios SL

Epsilon Telecommunications GmbH
Exactive Holdings Limited
Exactive Limited
Exactive Online Limited
Exactive Poland sp. zoo.
Gamma Business Communications Limited
Gamma Business Services BV (Formerly
Schiphol Connect, merged with Nimsys BV
8 July)
Gamma Communications Benelux BV
Gamma Communications Europe BV
Gamma Communications Germany GmbH

Gamma Communications Ireland Limited

Gamma Communications Nederlands BV
(Formerly, Dean One BV, merged with
gnTel BV 1 December)
Gamma Communications US Inc

Registered Address
5 Fleet Place, London, EC4M 7RD
Parque Empresarial Zuatzu, Edificio Zurriola, local 2,
planta baja, 20018 San Sebastián, Guipúzcoa, Spain
Ziegeleistraße 2, 95145, Oberkotzau, Germany
30 & 34 Reform Street, Dundee, Scotland, DD1 1RJ
30 & 34 Reform Street, Dundee, Scotland, DD1 1RJ
30 & 34 Reform Street, Dundee, Scotland, DD1 1RJ
ul. Abrahama 1A, 80-307 Gdańsk, Poland
5 Fleet Place, London, EC4M 7RD
Evert van de Beekstraat 1-63, 1118CL Schiphol, the
Netherlands

Ownership % Class

Country
United Kingdom 100%
100%
Spain

88.15%

Germany
United Kingdom 100%
United Kingdom 100%
United Kingdom 100%
Poland
100%
United Kingdom 100%
100%
Netherlands

Ordinary shares
Ordinary shares

Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares

Krijgsman 12 1186DM Amstelveen, the Netherlands
Office address: 5 Fleet Place, London, EC4M 7RD
c/o Bird & Bird, Maximiliansplatz 22, 80333 München,
Germany
6th Floor, 2 Grand Canal Square, Dublin, Republic of
Ireland
Krijgsman 12 1186DM Amstelveen, the Netherlands

Netherlands
Netherlands
Germany

100%
100%
100%

Ordinary shares
Ordinary shares
Ordinary shares

Ireland

100%

Ordinary shares

Netherlands

100%

Ordinary shares

Gamma Development KfT
Gamma Europe Holdco Limited
Gamma Group Holdings Limited
Gamma Network Solutions Limited
Gamma Telecom Holdings Limited
Gamma Telecom Limited
Gamma Telecomunicaciones Spain Holdings SL Calle Artesans 10, Parc Tecnologic del Vallés, 08290

1313 N. Market Street, Suite 5100, Wilmington, Delaware,
198001
Széchenyi rakpart 8, 1054 Budapest, Hungary
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD

gnTel GmbH
HFO Holding GmbH
HFO Technology GmbH
HFO Telecom GmbH
Mission Labs Limited
Mission Labs Limited (New Zealand)

Telsis Communications Services Limited
Telsis Direct Limited
Telsis GmbH
Telsis Services Limited
Uniworld Bureau Services Limited
VozTelecom Andalucía SL

VozTelecom Comunicación Inteligente SLU

VozTelecom Maroc, SARL AU

VozTelecom Oigaa360 S.A.U.

Cerdanyola del Vallés, Barcelona, Spain
Stadttor 1, 40219 Dusseldorf, Germany
Ziegeleistraße 2, 95145, Oberkotzau, Germany
Ziegeleistraße 2, 95145, Oberkotzau, Germany
Ziegeleistraße 2, 95145, Oberkotzau, Germany
5 Fleet Place, London, EC4M 7RD
C/o TMF Corporate Services Limited, 41 Shortland
Street, Auckland Central, 1010, New Zealand
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD
Robert-Bosch-Straße 7, 64293 Darmstadt, Germany
5 Fleet Place, London, EC4M 7RD
5 Fleet Place, London, EC4M 7RD
Calle Isaac Newton 3, Edificio Bluenet PCT Cartuja,
41092 Sevilla, Spain
Calle Artesans 10, Parc Tecnologic del Vallés, 08290
Cerdanyola del Vallés, Barcelona, Spain
Park Tetouanshore route de Cabo Negro Shore 3 Local
004, Comune de Martil – Tétouan CP 93150, Morocco
Calle Artesans 10, Parc Tecnologic del Vallés, 08290
Cerdanyola del Vallés, Barcelona, Spain

United States

100%

Common stock

100%
Hungary
United Kingdom 100%
United Kingdom 100%1
United Kingdom 100%
United Kingdom 100%2
United Kingdom 100%
100%
Spain

100%
88.15%
88.15%
88.15%

Germany
Germany
Germany
Germany
United Kingdom 100%
100%
New Zealand

United Kingdom 100%
United Kingdom 100%
Germany
100%
United Kingdom 100%
United Kingdom 100%
100%
Spain

Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary and B1 shares
Ordinary shares
Ordinary shares

Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
A, B, C, D ordinary shares
Ordinary shares

Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares

Spain

100%

Ordinary shares

Morocco

100%

Ordinary shares

Spain

100%

Ordinary shares

VozTelecom Puntos de Servicio SLU

Calle Ortega y Gasset 63, 1ºB, 28006 Madrid, Spain

Spain

100%

Ordinary shares

1 Directly held by the Company.
2

In December 2021, the ownership of Gamma Telecom Holdings Limited was transferred from Gamma Communications plc to Gamma Group Holdings 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 Communications plc SIP Trust.

Through the acquisition of the Voz Telecom Group, the Group acquired a 40.87% stake in VozTelecom Latinoamerica Sa de CV, registered
in Mexico. The investment value is £0.025m and is accounted for under the equity method. The Group holds no other interests in
unconsolidated structured entities.

112

Financial statements continuedGamma Communications plc Annual Report and Accounts 202118. Business combinations

Summary of acquisitions
On 3 March 2021 the Group acquired 100% of Mission Labs Limited and its subsidiaries. (“Mission Labs”). Mission Labs is a leading
developer of applications to manage cloud contact centres and enhance customer experience.

The identifiable acquired assets and liabilities assumed are as follows:

Tangible fixed assets
Right of use assets
Intangible – development costs
Intangible – customer contracts
Intangible – brand
Cash
Trade receivables
Other receivables
Trade payables
Other payables
Borrowings
Deferred tax liability
Total identifiable assets
Add: Goodwill
Net assets acquired

Satisfied by:
Cash paid
Contingent consideration1
Total

Mission Labs
£m
0.1
0.1
5.2
1.5
0.9
2.4
1.0
0.3
(0.3)
(0.5)
(0.2)
(1.3)
9.2
38.7
47.9

Mission Labs
£m

43.2
4.7
47.9

Contingent consideration is based on Mission Labs achieving milestones in 2021, 2022 and 2023. Consideration of up to £6.0m may be payable. The fair value of
£4.7m at acquisition is based on a payout of £5.7m which takes into account the weighted probability of success.

Net cash outflow on acquisitions:

Cash consideration
Less: cash acquired
Net outflow of cash for acquisitions in the year
Contingent consideration payments during the year
Put option liability payment in the year
Net outflow of cash – investing activities

Mission Labs
£m
43.2
(2.4)
40.8
–
–
40.8

Other
£m
–
–
–
3.5
5.0
8.5

Total
£m
43.2
(2.4)
40.8
3.5
5.0
49.3

Valuations of intangible assets
Customer contracts were valued under the Replacement Cost and Distributor approach as appropriate. Technology was valued under the
multi-period excess earning model and Brand under the Relief-from-royalty methodology.

Goodwill
The goodwill encapsulates the ability to grow through new technology and attracting new customers as well as the synergies gained
through bringing Mission Labs into the Group and is not deductible for tax purposes. The goodwill has been allocated to the UK Indirect
segment which is the level at which the goodwill is monitored for impairment purposes.

Acquired receivables
The fair value of acquired trade receivables for Mission Labs is £1.0m. The gross contractual amount for trade receivables due is £1.0m.

Revenue and profit contribution
From the date of acquisition, Mission Labs has contributed £5.4m of revenue and £2.2m of loss after taxation attributable to the equity
holders of Gamma Communications plc. If the acquisition occurred on 1 January 2021, Mission Labs would have contributed £7.1m
revenue and £2.3m loss after taxation attributable to the equity holders of Gamma Communications plc. These amounts are unaudited.

19. Inventories

Raw materials and consumables

The replacement cost of inventories equals the statement of financial position amount.

2021
£m
7.9

2020
£m
8.1

113

20. Trade and other receivables

Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Contract assets
Prepayments
Other receivables
Total trade and other receivables

Of which:
Due within one year
Due after more than one year

The carrying value of the trade and other receivables is considered to be approximately equal to their fair value.

Movements on the provision for impairment of trade receivables are as follows:

At 1 January
Acquisition of subsidiaries
Provided during the year
Receivable written off during the year as uncollectible

2021
£m
46.1
(7.1)
39.0
41.4
25.8
6.5
112.7

98.4
14.3

2021
£m
6.4
–
0.9
(0.2)
7.1

2020
£m
44.2
(6.4)
37.8
43.9
22.4
4.4
108.5

93.7
14.8

2020
£m
4.4
0.5
1.5
–
6.4

The movement on the provision for impaired receivables has been included in revenue or operating expenses as appropriate in the
Consolidated statement of profit or loss.

The main factors considered by the finance function in determining that amounts due are impaired are that the customers are unlikely to
be trading or the debts are three months and more past due. We provide for all receivables based on knowledge of customer and historical
experience and estimate irrecoverable amounts by reference to past default experience. The ageing of these receivables is as follows:

Not due
Up to 3 months
3 to 6 months
6 to 12 months
Older than 1 year

2021
£m
0.7
1.8
1.9
0.3
2.4
7.1

2020
£m
1.0
2.8
0.2
0.5
1.9
6.4

The Group does not have any concentration of credit risk. No customers represent more than 10% of trade receivables.

The ageing analysis of trade receivables that were past due but not impaired are detailed below. They relate to customers with no default
history or where we have an offset arrangement.

Up to 3 months
3 to 6 months
6 to 12 months
Older than 1 year

21. Cash and cash equivalents

Cash at bank
Short-term deposits
Total cash and cash equivalents

114

2021
£m
7.9
0.5
0.1
–
8.5

2021
£m
38.3
14.5
52.8

2020
£m
2.7
0.8
0.8
0.1
4.4

2020
£m
50.4
3.5
53.9

Financial statements continuedGamma Communications plc Annual Report and Accounts 202122. Trade and other payables

Current and non-current
Trade payables
Other payables
Accruals – Cost of sales
Accruals – Operating expenses (excluding payroll)
Accruals – Payroll (excluding tax and social security)
Tax and social security
Deferred income
Total trade and other payables

Book values approximate to fair value at 31 December
Of which:
Due within one year
Due after more than one year

23. Contract liabilities

Contract liabilities

2021
£m

5.7
5.6
10.3
8.9
11.6
4.5
3.5
50.1

48.1
2.0

2021
£m
17.4

2020
£m

9.4
8.6
16.0
6.4
10.2
3.2
2.6
56.4

54.9
1.5

2020
£m
15.9

Contract liabilities are deferred income arising from installations and Horizon upfront subscriptions, which are released to the statement
of profit or loss over the life of the contract.

The movement on contract liabilities can be explained as below:

At 1 January 2021
Additions
Amortisation
At 31 December 2021

2021
£m
15.9
10.2
(8.7)
17.4

The amount of revenue recognised in 2021 for performance obligations satisfied (or partially satisfied) in previous periods is £nil (2020: £nil).

24. Borrowings

Secured
Bank loans
Total secured borrowings

Unsecured
Bank loans
Other borrowings
Total unsecured borrowings

Total borrowings

Of which:
Current
Non-current

2021
£m

2020
£m

1.8
1.8

1.0
0.5
1.5

3.3

0.8
2.5

2.4
2.4

2.5
1.0
3.5

5.9

1.3
4.6

115

At 1 January
Acquisition of subsidiaries
Repayments of borrowings
Exchange difference
At 31 December

2021
£m
5.9
–
(2.3)
(0.3)
3.3

2020
£m
–
7.6
(1.6)
(0.1)
5.9

All loans are held by trading subsidiaries outside of the UK and pre-date acquisition by Gamma. The Group has complied with the financial
covenants of its borrowing facilities during the year.

Of the bank loans, £1.8m are secured on the Group’s land and buildings. Other secured borrowings are effectively secured as the rights
to the leased assets recognised in the financial statements revert to the lessor in the event of default.

Maturity analysis of borrowings is shown in note 28.

25. Lease liabilities

At 1 January 2021
Acquisition of subsidiary
Additions
Disposals
Repayments
Finance expense
At 31 December 2021

Lease liabilities included in the statement of financial position at 31 December
Current
Non-current

Amounts recognised in the statement of comprehensive income
Interest expense on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low value assets, excluding short-term leases of low value assets

The amounts recognised in the consolidated statement of cash flows is £3.1m (2020: £2.1m).

2021
£m
13.1
0.2
1.7
(0.3)
(3.1)
0.3
11.9

2020
£m

2.3
10.8
13.1

0.6
–
–

2021
£m

2.1
9.8
11.9

0.3
–
–

Gamma had no variable lease payments not included in the measurement of lease liabilities, no sale and leaseback transactions and no
income from sub-leasing right of use assets in 2021 (2020: £nil).

For maturity analysis of leases, see note 28.

26. Put option liability

Current
Non-current

2021
£m
3.4
2.3
5.7

2020
£m
5.6
5.6
11.2

The Group has an option to acquire the remaining 11.85% of the shares in HFO Holdings (which are held by management) in two tranches.
In 2022, c8% (where the consideration will be based on the results of 2021) and in 2023 a final tranche of c4% (based on net additions to
cloud seats in 2022). This additional consideration will in aggregate be between €4.5m and €11.0m and will be payable in cash. The upper
end of the option price will only be achieved if HFO achieves challenging growth targets related to its IP telephony business. This has been
included as a put option liability based on the estimated gross obligation.

116

Financial statements continuedGamma Communications plc Annual Report and Accounts 202127. Contingent consideration

Current
Non-current

2021
£m
2.6
3.7
6.3

The reconciliation of the carrying amounts of contingent consideration is as follows:

1 January 2021
Acquisition of subsidiary
Contingent consideration paid
Adjustment to contingent consideration
31 December 2021

Exactive
£m
2.3
–
(1.2)
(0.2)
0.9

Voz Telecom
£m
0.7
–
(0.3)
(0.2)
0.2

Mission Labs
£m
–
4.7
–
0.5
5.2

2020
£m
1.8
1.2
3.0

Total
£m
3.0
4.7
(1.5)
0.1
6.3

Contingent consideration for Exactive is based on the EBITDA performance for 2021. Management has recalculated the fair value at the
end of the accounting period and there have been adjustments to Exactive contingent consideration.

Contingent consideration for the Voz subsidiary relates to acquisitions made by Voz Telecom prior to the acquisition by the Group.

Contingent consideration relating to Mission Labs is based on milestones being achieved in 2021, 2022 and 2023. Consideration of up to
£6.0m may be payable. The fair value of £5.2m at 31 December 2021 is based on a payout of £5.7m which takes into account the weighted
probability of success.

28. Financial instruments – risk management
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

Cash and cash equivalents
Trade receivables – net
Contract assets
Other receivables
Financial assets at amortised cost

Trade payables
Other payables
Accruals – Cost of sales
Accruals – Operating expenses (excluding payroll)
Accruals – Payroll (excluding tax and social security)
Lease liabilities
Borrowings
Financial liabilities at amortised cost

2021
£m
52.8
39.0
41.4
6.5
139.7

2021
£m
5.7
5.6
10.3
8.9
11.6
11.9
3.3
57.3

2020
£m
53.9
37.8
43.9
4.4
140.0

2020
£m
9.4
8.6
16.0
6.4
10.2
13.1
5.9
69.6

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 Senior Leadership Team (SLT). The Board receives monthly reports from the
SLT 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 below:

117

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 into contracts.

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 where available.
Purchase limits are established for each customer, which represent the maximum open amount without requiring further approval from
the Credit Committee.

The Credit Committee determines concentrations of credit risk by monitoring the creditworthiness rating of existing customers and
through regular reviews of the trade receivables’ ageing analysis. During the COVID-19 pandemic, senior members from the finance,
commercial and sales teams have been meeting weekly to monitor customer performance and payments in order to identify any credit
risk at the earliest possible stage.

The Group does not enter into derivatives to manage credit risk.

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 20.

Due to the Group’s procedures for managing credit risk, expected credit losses on all non-trade receivable financial assets are expected
to be negligible. Expected impairment for trade receivables is calculated based on historical default rates. Details of this provision are
shown in note 20.

Financial assets – maximum exposure

Cash and cash equivalents
Trade receivables – net
Contract assets
Other receivables
Total financial assets

2021
£m
52.8
39.0
41.4
6.5
139.7

2020
£m
53.9
37.8
43.9
4.4
140.0

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 in addition to those already provided against.

Cash in bank
The Group is continually reviewing the credit risk associated with holding money on deposit in banks and seeks to mitigate this risk by only
holding deposits with banks with a credit rating of A or above, unless Board approval is obtained.

Market risk
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in Europe and the acquired companies under Gamma Communications
Benelux B.V., Voz Telecom Oigaa360 S.A.U. and HFO Holding GmbH which are not in the Group’s functional currency. The Group’s operational
risk is reduced by the fact that its European operations are small compared to those in the UK. The Group’s net assets arising from such
European operations are exposed to currency risk resulting in gains or losses on retranslation into Pounds Sterling. Given the levels of
materiality, the Group does not hedge its net investments in European operations as the cost of doing so is disproportionate to the exposure.

As of 31 December 2020 and 31 December 2021 the Group’s exposure to foreign exchange risk was not material. A sensitivity analysis
for foreign exchange risk has not been prepared as the risk is immaterial.

Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. At the year end the Group had £3.3m in borrowings and therefore the exposure to interest rate risk is limited. A sensitivity
analysis for interest rate risk has not been prepared as the risk is immaterial.

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 Group generates positive cash flows from operating activities and these fund short-term working capital requirements. Annually,
the Board receives five-year 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.

118

Financial statements continuedGamma Communications plc Annual Report and Accounts 202128. Financial instruments – risk management continued

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities at
amortised cost:

2021
2020

Lease liabilities
2021
2020

Less than 1
year
£m
40.9
50.4

Between
1 and 2
years
£m
2.7
3.9

Less than 1
year
£m

2.4
2.7

Between
2 and 5
years
£m
1.8
1.9

Between
1 and 5
years
£m

8.2
8.0

Over
5 years
£m
–
0.3

Over
5 years
£m

2.7
4.1

Capital disclosures
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’s overall strategy remains unchanged from the prior year. The Group monitors ‘adjusted capital’ which comprises all
components of equity that are managed as capital (i.e. share capital, share premium reserve, merger reserve, share option reserve and
retained earnings).

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.

Borrowings (note 24)
Lease liabilities (note 25)
Cash and cash equivalents
Total equity
Capital

Fair value of financial instruments
Set out below is the fair values of financial liabilities. All liabilities are classified as level 3.

Financial liabilities
Contingent consideration (note 27)
Put option liability (note 26)

2021
£m
(3.3)
(11.9)
52.8
254.2
291.8

2021
£m
6.3
5.7

2020
£m
(5.9)
(13.1)
53.9
204.4
252.4

2020
£m
3.0
11.2

The Group’s finance team performs valuations of financial items for financial reporting purposes and 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 CFO.

The valuation techniques used for instruments categorised in level 3 are described below.

Contingent consideration relates to the acquisition of Exactive (£0.9m), Voz subsidiary (£0.2m) and Mission Labs (£5.2m).

119

Contingent consideration for Exactive is based on the EBITDA performance for 2021.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 discount
rate. Management has recalculated the fair value at the end of the accounting period and there have been adjustments to Exactive
contingent consideration.

Contingent consideration for the Voz subsidiary relates to acquisitions made by Voz prior to the acquisition by the Group.

The put option liability was valued using a probability weighted expected returns methodology, using a discount rate appropriate to the
transaction. Movements in the fair value of the put option liability are charged through the profit and loss.

29. Provisions

At 1 January 2021
Additional provision in the year
Utilisation of provision
At 31 December 2021
Of which:
Due within one year
Due after more than one year

Leasehold
dilapidation
provision
£m
1.2
–
(0.1)
1.1

Onerous
contracts
£m
0.1
0.3
(0.1)
0.3

Other
provisions
£m
1.2
–
(0.6)
0.6

Total
£m
2.5
0.3
(0.8)
2.0

0.9
1.1

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. These balances relate to pre transition to IFRS 16 and the Group chose to apply the modified
retrospective approach. Under IFRS 16, dilapidations costs are accounted for within the right of use asset and released to the profit and
loss account through depreciation. 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. Leasehold dilapidation provisions relate to property rentals and vary
from less than 12 months to in excess of five years.

From time to time the Group engages in contracts with suppliers where there is a minimum commitment. This is done in instances where
the minimum purchase commitment is considered to be comfortably achievable and there is a material commercial advantage to making
that commitment. Rarely, there may be an unforeseen change in circumstances which means that the commitment becomes onerous and
a provision is made at the point it appears that the minimum commitments will not be achieved. Provisions for onerous contracts related to
contracts less than 12 months in length.

120

Financial statements continuedGamma Communications plc Annual Report and Accounts 202130. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the tax rate at which it is expected to unwind,
being 25% (2020: 19%) for UK companies.

The movement on the deferred tax account is as shown below:

Net liability at 1 January
Tax charge recognised in profit or loss
Recognised directly in equity
Tax arising on acquisition
Exchange difference
Net liability at 31 December

2021
£m
(3.3)
1.8
(0.7)
(1.4)
0.6
(3.0)

2020
£m
(0.9)
2.1
0.5
(5.0)
–
(3.3)

Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. All deferred tax has been recognised
as the Group is consistently profitable and so expects to have sufficient profits against which deferred tax can be utilised.

The deferred tax asset/(liability) consists of the tax effect of temporary differences as follows:

2021
Difference in capital allowances and depreciation/amortisation
Other temporary and deductible differences
Deferred tax on share options
Deferred tax on acquisition of subsidiaries
Deferred tax asset/(liability)

2020
Difference in capital allowances and depreciation/amortisation
Other temporary and deductible differences
Deferred tax on share options
Deferred tax on acquisition of subsidiaries
Deferred tax asset/(liability)

Asset
£m
0.2
4.3
2.5
–
7.0

Asset
£m
0.1
2.7
2.9
–
5.7

Liability
£m
(1.7)
(0.1)
–
(8.2)
(10.0)

Liability
£m
–
–
–
(9.0)
(9.0)

Credited/
(charged) to
profit or loss
£m
(1.6)
1.5
0.3
1.6
1.8

Credited/
(charged) to
profit or loss
£m
0.1
0.3
0.4
1.3
2.1

Net
£m
(1.5)
4.2
2.5
(8.2)
(3.0)

Net
£m
0.1
2.7
2.9
(9.0)
(3.3)

Credited/
(charged) to
equity
£m
–
–
(0.7)
–
(0.7)

Credited/
(charged) to
equity
£m
–
–
0.5
–
0.5

121

31. Share capital
At 31 December the share capital was as follows:

Authorised, allotted and fully paid
Ordinary Shares of £0.0025 each

Ordinary Share movement in the year is as follows:

2021
Number

2021
£m

2020
Number

96,323,054

0.2

95,402,437

As at 1 January 2021
January
March
April
April
May
June
June
June
July
August
September
October
November
December
As at 31 December 2021

(a) Ordinary shares were issued to satisfy options which had been exercised.
(b) Ordinary shares were issued to certain vendors of Mission Labs as a result of reinvestment in Gamma.
(c) Ordinary shares were issued to a certain vendor of HFO Holding GmbH as a result of reinvestment in Gamma.
(d) Ordinary shares were issued as consideration to the shareholders of Exactive Holdings Limited.

Number
95,402,437
5,629
8,305
182,086
23,715
47,400
359,377
37,294
15,844
144,727
327
44,536
19,487
10,582
21,308
96,323,054

2020
£m

0.2

Notes

(a)
(a)
(b)
(a)
(a)
(a)
(c)
(d)
(a)
(a)
(a)
(a)
(a)
(a)

122

Financial statements continuedGamma Communications plc Annual Report and Accounts 202132. Reserves
The following describes the nature and purpose of each reserve within equity:

Reserve

Description and purpose

Share premium reserve

Amount subscribed for share capital in excess of nominal value.

Represents the share capital and share related movements of the previous holding company Gamma
Telecom Holdings Limited following the common control transaction in 2014. 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.

Merger reserve

Share option reserve

Represents credit to equity relating to share-based payment expense on share options.

Foreign exchange reserve

Own shares

Retained earnings

Exchange differences relating to the translation of the net assets of the Group’s foreign subsidiaries from
their functional currency into the parent’s functional currency.

Purchase of own shares under a SIP scheme.

All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

Non-controlling interest

Proportion of equity relating to subsidiaries which are not 100% owned.

Written put options over
non-controlling interest

Represents debit to equity in relation to the put option liability.

A breakdown of other reserves is shown below:

1 January 2020
Issue of shares
Share-based payment expense
Other comprehensive
expense
31 December 2020

1 January 2021
Issue of shares
Share-based payment expense
Other comprehensive expense
31 December 2021

Merger reserve
£m
2.3
–
–

Share option
reserve £m
3.8
(1.4)
2.8

Foreign exchange
reserve £m
(0.6)
–
–

Own shares
£m
(0.7)
–
–

Total Other Reserves
£m
4.8
(1.4)
2.8

–
2.3

2.3
–
–
–
2.3

–
5.2

5.2
(2.2)
4.1
–
7.1

(0.1)
(0.7)

(0.7)
–
–
(3.5)
(4.2)

–
(0.7)

(0.7)
–
–
–
(0.7)

(0.1)
6.1

6.1
(2.2)
4.1
(3.5)
4.5

33. Share-based payment expense

Share options granted
On 1 April 2021, the Board approved awards under the Deferred Bonus Plan for the senior management team. 11,405 options were granted
over £0.0025 Ordinary Shares at an exercise price of £0.0025 per share which will vest on 31 March 2024. The awards granted will not be
subject to any performance conditions and will vest in full on the third anniversary of the vesting commencement date, being 1 April 2021.

On 1 April 2021, the Board approved awards under the long-term incentive plan for the Executive Directors. 178,320 options were granted
over £0.0025 Ordinary Shares at an exercise price of £0.0025 per share which will vest on 1 April 2024 subject to performance conditions.
The awards granted will have a performance period of three years starting from the vesting commencement date, being 31 March 2021.

The awards issued under the long-term incentive plan will vest as follows:

• 15% of the shares are subject to an award if annual compound total shareholder return (TSR) over the performance period equals

8% and 50% of the shares are subject to an award if the annual compound TSR over the period exceeds or equals 15% with pro rata
straight-line vesting in between; and

• 15% of the shares are subject to an award if annual compound growth of the Group’s adjusted earnings per share (EPS) over the

performance period equals 8% between the financial years at the beginning and the end of the performance period and 50% of the
shares are subject to an award if the annual compound growth of the Group’s adjusted EPS exceeds or equals 20% with pro rata
straight-line vesting in between.

On 6 May 2021 the Board approved an issue of options under the Company Share Option Plan which granted 183,643 options over

123

£0.0025 Ordinary Shares at an exercise price of £17.9600. These will vest in May 2024.

On 7 May 2021 the Board approved an issue of options under a Save As You Earn scheme which granted 155,514 options over £0.0025
Ordinary Shares at an exercise price of £14.1120. These options will vest in July 2024.

The weighted average fair value of awards granted during the year was £6.93 (2020: £8.42).

Share options movements
Movements in the number of options during the year were as follows:

The options below were exercised at a weighted average share price of £19.27, and weighted average exercise price of £3.10, and the
weighted average exercise price of share options exercisable at 31 December 2021 was £5.68.

2021
Date of grant
8 May 2015
15 April 2016
5 April 2017
3 April 2018
8 May 2018
23 May 2018
8 May 2019
13 May 2019
3 June 2019
20 September 2019
1 October 2019
22 November 2019
28 April 2020
7 May 2020
14 September 2020
14 September 2020
1 April 2021
1 April 2021
6 May 2021
7 May 2021

Start
of year
34,810
11,470
61,758
307,334
192,718
169,755
329,333
147,335
220,276
3,422
4,183
9,209
335,536
200,839
264,936
18,310
–
–
–
–

Granted
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178,320
11,405
183,643
155,514

Forfeited/
Cancelled
–
–
–
(1,742)
(2,066)
(4,540)
(27,542)
(12,987)
(2,686)
–
(1,194)
–
(42,706)
(17,690)
(27,635)
–
(9,830)
–
(9,457)
(9,658)

Exercised
(24,501)
(9,176)
(38,319)
(305,592)
(189,195)
(87,922)
(3,358)
(5,694)
–
–
(2,989)
–
(344)
(1,961)
–
–
–
–
–
–

End
of year
10,309
2,294
23,439
–
1,457
77,293
298,433
128,654
217,590
3,422
–
9,209
292,486
181,188
237,301
18,310
168,490
11,405
174,186
145,856

Exercise
price
£2.7000
£4.3575
£4.9325
£0.0025
£5.5520
£7.3400
£8.2800
£10.9000
£0.2500
£0.2500
£0.2500
£0.2500
£8.000
£12.6500
£0.2500
£0.2500
£0.2500
£0.2500
£17.9600
£14.1120

Class of
share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

Notes
(a)
(a)
(a)
(a)
(a)(m)
(a)(m)
(b)(m)
(c)(m)
(d)
(d)
(d)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)

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 July 2019.
(c) The awards granted will have a performance period of three years starting from the grant date, being 13 May 2019.
(d) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 April 2019.
(e) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 July 2020.
(f) The awards granted will have a performance period of three years starting from the grant date, being 7 May 2020.
(g) The awards granted will have a performance period of three years starting from the vesting commencement date, being 31 March 2020.
(h) The awards granted will vest in full on the third anniversary of the vesting commencement date, being 31 March 2020.
(i) The awards granted will have a performance period of three years starting from the vesting commencement date, being 31 March 2021.
( j) The awards granted will vest in full on the third anniversary of the vesting commencement date, being 1 April 2021.
(k) The awards granted will vest in full on the third anniversary of the vesting commencement date, being 6 May 2021.
(l) The awards granted will vest in full on the third anniversary of the vesting commencement date, being 1 July 2021.
(m) Options for good leavers vested early on a time pro rata basis and hence exercised before the rest of the scheme becomes exercisable in accordance with the terms

of the scheme rules at the time of the award. The unvested shares were cancelled.

There were no lapsed share options during the year (2020: none).

Apart from the options noted as exercisable, all other options above are outstanding. The share options outstanding at 31 December
2021 represented 2% of the issued share capital as at that date (2020: 2%) and would generate additional funds of £12.3m (2020: £12.3m)

124

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021if fully exercised. The weighted average remaining life of the share options was 15 months (2020: 16 months), with a weighted average
remaining exercise price of £7.21 (2020: £5.33).

Movements in the number of options during the prior year were as follows:

The options below were exercised at a weighted average share price of £14.21, and weighted average exercise price of £2.71, and the
weighted average exercise price of share options exercisable at 31 December 2020 was £4.17.

2020
Date of grant
6 June 2014
8 May 2015
15 April 2016
19 May 2016
5 April 2017
9 May 2017
22 May 2017
3 April 2018
8 May 2018
23 May 2018
8 May 2019
13 May 2019
3 June 2019
20 September 2019
1 October 2019
22 November 2019
28 April 2020
7 May 2020
14 September 2020
14 September 2020

Start
of year
14,400
35,810
16,058
7,925
156,667
223,785
198,912
315,353
200,204
175,886
362,037
154,245
232,674
3,422
4,183
9,209
–
–
–
–

Granted
–
–
–
–
–
–
165
9,300
–
–
–
–
–
–
–
–
345,953
201,629
264,936
18,310

Forfeited/
Cancelled
–
–
–
–
–
(1,817)
–
(17,319)
(5,391)
(3,294)
(30,395)
(5,917)
(12,398)
–
–
–
(10,417)
(790)
–
–

Exercised
(14,400)
(1,000)
(4,588)
(7,925)
(94,909)
(221,968)
(199,077)
–
(2,095)
(2,837)
(2,309)
(993)
–
–
–
–
–
–
–
–

End
of year
–
34,810
11,470
–
61,758
–
–
307,334
192,718
169,755
329,333
147,335
220,276
3,422
4,183
9,209
335,536
200,839
264,936
18,310

Exercise
price
£0.2500
£2.7000
£4.3575
£3.4440
£4.9325
£4.1600
£0.0025
£0.0025
£5.5520
£7.3400
£8.2800
£10.9000
£0.2500
£0.2500
£0.2500
£0.2500
£8.000
£12.6500
£0.2500
£0.2500

Class of
share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

Notes
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(b)
(c)(l)
(d)(l)
(e)(l)
(f)(l)
(g)
(g)
(g)
(g)
(h)
(i)
(j)
(k)

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 3 April 2018.
(c) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 July 2018.
(d) The awards granted will have a performance period of three years starting from the grant, being 23 May 2018.
(e) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 July 2019.
(f) The awards granted will have a performance period of three years starting from the grant date, being 13 May 2019.
(g) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 April 2019.
(h) The awards granted will have a performance period of three years starting from the vesting commencement date, being 1 July 2020.
(i) The awards granted will have a performance period of three years starting from the grant date, being 7 May 2020.
( j) The awards granted will have a performance period of three years starting from the vesting commencement date, being 31 March 2020.
(k) The awards granted will vest in full on the third anniversary of the vesting commencement date, being 31 March 2020.
(l) Options for good leavers vested early on a time pro rata basis and hence exercised before the rest of the scheme becomes exercisable in accordance with the terms

of the scheme rules at the time of the award. The unvested shares were cancelled.

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 or loss account of the subsidiary as the employees’ services are provided to the
subsidiary company. The charge for each year is as listed below:

Share options issued to key management
Share options issued to other employees
Total share-based payment expense

2021
£m
2.8
2.0
4.8

2020
£m
1.8
1.7
3.5

Included within the total share-based payment expense of £4.8m (2020: £3.5m) is National Insurance of £0.7m (2020: £0.7m).

125

Fair value is measured using the Black-Scholes model and the Monte Carlo model (where market performance conditions are imposed).
The information set out in the table below is used in the calculations. The expected life used in the model assumes that vesting conditions
will be met and all options will be exercised at the earliest opportunity.

Share price at grant date (pence)
Exercise price (pence)
Expected volatility
Risk-free rate
Expected dividend yield

2021
£m
1700 – 1798
0.25 – 1796
28%

2020
£m
1245 – 1565
0.25 – 1090
28%
0.1357 – 0.1730% -0.086 – 0.704%
0.9%

0.0 – 0.6%

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 2021 and 2020.

34. Capital commitments
As at 31 December 2021, amounts contracted for but not provided in the financial statements amounted to £nil for the Group (2020: £6.3m).

35. Related party transactions
Details of key management’s remuneration are given in note 9.

Dividends of £0.04m (2020: £0.07m) were paid to Directors during the year and no dividends were payable to Directors at the year end.

During the year, £5.0m was paid to a member of key management personnel who holds a non-controlling interest in HFO Holding GmbH.
There are future commitments with this party, details of which can be found in note 26.

There were no other transactions with related parties outside of the wholly owned Group during the year.

36. Subsequent events
There have been no subsequent events that the Directors of the Group are aware of at the date of signing.

126

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Company statement of financial position
As at 31 December 2021

Non-current assets
Investments
Other receivables

Current assets
Other receivables
Cash and cash equivalents

Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities

Capital and reserves
Called up share capital
Share premium account
Share option reserve
Profit and loss account
Shareholders’ funds

Notes

3
4

2021
£m

19.9
19.3
39.2

0.3
27.2
27.5
(1.4)
26.1
65.3

0.2
14.9
19.9
30.3
65.3

2020
£m

15.9
–
15.9

76.9
34.4
111.3
(56.1)
55.2
71.1

0.2
9.0
15.6
46.3
71.1

As a consolidated statement of comprehensive income is published, a separate profit or loss account for Gamma Communications plc is
omitted from the Group financial statements by virtue of section 408 of the Companies Act 2006. The loss in respect of the Company for
the year was (£4.48m) (2020: £1.17m).

The financial statements of Gamma Communications plc (registered number 08943488) on pages 127 to 130 were approved and
authorised for issue by the Board of Directors on 21 March 2022 and were signed on its behalf by:

Andrew Belshaw
Chief Financial Officer

The notes on pages 129 to 130 form part of these financial statements.

127

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Company statement of changes in equity
For the year ended 31 December 2021

1 January 2020
Dividends paid
Share-based payments
Issue of shares
Transaction with owners
Loss for the year
Total comprehensive expense

31 December 2020

1 January 2021
Dividends paid
Share-based payments
Issue of shares
Transaction with owners
Loss for the year
Total comprehensive expense

31 December 2021

1 These reserves are not distributable.

Notes

Share
capital
£m
0.2
–
–
–
–
–
–

0.2

0.2
–
–
–
–
–
–

0.2

Share
premium
reserve1
£m
6.6
–
–
2.4
2.4
–
–

9.0

9.0
–
–
5.9
5.9
–
–

14.9

Share
option
reserve1
£m
12.8
–
2.8
–
2.8
–
–

Profit and loss
account
£m
57.8
(10.4)
–
–
(10.4)
(1.1)
(1.1)

15.6

15.6
–
4.3
–
4.3
–
–

19.9

46.3

46.3
(11.7)
–
–
(11.7)
(4.3)
(4.3)

30.3

Total
equity
£m
77.4
(10.4)
2.8
2.4
(5.2)
(1.1)
(1.1)

71.1

71.1
(11.7)
4.3
5.9
(1.5)
(4.3)
(4.3)

65.3

The notes on pages 129 to 130 form part of these financial statements.

128

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Notes to the Company financial statements
For the year ended 31 December 2021

1. Accounting policies

General information
Gamma Communications plc (“the Company”) is a public company limited by shares and is incorporated and domiciled in England and
Wales. The address of its registered office is 5 Fleet Place, London, EC4M 7RD. The principal activity of the Company is to act as a holding
company for Group subsidiaries and includes the day-to-day running costs of the plc.

Basis of preparation
The Company financial statements have been prepared in accordance with Financial Reporting Standard 101, “Reduced Disclosure
Framework” (FRS101).

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 years presented, unless otherwise stated. The financial statements have been prepared on a historical cost basis.

The financial statements are presented in Pounds Sterling and unless otherwise stated, have been rounded to the nearest 0.1 million (£m).

The financial statements are prepared on the going concern basis as set out in note 1 of the consolidated financial statements of the Group.

The Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented the
income statement or a statement of comprehensive income for the Company alone. The loss in respect of the Company for the year was
£4.3m (2020: £1.1m).

Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore
these financial statements do not include:

(a) certain disclosures regarding the Company’s capital;

(b) a statement of cash flows;

(d) the disclosure of the remuneration of key management personnel;

(e) disclosure of related party transactions with other wholly owned members of the Group headed by Gamma Communications plc;

(f) disclosures in respect of financial instruments; and

(g) disclosures in respect of IFRS 2 share-based payments.

Where required equivalent disclosures are given in the consolidated financial statements of the Group.

A summary of the Company’s significant accounting policies is set out below.

Investments
Shares in Group undertakings are initially recorded at cost and subsequently adjusted for capital contributions related to share-based
payments and any provisions for impairment.

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 assets
The Company does not have any financial assets which it would classify at 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
comprise amounts due from Group undertakings, other receivables and cash and cash equivalents in the statement of financial position.
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less. Bank overdrafts are shown within loans and borrowings in current liabilities on the statement
of financial position.

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 directly to equity.

129

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Notes to the Company financial statements continued
For the year ended 31 December 2021

2. Critical accounting judgements and estimates
Gamma Communications plc is a non-complex entity primarily holding intercompany debtors and creditors. As such there are no critical
judgements or accounting estimates that represent a risk of material misstatement over the next 12 months.

3. Investments

At 1 January
Transfer of ownership of subsidiary1
Capital contributions arising from share-based payments
At 31 December

2021
£m
15.9
(0.2)
4.2
19.9

2020
£m
13.0
–
2.9
15.9

1 In December 2021 the ownership of Gamma Telecom Holdings Limited was transferred to another member within the Gamma Group.

Details of the subsidiaries held directly or indirectly by Gamma Communications plc are given in note 17 to the consolidated financial statements.

4. Other receivables

Amounts due from Group undertakings
Prepayments

2021
£m
19.3
0.3
19.6

2020
£m
76.7
0.2
76.9

Amounts due from Group undertakings are payable on demand. The expected credit loss on amounts due from Group undertakings is negligible.

5. Creditors: amounts falling due within one year

Amounts due to Group undertakings
Accruals

2021
£m
–
1.4
1.4

2020
£m
55.7
0.4
56.1

6. Called up share capital
Details of the share capital and movement during the year are given in note 31 to the consolidated financial statements.

7. Dividends paid
Details of the dividends paid during the year are given in note 13 to the consolidated financial statements.

8. Contingent liabilities
The Company had no contingent liabilities at 31 December 2021 or 31 December 2020.

9. Capital commitments
The Company had no capital commitments at 31 December 2021 or 31 December 2020.

10. Related party transactions
The Company has taken advantage of the exemption available within FRS 101 Reduced Disclosure Framework not to disclose
transactions with other members of the Group headed by the Company. See note 35 to the consolidated financial statements for details
of the disclosed related party transactions.

11. Subsequent events
There have been no subsequent events that the Directors of the Company are aware of at the date of signing.

130

Financial statements continuedGamma Communications plc Annual Report and Accounts 2021Company 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
30 Gresham Street
London
EC2V 7QP

Company auditor
Deloitte LLP
Abbots House
Abbey Street
Reading
RG1 3BD

Legal Advisers to the Company
Bird & Bird LLP
15 Fetter Lane
London
EC4A 1JP

Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Company website
www.gammacommunicationsplc.com

Company number
08943488

131

Strategic reportGovernance reportFinancial reportSupplementary informationGamma Communications plc Annual Report and Accounts 2021Glossary

Carbon net-zero

Carbon neutral

CircleLoop

Cloud PBX

CloudUCXTM

Contact Centre as a Service (CCaaS)

Horizon

Horizon Collaborate

Horizon Contact

Internet of Things (IoT)

Operator Connect

PhoneLine+

Net zero is all about ’balancing’ or cancelling out any carbon we produce. We
reach net zero when the amount of greenhouse gas we produce is no more than
the amount taken away.

Counteracting carbon emissions through investment in carbon offset.

A cloud-based telephony product which is fully serviced through web, desktop
and mobile applications and aimed at the micro-business market.

A virtual PBX system rooted on the internet, which automatically answers all
calls and routes them to the right department or user extension.

CloudUCX™ is a collection of leading cloud solutions delivered as a service and
designed to enhance the standard Microsoft Teams offering.

Software platform that allows contact centres to operate over the internet.
Increasing these are moving beyond telephone calls to allowing conversations
to occur and be actively manged through multiple media (email, social media, etc).

Gamma’s complete business phone system – a hosted communications service
that provides businesses with extensive fixed and mobile telephony capabilities.

Built on the Horizon business phone system, Horizon Collaborate satisfies
internal and external communication needs including voice and video calls,
instant messaging, video conferencing, desktop sharing and document sharing.

Horizon Contact is a cloud-based contact centre solution that is designed
specifically to work in conjunction with Horizon and Horizon Collaborate.

Technologies that connect and exchange data between machines (devices and
systems) over the Internet or other communications networks.

A service which is designed to enable seamless and integrated calling between
Teams and the local telephony infrastructure (known as the PSTN).

Simple phone line replacement service using VoIP technology to deliver voice
calls over the broadband network.

Public Switched Telephone Network (PSTN)

The world’s collection of interconnected voice-oriented public telephone networks.

Session Initiation Protocol (SIP Trunking)

SIP is a signalling protocol, widely used for voice and video calls over the
Internet. One SIP trunk allows for one channel of voice. This can be an
alternative to ISDN or Analogue channels.

Single Order Generic Ethernet Access (SoGea)

A standalone broadband line, without any associated voice service.

SIP Trunk Call Manager

Software as a Service (SaaS)

Software-defined wide area network (SDWAN)

All the benefits of Gamma SIP Trunks together with a centralised inbound call
management service.

Software which is delivered through the internet and which is consumed on a
subscription basis.

Enhanced connectivity between an organisation’s locations which using
improved software to more effectively control, route and distribute traffic
across the network and improve the overall experience.

Unified Communications as a Service (UCaaS)

Software platform that allow communication using multiple different media and
which run over the internet.

132

Supplementary informationGamma Communications plc Annual Report and Accounts 2021This Report is printed on material which is derived from sustainable sources. Both the manufacturing
paper mill and printer are registered to the Environmental Management System ISO 14001 and are
Forest Stewardship Council® (FSC) chain-of-custody certified.

Designed and produced by SampsonMay
Telephone: 020 7403 4099 www.sampsonmay.com

Working smarter,
together.

+44 (0) 333 014 0000
info@gamma.co.uk
www.gammacommunicationsplc.com

We’re a certified Carbon Neutral® Company. This means you
can demonstrate green credentials yourself. By working with
us you have a solution that not only helps the environment
but also enables you to become greener and conform to new
Government environmental policies.