When a teenager, not for nothing was Gamma's CEO Bob Falconer described as 'the wee hairy boy that goes steaming in'. Such characteristics have not been outgrown and their influence is strongly felt as the driving force behind Gamma's evolution as a listed company.
In October 2014 Gamma confirmed a successful IPO on AIM, with 50 per cent of shares being sold to institutions at 187p per share for a £165.2 million market capitalisation. An attractive dividend yield and strong organic growth formed a springboard for Gamma as a public company. And its successful transition from private to listed company, despite a difficult market, was recognised in May this year when it won Management Team of the Year at the Thames Valley Deals Awards. Investors don't just look at what businesses do, they look at the people who are driving the business forward - a factor that also came to the fore pre-flotation.
"On the 25th presentation of the business to City institutions my CFO Andrew Belshaw and I presented to a particularly young pair of investors," recalled Falconer. "As we came out I quipped, 'how did they manage to get out of school for the day?'. Andrew replied, 'funny you should say that, because as we were leaving I heard them ask how did that guy get out of the care home?'. Investors and management are two sides of the same coin - different, but complementary."
Perhaps one of the most encouraging aspects of the many discussions Falconer held with the investment community is that, providing you explain clearly what you are doing, they are not as short-term in their outlook as often portrayed. "They are highly intelligent people entrusted with pension funds and the like, and look for businesses with a track record, decent management and a clear strategy with competitive differentiation," stated Falconer.
The decision to float was straightforward, he pointed out. Although no new money was raised there were three primary reasons for the move: These were to give long-term liquidity to shareholders who've been with Gamma for over 12 years, to incentivise employees and also raise the public profile of the business. "For the CFO and me, this brought a marked change in the nature of our jobs," commented Falconer. "We have a new investment constituency to look after and that takes time and sensible handling. We also have a more formal board structure with clear governance frameworks. Although this took some getting used to, we found it to be constructive."
One of the downsides of public markets, noted Falconer, is not being able to be open about financial prospects both internally and externally, with a restriction on forward looking statements. "That's frustrating, but necessary," he added. "There was also a fear that we might lose our open, highly delegated culture where people are trusted to do the right thing. But that looks to be quite safe. We've no plans to become a faceless corporate."
The impact of Gamma's flotation on most staff has been negligible, aside from the introduction of a tax efficient company-wide share incentive scheme that has been well received. The company is just as popular with partners, working with them to identify the products that will move the dial in their markets, avoiding the niche, the consultative and the labour intensive. "That's not for us," stated Falconer, who aims to keep things simple and work with the channel to gain volume in high growth new, or displacement markets. "Essentially, we bring services from the core of our network that can be wrapped up with, and enhance, the partner's proposition. And we need to be quick at deploying such products into the channel with a high level of quality."
Gamma is focusing on bringing more integrated fixed, mobile and data services to the market and late last month launched its Converged Private Network service (MPLS-based). "We plan to help our channel partners expand by providing an easy-to-order capability for integrated comms, enabling the channel to focus on broadening its portfolio," added Falconer.
The trick is to take new or significantly differentiated products to the business market, particularly products that change the way a business operates, not just reduce its costs, believes Falconer. "It will be increasingly difficult for all but the very largest players to compete in the high volume commoditised service game where price is all," he said. "The days of 'it's BT (or Vodafone) minus 20 per cent' are largely behind us, and both growth and customer loyalty are difficult to achieve with that sort of model."
The channel is driving growth in Gamma which notched up 2014 revenues of £173 million and now has a headcount of circa 600-plus staff. "Last year we signed up 155 new partners and this year will beat that," noted Falconer. "Gamma has been targeting a number of areas - the IT partner market, Microsoft partners, Systems Integrators, and of course we receive a huge amount of new partners that come from within existing partners who may have sold out or are starting up their own businesses."
The biggest trend witnessed by Falconer is for businesses to buy all of their comms (and perhaps their IT) from a single trusted supplier. "This is well established in the consumer market with triple play and the rush to quad play including mobile and sports content," he said. "There aren't many resellers that still compete in the consumer market. The quad play argument is purportedly part of the reason for the BT purchase of EE, creating a huge monolith with much control over the UK infrastructure, and also some content.
"In response, many in the channel have done a paint job on their website and offer 'full comms and IT services'. However, providing a real value add ICT solution is much more difficult than just reselling the parts. Once services become more functionally integrated - think single directory, voicemail etc - buying in the bits and reselling them isn't going to cut the mustard."
Therefore, Gamma's focus is to take the burden of building and supporting integrated voice, data and mobile services off the backs of the channel, enabling each partner to focus on their own additional services and particular differentiation. "All of our thought goes into the product and support structure that enables Gamma and the channel to grow together," commented Falconer. "You will see more from us in that space."
Despite all he's achieved in his famous career, Falconer believes even more high points are yet to come. "I've certainly not finished yet! I'm proud of what we've built at Gamma, and it's been great to oversee a business that's grown based on its reputation, quality and sound ethical principles where 600 people tell us they are happy to work," he commented. "It's not rocket science, but it just works."•