Thank you very much indeed for coming out to spend some time with us this morning. I think I know most of you, but just in case I don't, and for people watching us, hello, you're very welcome as well. My name is Andrew Belshaw. I'm Gamma's CEO, and we've come to talk about Gamma's 2025 results, which we are super pleased with, I have to say. Fairly sort of standard agenda for this morning. I'm gonna give us a bit of an overview on the business. What I'm gonna do is spend a bit of time talking about what Gamma does.
I know people generally understand that sitting in the room, but we've probably got some new investors and new people joining us online, and we'll have a couple of slides just explaining what Gamma does. Then a bit of a strategy and market update. Again, nothing desperately radical going on there. I will then give you a bit of an outlook, and we'll get to Q&A in around about 35, 40 minutes, I would hope. It's a very busy slide, and Bill will cover that later. But we've got lots of really good numbers that we're very proud of, and we wanted to share those with you. Our gross profit, as you can see, up 16%. Our EBITDA up 13%. Cash generation remains very strong, and we're very pleased with all of those metrics.
You'll notice that I'm talking about GP, and we're gonna be focusing a little bit more on GP as Gamma moves forward rather than revenue. This is in a world where, you know, sometimes you can see ARPU's on particular solutions coming down, but actually we're making more GP per user. GP will be the metric that we focus on going forward. The other thing I'd say is historically, we've sometimes been a little bit criticized for giving lots and lots of KPIs, and as we've introduced a new solution or gone into doing something different, we've put a new set of data out there.
What I'm gonna do is spend a bit of time later this year explaining to you how we monitor the business and actually how we as a management team get paid for running the business, which is very much GP-focused and how we kind of drive and how we model GP coming from various areas of the business. We'll talk a little bit about that as well as the morning goes on. Really just to kinda highlight that GP split. I think one of the things that we've noticed over the course of the last 12 months is the U.K. SME sector has been struggling. We know that. It's not a good time to be running a small business in the U.K. for a whole host of reasons that you're well aware of.
We just wanted to highlight that the U.K. SME is now 42% of Gamma's GP. When I was talking to you 10 years ago, Gamma was basically a company that dealt with SMEs in the U.K. That's not true anymore. We've still got lots of SME business. We still love U.K. SME, but it's only 42% of our business. Actually what we wanna focus on is things like Germany, which is now heading rapidly towards being a quarter of our business. That's 23% of our GP and growing double digit. We're also gonna talk this morning about service provider that we split out for the first time, 13% of our GP, and we'd be explaining to you how we're increasing the addressable market for that. Gamma is no longer a U.K.-based business selling to SMEs in the U.K.
We are a truly European communications provider, and Bill will talk to you about all of those wonderful cash metrics as well. Let's talk about operational highlights for 2025. We think, again, we've done pretty well running the business in 2025. Germany is clearly the absolute highlight for us. We bought Placetel actually in 2024, but throughout 2025, we've integrated Placetel and STARFACE that we acquired in February with our existing German business, and that's gone really well. We bought well. We bought great businesses in Germany. I think throughout 2025, we've integrated well, and those businesses are now growing very strongly, double-digit. U.K. SME, as I said a minute ago, it's been tougher, but the team have done an amazing job against a very difficult macro backdrop.
Remember, it's 40% of our business. We've had to contend with PSTN switch off. That cost us GBP 4 million of GP. We went into 2025 knowing that we were gonna lose about GBP 4 million of GP, and actually we go into this year knowing that we're gonna lose about the same amount of GP just because the PSTN being switched off and we're having to move people from high-margin copper solutions onto slightly lower margin fiber-based solutions. If you take that out, that once in a generation they don't turn off the national telecoms infrastructure very often. It's a once in a generation thing. U.K.'s SME has been pretty flat year-over-year, which I think is a really good performance, as I say, against a difficult economic backdrop. I mentioned earlier on service provider we're splitting out.
What is service provider? We'll talk about it a little bit more this morning. Service provider is where we take Gamma's network. Gamma has a telephony network, and effectively we wholesale that out to people who don't have their own network. If you think about some of those cloud communications platforms that you might use regularly, and I'm not allowed to name them, but you kinda hopefully know who I'm talking about. When you think of the Gartner Magic Quadrant, they're all up in the top right-hand corner. They don't get involved in telecoms infrastructure. They're software players, and they need somebody they can rely on, and quite often that person is Gamma.
What we've done throughout 2025 is we've taken that service provider business, all of our 2025 revenue, by the way, and GP is coming from the U.K., but we now have the capability to operate our service provider business in 30 countries around the world. We've actually now got boots on the ground. We've got sales teams in Australia who are selling into the APAC region, which we've never done before. We're increasing our addressable market for that. While we're on the topic of taking things outside of the U.K., enterprise as well has had a really, really good year. Difficult first half of the year with everything that was going on in the world, and clearly that hasn't exactly stabilized in the last few weeks.
I think enterprise has just decided they've got to get on and do things, and they've got to get on and procure things. Towards the end of 2026, we had a really good quarter of people signing new business, putting tenders out. As we sit here today, we've got a nice pile of new business that we need to get on the network, and we'll do that in the back end of the year. You'll see that revenue coming through. We also have a good pipeline of things that we're currently bidding for. Very positive on enterprise as we get into 2026. We're also taking enterprise outside of the U.K.
We'll talk a little bit about Robert Bosch in a moment, which is our first, Anglo-German and actually Pan-European, win for us. I said I'd talk a little bit about what Gamma does before I do anything else, and many of you will have seen that slide before, but pause for a moment because you've not seen exactly this slide before, for there is a new logo on it that we're quite proud of, and we'll come onto that in a moment. Gamma for the last 25 years has been a network operator. We have our own infrastructure. We have a telecoms network. What does that actually mean?
Well, fundamentally, if you wanna make a phone call, if you want to dial a phone number and be connected to somebody else who is using phone numbers, you need somebody who has a telecoms network to be able to do that, and Gamma does that. It's kind of hard to do. It's difficult to do. We now do it in 30 countries, or we have the capability to do it in 30 countries, and I'll come on and talk about AI in a moment, but AI can't replace that. Because it's regulated and because it's hard to do, all of those brands on the left-hand side of your screen there, all of those hyperscalers, they don't do it. They lean on people like Gamma.
What we do is we take products from Cisco, Amazon, Microsoft, IPX, and as of last week, Zoom, we're now on the Zoom Provider Exchange program, and we plug their solutions into our network, so everything just works. You as an end user don't have to worry about how all that works. We take their software, we take our network, you can do video calling, you can do messaging, you can do all the clever stuff that they can do, but you can also just dial a number and make a phone call as well. Those hyperscalers don't just talk to us because we've got a network. They also talk to us because of this. Because Gamma has around Europe thousands of channel partners reaching tens of thousands of small businesses, mechanics, florists, travel agents, and also hundreds of enterprise customers.
Why do those businesses want to talk to Gamma? Well, fundamentally, they want to talk to Gamma because we can deliver them the best of breed communication solutions that are all linked into our network, so everything just works. We underpin that. We underpin everything we do with quality of service. That's fundamentally what Gamma's about. In terms of the things we sell, well, over there on the left-hand side of the screen as you're looking at it, calling is something that we focus on. As I said a minute ago, it's using phone numbers. A number of businesses in the U.K., about 40% of businesses in the U.K., about 80% of businesses in Germany, they still use what we call a hardware phone system.
They've got plastic phones on their desks plugged into a box in the basement with a physical piece of wire. We carry the calls in and out of those offices using the Gamma network and something called SIP trunking. We're the U.K. market leader for that. We do it in all the countries in which we have sales teams. Also these days, we do what we call voice enablement, so it's a very, very similar technology for people who've moved away from that hardware solution and now they're using a cloud-based solution. It could be Teams, it could be Cisco, it could be Amazon, it could be Zoom. We still provide the voice enablement, so we're just carrying phone calls in and out of that platform for our customers.
As I mentioned earlier on, we have our service provider business where we take that whole capability and we wholesale it possibly to people whose logos that you can see up there, and others as well who need that kinda capability for their overall solution. If you want to buy a cloud communications platform, well, we can sell you one of those as well. We have a number of things that are largely our own IP, things like PhoneLine+, Horizon, STARFACE in Germany, and also we sell third-party products, so things like Webex, things like IPX. Placetel is a digital variant of Webex as well. We can supply you with a cloud communications platform. We can also supply you with connectivity, so things like fiber.
If you want fiber into your premises, if you want a network because you've got multiple premises, and if you want that network secured, we can do all of that for you. If you want mobile, if you want IoT, Gamma can provide all of that. Now again, we're asset light. We rely on partners, so in the U.K., we work with people like BT to provide fiber. We work with people like EE, Voda Three to provide mobile. That's broadly the solution set that we have. AI, you may have heard of AI. It's quite big apparently and getting bigger. What we read when I look at analysts is that telcos are essentially net beneficiaries of AI. You're all analysts. You'll have a view.
Might be a few nodding heads in the room, which is pleasing. Gamma's already using AI. In our network there on the top left, we're already using AI tools to make our network more efficient, to make our network more secure, to make us spot fraud more quickly. We're also monetizing AI. We have customer solutions in the air at the moment. Essentially AI Concierge, we call it answers the phone for you. If you're a small business and you're not available 24/7, you don't need to be anymore because we have tools that can essentially answer the phone for you, and we'll come on and talk about how we generate revenue from that in a moment. Areas we're currently exploring, so things like how we enable our partners with more data.
We've said to you before, we have an astonishing amount of data. We see lots and lots of phone calls transiting our networks. We kinda know who's making them, which parts of the country, which sectors, so therefore you kinda have a sense of who's vibrant and who's growing. We can share that data with our partners so that they're able to target customers, you know, in a better way than they've been able to do historically. We're even thinking about ways we can actually share that data. It's all anonymized, by the way. No GDPR issues. We can share that more broadly with people who just want to know which sectors of the economy are doing well because as you may remember from years gone by, we're pretty good at identifying economic growth or economic decline before other people get there.
Internal efficiency, like everyone else who's talking to you at the moment, we want to think about how we can make our customer service better and ultimately cheaper using some of the new AI tools. Just coming back to what I said at the beginning, you know, Gamma has strong AI-proof foundations. We're running a physical telecoms infrastructure. It is regulated. We rely on those relationships that we've built up over years with the hyperscalers and our channel partners, if you go back to that earlier Arrow slide. Those are things that AI cannot replicate. We see AI being really useful in some areas already. It will be more useful, but fundamentally, we don't see AI changing, the, you know, what Gamma does and what Gamma stands for. We don't have that same existential threat as others do.
I said earlier on we were gonna sort of talk about gross profit and think about how we can analyze the business, and we will spend a bit more time doing this as the year goes on. This is how we think of the business internally. Both of these pie charts here are just analyzing Gamma's gross profit. The one on the left-hand side over there, as you're looking at it, is gross profit by segment, so business unit. The one on the right, as you can see, is gross profit split across those three areas of things that we sell I was describing earlier on. Just to kinda hammer home the point, Gamma's been, I think, probably unfairly rated because people are worried about what's gonna happen to this U.K. SME space, and I think, you know, rightly so.
As I said earlier on, it's difficult being a SME in the U.K. right now, and there definitely are challenges for this part of the business. As I said earlier on, if you take out the PSTN switch off, which is a once in a generational event, that was flat from 2024 to 2025. All of these areas have significant potential for growth. Germany is growing like an absolute train at the moment. That will do double-digit growth for some time to go. Enterprise is doing really well now, really strong pipeline, potential for us to take that outside of the U.K. Service provider, as I say, all of that revenue at the moment is in the U.K.
We can now offer that service in 30 countries, and we've already got sales teams in Australia, and we will be winning our first business in the next few weeks in Asia Pac. Looking at this business on the right-hand side, different way of analyzing things. People get, again, a little bit worried about calling. Are people making fewer phone calls? Yeah, people are making fewer phone calls. That's just a fact of life. You know that. I know that. But it's around about a third of our business. We're selling lots of cloud seats, and there's still 40% of U.K. business to move to the cloud, 80% of German businesses to move to the cloud. Connectivity, fiber connectivity, mobile, those things aren't gonna go away anytime soon.
By the way, calling, I'm increasing the addressable market that we can get to by going into those 30 countries and taking service provider overseas. We're in a very, very strong position. All businesses need a communications technology provider. AI is not gonna change that. Nothing's gonna change that. Businesses need to talk to each other. Businesses need to communicate internally and externally, and we are a leading provider of that, both in the U.K. and Germany and around Europe. We're financially a very strong business. We have recurring revenue, recurring GP, very stable margins, and very strong and predictable cash conversion, and we have undertaken that we will deliver GBP 42.5 million this year and next year on a share buyback. We said we're gonna keep the dividend at the same level.
If you add all of that together, we're gonna be generating GBP 125 million or handing back to shareholders GBP 125 million over the next two years. Just talk a little bit about our strategy, talk a little bit about the market. As I said, I don't think any of this is gonna be hugely revolutionary, but these are our 5 strategic priorities throughout 2026. We've recently done what we call a staff roadshow, so I've been around pretty much every office in the Gamma business. I've spoken to virtually all of our employees, and we've taken these five priorities, and we've split them down on a country-by-country and office-by-office basis, so everybody's very, very clear what they need to do. The first thing we wanna do is focus on migrating customers to modern platforms.
As I mentioned earlier on, Gamma's 25 years old this year, and we've got some customers who've been with us for quite some time. Some of those are on older technologies that might not suit them anymore. We need to make sure that they move to newer technologies so that they remain as Gamma customers and also, frankly, so that we can take a bigger share of their wallet through moving them to newer services. We also want to grow our core business. Gamma has the best solution portfolio that we have ever had, and it is growing. As you saw on that earlier slide, we've got logos on there, Zoom, that we've never had on before. Webex in the U.K. that we launched back in October was the best product launch we ever had.
We went from no users to well over 20,000 users in the space of three or four months. We've never, ever done that for a new product launch. That's gone very, very well. We're gonna take Webex into Spain, and we're already attracting new channel partners that have never spoken to us before in Spain. It's very, very exciting some of the things we're doing. We're launching Fiber Exchange, which will hopefully increase our share of the fiber market. That's where we're bringing more fiber providers onto the Gamma Portal, and over time, you'll also see more cloud providers coming onto the Gamma Portal. We expand into adjacent markets. I've already spoken about this a little bit.
It means both geographically, so taking our enterprise business over into Europe, taking our service provider business globally and into Asia Pac, and also taking our digital offering. Placetel that's currently in Germany, we'll be launching that this year in Austria. We'll also be launching that in the Netherlands, and I'm sure when I'm here in 6-12 months' time, we'll be talking about taking that digital offering into new countries as well. It's not just going into adjacent geographical markets, it's selling new things. We've spoken before about taking a managed service to our channel partners as we do with Clear Business, and we spoke about that six months ago. We also spoke about managing a platform for Daisy, and we're now doing that for Redcentric as well.
We're gonna offer new services to our customers, so later this year we'll be offering a cybersecurity suite for small businesses as well. We expand into new markets, both geographically and by selling new things to our existing base. We need to keep being efficient. Gamma's expanded 50% at all metrics, revenue, GP, EBITDA. Gamma is now 50% bigger than we were four years ago. We need to make sure that as we grow, both organically and by acquisition, that we remain efficient. That's things like rationalization. That's things like driving the synergies out of acquisitions that we've made. It's things like offshoring, and we already have a team working in the Philippines. It's things like using AI as well, just to make sure that we maintain that level of efficiency.
As I've said a few times this morning, it's so important to Gamma, we need to deliver excellent customer service, because if we don't do that, we don't have customers, and we don't have a business. What are some of the market trends that we're seeing at the moment? Again, I don't think this is particularly new news for you. Cloud communications, I've said it a couple of times this morning. Somebody, one of you said to me this morning, you know, "Are we seeing kind of the end of the cloud comms growth?" Absolutely not. We've still got 40% of businesses in the U.K. using a hardware solution. They will move to cloud. In Germany, it's 80% of businesses are on a hardware solution. They will move to the cloud.
Full fiber connectivity, we still have businesses using legacy broadband services, even more so in places like Germany. We grow the core business by selling more of the things that we're already selling, that we're really good at selling. Expansion of the hyperscalers. In the last few years, you'll be well aware that, you know, those logos we put up there, the Ciscos, the Amazons, the Microsofts, they weren't really in comms five, six, seven years ago. Now they are, and they want to be in comms globally, and they don't wanna be signing deals with 200 network providers around the world. We are in a fantastic position to use our service provider business and the fact that we're now in so many countries to be able to sign multi-country contracts with
Oh, it's easy for you to say, multi-country contracts, with some of those, hyperscalers, and we will be doing that as this year goes on. Things that we weren't even talking about a few years ago, cybersecurity, IoT, AI, we now have solutions in theater, in market that we're selling today, meeting those new needs of our customers. They meet this, the strategic objectives of growing the core business and expanding into adjacent markets. Bosch is now a customer, I'm delighted to say, and it's one of our first probably our first big Pan-European win. We now have Bosch. It's not just a U.K. customer, it's not just a German customer, it is a European customer. It just begins to demonstrate we can take that enterprise business outside of the U.K., and we can win business, across Europe.
When I mentioned earlier on that the enterprise pipeline's looking good, a number of things in that pipeline are actually businesses that are operating across the whole of Europe rather than just in a single country. Curve, many of you will know. Curve as a business has been a channel partner of Gamma's for a long, long time. It now has customers that also are operating internationally. It makes no economic sense for Curve to go and build out an international network, so they use ours. They need fully compliant voice services. That doesn't just mean being able to make and receive a call. That means you can connect 999 services. It means you can do all the things that you need to be able to do, with governments in each country, to meet your requirements.
We can do that for them in 18 countries. Effectively, Curve are sitting on top of our international network, and we are wholesaling it to them. That's what our service provider business does, not just for the big hyperscalers, but also for businesses like Curve, and we're absolutely delighted to do that. That's been a particular technical challenge, but also a commercial challenge in terms of some of the tripartite agreements that we've had to be signing in countries to be able to do that. We're very, very happy to do it for a very good partner. Innomol is probably not a business that you've heard of, but it's a German laser tag business. They operate laser tag parties in Germany. They've taken our AI voice agent. We now answer 3,000 calls a month for them.
People are saying to me, "Andrew, is AI gonna mean you have fewer and fewer seats?" Well, yeah, honestly, it might mean that you have fewer seats, but why do you have fewer seats? 'Cause you've still got people calling. We're answering the calls now, and we're charging you more, not just for the seat, because we're now doing more for you. We're not just providing that seat and that connectivity, we are actually answering the call. As AI gets better and as agentic AI comes in, we will begin to process that call and do things with the information from that call. What does that mean? Well, it means that the monthly revenue from that customer has gone up 4 times. Actually, in Germany, we've only just launched our AI voice agent towards the back end of last year.
We're already doing EUR 50,000 a month of revenue from that AI voice agent, which doesn't really sound very much. The interesting thing for me is that's growing 30%. Not 30% year-on-year, that's growing 30% month-on-month at the moment. That percentage will come down before you put that in the model and have Gamma having GBP 1 billion of revenue by next year. Bill, come and talk about the numbers, please.
Thank you.
Do you want me to take that?
Yeah.
I'll take that. Sorry.
Hi there. I'm Bill Castell, CFO for one more week, as Andrew said, on that side. I'm gonna take you through around 11 slides. A lot of those will be familiar to you from the half year and previous years on that side. The first one, which I once called a nine-box grid, but it's actually a six-box grid, is gonna kind of reiterate what Andrew said earlier. If you look at our headline, we've had a strong 2025, with double-digit growth across all of those P&L items. You'll note we guide to adjusted EBITDA and EPS, and while our EBITDA was GBP 141.7 million, the EPS was 94.5p, adjusted EPS. That was well within the guidance that we provided at the end of last year on that side.
I think, again, Andrew stole my thunder a bit, but when I first came to Gamma four years ago, so the back end of 2021 results, that GBP 141.7 million adjusted EBITDA was GBP 95.4 million. We've grown that significantly. As well, four years ago, adjusted EPS was 64p. Just to give you a view of our growth profile over the last four years. It's not all just about P&L, it's also about cash generation. Our cash conversion remains well above the 90% guidance at 93%, and we generated GBP 131.8 million from the adjusted cash conversion. Our net debt at the end of the year, so the end of 2025, 31st of December, was GBP 9.3 million in net debt.
That obviously is gonna be one wave of our cash generation as we go through 2026. That kind of came down from the previous year as a result of our STARFACE acquisition that was in February 2025. Shareholders' returns remain high. This number here is for the 2025 period. That was a GBP 45.1 million share buyback and also our in-year dividend. We did announce in line with previous that our dividend will be up 14% for 2025, and our final dividend will be 14.8p, which when you combine with the 1/3, 2/3, is a full dividend of 22.2p for the year. We also gave guidance at the back end of last year in January that we would be doing a GBP 42.5 million share buyback in 2026.
That's already started. It's underway, and the intention for 42.5 for 2027 as well, and that we'd be keeping the dividend flat to the 2025 level. That's the 22.2p going into 2026 and onwards. But high cash generation. If we go now to the principal statements, there are a lot of numbers on this page. I'm not gonna focus on all of them. 89% recurring revenue continues. That's the same as prior year. You'll notice our gross profit margin, so the red circle there, is increased to 53.9%. That's a result of our German acquisition, STARFACE and Placetel. High margin business, I'll come to that, but you will see their margins are 71.1% in Germany on that side.
It was a very, very busy 2025. We've already talked about the STARFACE acquisition. We also did the AIM to Main move. As Andrew also slightly mentioned, we did some restructuring at the back end of 2025, which I'll come and talk to a little bit more when we give guidance on 2026. That's why the exceptionals for the year were higher than normal at GBP 10.8 million. Adjusted PBT grew 7%, slightly lower than the double digits above, mainly due to the fact that we didn't have that big cash balance. The interest income was lower in 2025 than it was in 2024, and we went into the RCF for the first time.
That's the reason why, the main reason why that 7% growth, which is still very healthy, high-level growth. We're gonna start with Gamma Germany. I wanted to start with triple-digit growth, going there. You can see the headline there of 103%, 197%. Don't model that completely, but you can model double-digit growth in Germany. We had organic double-digit growth in Germany, so that's not including the M&A. That's just looking at the organic side. You can see the high margin I mentioned at the 71.1%, and gross profit is now very meaningful, as Andrew showed in his gross profit contribution slide, that Germany is now contributing GBP 78.4 million in 2025, and that's just gonna grow and grow and grow. Moving on, Gamma Business.
We mentioned that Gamma Business is made up of U.K. SME, so that's that wholesale piece that we go through our 1,500-plus channel partners. It is also made up of service provider that Andrew already started to discuss in the 30-odd countries now that we can cover through the service provider. Overall headline growth revenue growth was around 2%, 1% on that side when you look at organic. We did go slightly backwards organically at the GP level to GBP 190.8 million, so that was -2%. Interestingly, when you take out the PSTN that we've been signposting for some time, which was GBP 4 million hit, then that Gamma business was flat year on year.
You can also see that we had some significant wins with Clear Business and also the O2 Daisy relationship that we've previously signposted going forward. This is a new slide, as Andrew said, as we pull out service providers. This is a subsection of that Gamma business that you've just seen. We wanted to identify that there are parts of Gamma business that did see growth in 2025 and will continue to grow 2026 onwards. This is the service provider. You can see it contributes around GBP 44.3 million GP in 2025 and grew organically at 3%. Andrew mentioned about APAC and Philippines, and we have significant opportunities in that marketplace that we will crystallize in 2026.
Gamma Enterprise, there was a small acquisition, BrightCloud, which is why you do have a difference between the headline and the organic. Flat at the revenue level, slightly down organically at the GP. But again, we've talked about the Ethernet pricing challenges, and we've identified those, and we're excited about the opportunities in 2026. There is normally a time lag 'cause the size of the contracts of around 9-12 months, but we have significant wins in Q4 2025. We're in a more positive position certainly than we were 12 months ago, given that very strong Q4 that gives us great momentum, and that's just not in the U.K., as Andrew's already mentioned. That's more international as well. This slide, you know, we are not a capital-intensive business.
If you look at the graph at the bottom, you can see historically 2022, 2023 were just above 4% of revenue. Our CapEx is now below 4% of revenue, so we're at 3.8% for 2025. Our CapEx was GBP 24.3 million, which you can see on the table there in the CapEx. You can see our development spend did increase slightly, GBP 6.4 million. You'll recall we said 2024 was a transition year as we moved away from developing our own software. We still develop PhoneLine+ at the bottom end of the stack in relation to our cloud offering, but we have invested a lot in a portal and our platform going forward. You heard about AI Concierge as well previously, as we invest in that.
I'll provide guidance in the last slide around where we see in 2026. Historically, we're well below the 4% of revenue. Strong balance sheet is something that we've talked about a number of times. You'll see that there's quite a significant variance between many of the line items on the balance sheet between 2024 and 2025. That is largely due to the STARFACE acquisition, which was a major acquisition with intangibles and goodwill. The retained earnings, we are profitable, but the retained earnings, given the share buyback, comes through the retained earnings. There's a deduction there, which is why you're seeing flat year-on-year retained earnings on that side of things.
Net debt I talked about was GBP 9.3 million, and you'll also note an increase in the IFRS 16 leases, as we inherited some leases as we purchased STARFACE on that side of things. Deferred consideration came down during the period. Interestingly, we have the GBP 130 million RCF facility. GBP 97 million of that was undrawn. More of it's undrawn as we sit here now 'cause we're generating more cash between the end of the year and where we stand here today. We have plenty of liquidity available for ourselves going forward, as well as just the natural cash generation of the company. Talking about cash. Oh, I should say, sorry, I was...
You'll notice that we have, for the first time, and Andrew will cover this more when, you know, in the Capital Markets Day, later in the year, brought in the return on capital employed. The ROCE figure that you can see is a very healthy 27.8%. That remains high. I think that's just re-emphasizing that although we're software, we have infrastructure as well, and we're a low CapEx business and a very high ROCE business on that. It's in the back end of the RNS. Everyone I know looks at ROCE in different ways. For the analysts out there, if you look at the back of the RNS, I've shown exactly how we calculate it, and there should be no surprises on that side. Cash flow.
93% cash conversion that you can see there going through the 131.8, which was up 9% year-on-year. CapEx, I've talked about the GBP 24.3 million. The acquisition, predominantly STARFACE, GBP 152.2 million of that was STARFACE, a few small other tiny bolt-ons along the side. As I mentioned before, part of the reason why that adjusted PBT is a bit lower percentage is the interest income swung to a net interest expense for the year, going forward on that side. Again, all the main dynamics, when you've got 89% recurring revenue, 93% cash conversion, and you're a capital light business, it's not a bad place to be. Now I can see the analysts in the room having a look at this slide.
Just talking, these are modeling considerations going forward. Similar to the way that we were happy with our 2025 results being in line with our range, we're saying exactly the same for 2026. You can see at the footnote, as of last night, before all of the updates, the range on the adjusted EBITDA was GBP 138 million-GBP 144.6 million. The adjusted EPS was 90p-96.6p. We're very comfortable with that range, and that's what we're saying today. Cash conversion, STARFACE is very similar to our business, if not even more cash conversion, so we're very happy with continuing to state that we'll be above 90%. CapEx, as I mentioned earlier, will be circa 4% of revenue. We have highlighted previously the PSTN switch off.
That is a transitional event that, as BT is still targeting January 2027 for the switch off. Similar to 2025, we'll see similar headwinds in 2026, but that is well known to the market and well indicated last year. Enterprise and Ethernet as renewals come up. I think everyone's aware that the Ethernet pricing today is very different to three, four, five years ago. As contract renewals come up, we know there's a bit of a headwind. That all being said, we've had a successful efficiency exercise, and so we've hit the target of a GBP 7 million run rate cost savings into 2026, that mitigates that 4% and 3% that we discussed earlier. Again, no new news, exactly what we said at half year.
Then the last slide, just to highlight, the six-box grid at the end. 89% recurring revenue. Gross margins have gone up, not down, 50% plus. High cash conversion at 93%. The net debt at year-end, but we generate a lot of the cash, so that number gets positive as we speak. Healthy return on capital, the 27.8% we mentioned earlier. We've renounced through our capital allocation policy that we've listened to shareholders. We see where our share price is, the yield that is nearly double digit now on free cash flow, that the best investment at the moment for us is our own shares. There's not many things as attractive as Gamma out there, the 5x-6x EBITDA multiple and sub-10 PE.
Therefore, we've announced the, you know, the 42.5, 26, and 27 share buyback, plus keeping dividends as well. That's returning over GBP 125 million over the next two years as well. On that note, I will pass over to Andrew.
Thank you very much, sir. Right. There we go. Right. Thank you very much indeed, Bill. Is that working? Yes, it is. Right. So hopefully, you have formed the same impression that we've formed that 2025 was a really good year for Gamma, and we're really pleased with it. But we don't just wanna stop there. We are really confident in 2026. We're very confident with where you guys in the room have got the range, and we've said this morning that we think we're tracking to within the range for 2026, which is fantastic. Why is that? Well, I can't say it enough times. Germany is doing very well. It's now a quarter of the group. We bought well. We've integrated well. The market is moving.
We're seeing double-digit growth in that German business, and we expect to see that for some time. SME, people have been worried about SMEs. As I said a couple of times, it's difficult to be a SME in the U.K. at the moment. We've also had this once in a generation turning off of the copper network. If you take that out, our business has been flat, which actually isn't a bad return in the current climate at all, and we have the opportunity to grow. Once that PSTN switch off has worked its way through, that's gonna be done by January 2027, hopefully. We can begin or carry on migrating our customers onto newer platforms, taking some of those SIP customers, moving them onto cloud. That generates a bigger GP per user.
Selling things like AI tools, selling things like cyber tools into that base, and just taking a bigger share of the customer's wallet, which is what we want to do. We still see plenty of growth in U.K. SME. You're just not seeing it come through at the moment because of the macro and the PSTN. We've pulled out service provider because that's got completely different headwinds and tailwinds to SME. We've been reporting those two historically together, but we're now pulling them apart. The opportunity for me to take that service provider business outside of the U.K. into Asia Pac, into some of those other 30 countries that we talk about, is significant. We are increasing the addressable market for our service provider business significantly.
Again, when we meet in six months, 12 months, I will be telling you about contract wins we've had outside of the U.K. that begin to show the growth in that business. Enterprise, I mean, goodness me, what a strange world it is for enterprise businesses at the moment, but we're seeing a really strong pipeline. We're seeing people continue to tender. We're seeing people continue to deploy. We have business that we have won at the back end of 2025 that I know you're gonna see coming through the results in the tail end of 2026 or the second half of 2026. We have a great pipeline of things that we are bidding at the moment, not just in the U.K., but across the whole of Europe.
We focus on operational efficiency, AI, rationalization, offshoring, and I've given my team the target of increasing that EBITDA margin over the coming years as we become more efficient. Our portfolio is stronger than it's ever been. There were new logos on the slide this morning, and when we come back in six months, 12 months, there will be new logos again. Those hyperscalers want to work with us because we have that network capability. We have that reach into thousands of channel partners, tens of thousands of small businesses, hundreds of enterprise customers, and that quality of service that we're well known for. That's why people wanna work for us, and that solution set will continue to increase.
As I close this morning, as we sit here at the end of Q1 2026, thank you so much to my team back at base for a fantastic 2025. We're looking forward to an amazing 2026 as well. The growth drivers are still there. Bits of the business have been a little bit sticky, but we will move on, and we will continue to grow. Now, normally, at this point, I would hand over to a Q&A, but I need to do something that's super important, which is to thank Mr. Castell for the last four years. Bill, it's been an absolute pleasure working with you. Thank you on behalf of everyone at Gamma, but also thank you on behalf of everyone in this room because you've been very generous with your time.
Everyone here is very, very grateful to you for all the help and support and guidance, literal guidance, that you've given them over the last four years. As Bill sails off into the sunset, we have managed to find somebody else. Damian can't be with us this morning. Many of you will know Damian Moultrie. He started out as an analyst, but, you know, never mind. Some of you will know Damian. As I say, he was an analyst, then he ran IR at BT, and he was a CFO for BT Wholesale and other bits and pieces of BT, and he's been the group FC at LSEG for the last three or four years as well. I'm delighted Damian's gonna come and join us.
I'm gonna go out on a limb and say next time I'm stood up here doing the half-year results, Damian will be very much on board with Gamma and helping me do the results. He apologizes he's not here this morning, but he's got an away day with his current team that he couldn't miss. As I say, many of you will know Damian. You will certainly get to know Damian. I'm very much looking forward to working with Damian as well. With that, I'm gonna say let's go to Q&A, and I shall go and have a sit down. Apparently, I've got to do the far seat, Bill. You've got to do this one. I've got to do the far one.
All right.
Holly's got a microphone if. Oh, there's two microphones. Holly, go on.
All right. Okay. Got it. First go. Couple of questions on market share and revenue growth. In Germany, obviously, you talk about double-digit growth.
Yep.
Of the business you acquired on a revenue basis. Could you be a bit more specific what you mean by double-digit there? Because obviously double-digit's a broad church. Anything from 10%-99%.
Yeah. Closer to 10.
That's what I thought. How does that factor in sort of market share developments? 'Cause
Yeah.
Sort of a related question, the U.K., when you've done that.
In terms of growth, it's around about sort of 13%, 14%, 15% for both Placetel and STARFACE, is what we've been seeing year-over-year.
Against quite a poor macro, Germany.
Yeah. Against quite a poor macro. What that means for market share is we must be increasing market share and I'm sort of struggling to get any third-party data for that. I look at others, without naming others, that are reporting that clearly aren't growing 13%, 14%, 15%, and therefore we must be increasing market share. We think our market share for cloud seats in Germany is pretty similar to the U.K. Sort of, you know, again, 13%, 14%. Just keep coming back to those. It's around sort of mid-teens percent of market share. As I say, just looking at other people's results, we must be growing it because nobody else seems to be growing at that sort of level.
With the organic number you give in the statement for Germany in the notes is 1%.
Yeah.
for the existing business. I mean, what's driven the delta between your own businesses?
Yeah. In the existing German business, there's a very high proportion of mobile in the Epsilon business, which is very high revenue, not particularly high EBITDA, and that is flat. Actually they're doing pretty well keeping that flat. We also had a bit of an issue with our SIP business. Our SIP business went down. If you look at 2024 to 2025, I think I'm right in saying the SIP business went backwards, but actually in the back end of 2025 and certainly into Q1, it's now come back. Candidly, that's just because the guy running it left and has now come back. Therefore the business has kind of taken off again.
If you looked at our existing German business, we had a SIP business, we had a mobile business, it was doing a little bit of cloud.
Yeah.
We've now got two, you know, very strong cloud businesses.
Actually, the underlying business, the one before STARFACE and Placetel was closer to 4%-5% growth is the underlying. Just the nature, as you say. 'Cause the mobile side of things, then clearly as we've got our own software in STARFACE and elsewhere, there was cloud seats being sold by the former business, but the focus is on the new Placetel and STARFACE cloud. There's a natural, if you like, shift across. All other things equal, our kind of underlying German business pre the acquisition probably would've grown more if we hadn't bought STARFACE and Placetel, but the shift went to that cloud communication set.
Right. A more difficult question coming up now. Just in the U.K., obviously difficult to disaggregate what's macro and what's secular. Obviously the market is more concerned about maybe secular issues, but you were pretty confident about growing that 60% penetration. If you could put a figure on how much has macro taken off your U.K. growth, what would your best estimate be?
I mean, I think we've sort of said that the default position. The U.K. SME bit's not gonna get back to double-digit growth anytime soon just 'cause of the market. It should probably be growing about 4%-5%. My gut feel is while the economy, you know, leaving it, parking the PSTN piece for a moment, we've probably lost a couple of percent just because we're seeing price pressure. By price pressure I mean that in its purest sense of people saying, "Can I have the same thing for less money?" Also people spending less.
Therefore, ARPU's coming down because they're not buying some of the adjuncts that we've got. Then we're probably losing another 2%-3% just purely because, you know, it comes back to gross adds are lower than they normally are 'cause nobody's starting a small business. Churn is a bit higher 'cause people are stopping a small business and people are renewing with fewer seats than they were to begin with. If you kinda say the default is probably 4%-5% growth, you knock off about half of that 'cause of pricing, about half of that just because of seats growth.
Is that?
I think, yeah, net adds, you look at the back, the net adds are still growing. You know, yeah, there's this concept that we're still growing our adds. I think exactly what Andrew said. I think the interesting thing we're seeing, which is a positive for us 'cause we've now got a big suite of products. We've got PhoneLine+ at the bottom end at GBP 3.95. Still selling Horizon, you know, and we have Webex now, which was our best launch that we've ever launched, so over 20,000 seats now on that. We've got the whole suite. We're finding people who are starting a business that because of the economic environment is just asking for the cheap, you know, the simple. Webex has got six SKUs. Our PhoneLine+, we've now got three SKUs, i.e.
different levels, but they're still coming in at the entry point. We can move them up if the economy improves, and they're willing to take WhatsApp integration and other aspects. What we're finding compared to maybe when the macro was a bit better, more people are taking the base product than the others, which you're seeing why are the net adds growing, but you're not getting the 3%-4% Andrew was saying. That's partly because they're taking the cheaper products at the moment.
That comment's consistent with the sort of total connections, if you want to add them up, about 4.6, I think, is about the number I guessed. Just so you. Just a final point on that. You're not losing share is the basic summary of that.
I don't think so, no.
No.
Thank you. All right. Thanks.
Okay, I better write this down. Four sections to your questions?
No. I had a few. I'll just keep it to two. Thank you.
No worries.
It's John Corrigan from Deutsche Numis. Firstly, Andrew, I mean, you've had Coolwave Communications since February 2024. Why is it? Have we had to wait for two years essentially before we start seeing some growth? Secondly, Bill, CapEx. Is it possible to get some numerical guidance for the CapEx, not just for 2026 but also for the next two or three years, given all the projects that are going on and
Yeah
in the firm? Sorry. The third one is.
Yeah, here we go.
I'm sorry. The third one is, are you getting the handsets that you need?
Okay
in the volumes that you need? Thanks.
Okay, let's talk about Coolwave. I'm glad you asked the Coolwave question 'cause I think, you know, this kinda comes back to we live in a very regulated world. We bought Coolwave, and we knew what we were buying. We knew exactly what we were getting into. Coolwave had the ability to do numbering in some countries, but it wasn't necessarily what we called fully compliant, and what I think I sort of said earlier on. Yes, you might be able to answer a phone on a French phone number. You might be able to make a call presenting a French phone number. But if you dial, it'd be 112 in France, wouldn't it?
Do you actually go through to the French emergency services, or do you go through to somewhere random? If the French police phone you up and essentially say, "We'd like to, you know, monitor that phone line because, you know, we've got a court order to monitor that phone line," can you oblige them and do that? It's that sort of degree of compliance that you have to have in every country, and that takes time to get. What we sort of haven't done, John, and maybe we could have done and you're never quite sure, is I've not sort of come to you and gone, "You know, we're now in five countries. Now we're in eight countries. Now we're in 11 countries." You know, we're in.
I think you know, I sort of use having the Microsoft Operator Connect badge as being a good, you know, kind of indicator of whether you're compliant or not. I think if you go on the Microsoft list now, we're in 27 countries. It may even be slightly higher, which is why I kinda say nearly 30. It's things like, you know, trying to get I mean, Rachel Arkless is at the back, and I mean, she will throw something at me in a minute because trying to get a license in the Philippines to be able to kinda serve the contact center market in the Philippines has been a painful process, Rachel, has it not? I think it's probably fair to say. Yes. Just getting. Yes, exactly. Getting all the legals and things done.
What we've actually done is we've put somebody in the Philippines and basically said, "You're not allowed to come back into the country until you've got the license sorted out." He's kind of running around getting all that done. These things are hard. In our world, hard is good 'cause it takes a while. If we can kind of build this service out and build it out in some of the countries that are a little bit harder, I think we're building something that's kind of unique. What I now need to do, and I think where you're gonna kinda test me going forward, is we've now built it, and it is build it and they will come. We've now gotta fill it, and we've actually gotta start generating the revenue from it.
That will be the test for us for the remainder of this year and into next year that I'm sure you will hold me accountable to. You can do the other questions.
Great. Yeah, I'll do the other two.
On the CapEx, I know we talked about it, kind of 4%. We're gonna remain capital light. With STARFACE, part of the reason the GBP 24 million is we inherited a couple of CapEx million of CapEx there in relation to their own software 'cause STARFACE is our own software, and we also have our own hardware as well for those who wanna stay on it. To give you a view, I think, you know, we hopefully came across we're comfortable where the market is at on our 2026 numbers. When you look at the CapEx, the market's around GBP 27 million-GBP 28 million. So I can, you know, you can take my general comfort on that, on that side. Going forward, we're not a capital intensive. There's no view on that. We have Cisco, we have Microsoft Teams, Copilot, Cisco.
You know, all of these have their own AI build. They're spending a fortune on R&D, and we get the benefits of that we can offer. We know we're not gonna enter that arms race in relation to it. At the bottom end, Andrew talked about in Germany and others, there's some neat AI receptionists that we can do on that side, which is quite low investment, but a good add-on. To answer your question, there's no intention to suddenly go capital intensive. I'm not gonna tell you how to put your model on that side, but you know, we have been around the 20 mark. We've gone to, you know, with STARFACE and other acquisitions, we're now at 27, 28. I don't foresee us, you know, going much higher than that.
Okay.
Oh, the third one.
Handsets, please, yeah.
Okay. No, it's a good question on the handsets. Interestingly, before the tariff war, I think people are gonna talk about pre and post tariff war. We were conscious actually beginning of the year a lot. There was a lot of conversation around AI and in particular memory and RAM, and some of the supply chain side of that. We took an active decision there, and it's not just handsets, it's racking and switches, to work with the relationships we have got, Cisco and others, to kinda get slightly ahead of the curve, in respect to stock. Just 'cause we saw in COVID and other things, you wanna get your name at the top of the list.
At the moment, as we sit here today, I can't forecast where the world and supply chains. We've been prudent in making sure we stock up a bit more than we would normally do on the working capital, so we can meet the demands. As I said, the pipeline enterprise is strong, and therefore, we know we've got it coming down the line, and we're having no issues at the moment on the stocking side on handsets. Next question you might ask or someone. At the moment, we're not. I know we always talk about have you seen a delayed kind of response from the enterprise space 'cause of the tariff war and everything.
At the moment, we just spoke this morning with our MD. There's one small customer who's mentioned it, but it's not really being mentioned in the dialogue at the moment in respect to kinda delaying of programs and elsewhere at the moment on that side. It's a watching brief, and clearly, we're watching the energy situation just 'cause of the impact that might have on U.K. SME. At the moment, we're not feeling that.
Okay, thank you. Sorry, one last thing. How many hardware-based seats does STARFACE have or did it have at the end of the period, please?
Yeah, that's a good question. We know how many we've sold. Not all of them are under maintenance. We think it's somewhere between about 1.5-1.7 million used hardware seats out there using a STARFACE box.
That's a huge number.
Yes, I know.
relative to what you reported when you acquired it.
Well, if the maintenance is GBP 350,000 , so that's the ones that we can do. If you think historically how many have gone out-
Yeah
now the license has already been paid, so it's not-
Yeah
...coming through. We're getting a return on the maintenance costs of around GBP 350,000 .
Okay. Lastly, Bill, good luck. I will miss your attention to detail and your intensity. I truly mean that. All the best to you.
I'm getting some real-time feedback here, I think.
Thank you.
Thanks. Ollie, yeah.
Thank you. Just a couple of quick ones from me after that avalanche. The first one is just when we're looking at the pipeline for the sales cycle in enterprise, what is the timeline there when it comes to deals? In terms of it would be much longer than SME, but what's the timeline with those deals?
Yeah.
Secondly, you mentioned when you were looking at operational efficiencies, you'd sort of set staff margin targets.
Yeah.
What are those targets? Is it just maintaining it in sort of when the top line's slightly having some challenges? Is maintaining those margins the same, or have you got a higher target?
Yeah. No, it's a good question. In terms of enterprise sales cycle, it is a little bit how long is a piece of string? Because if you look at something like NatWest, which is a new logo for us, that was a Teams deployment, and that was. Well, actually, having said that should have been a relatively short sales cycle, but because of everything that was going on in the world, that probably took about 12 months, I think. Normally a Teams deployment you'd expect to take sort of 3-6 months to kinda go through the sales cycle.
Where we've done things in the past like Morrisons, where you're basically changing their entire network, I mean, that can be up to two years in terms of from the first time that you know, it might not be two years from when the RFP hits your door to it being awarded. But from the first conversations you begin to have that lead to an RFP, it can be that kind of period of time. Now we are, you know, again, we are bidding our first sort of Pan-European business now, and I mean, this stuff just goes on and on and on because it's huge. It's the kinda classic RFP kinda comes out.
Yeah.
Everyone realizes, you know, once the first responses come in, that wasn't necessarily quite what they wanted because they just amend it, so then you're into a rebid. Yeah, it can take a while. Some of the larger stuff can easily be over 12 months, which is why I say, you know, 2025. There wasn't much going on in the first three quarters. The fourth quarter we both won a load of stuff that, but, you know, something like NatWest, for example, got signed in Q4. I think in another year where you'd had a bit more of a stable geopolitical, that would've got signed earlier in the year. And that probably. Well, NatWest will be on a bit earlier, but other things that we sign in Q4 won't be on till the second half.
Bids that were kinda coming in Q4, we probably won't even get awarded them until the second half of this year, possibly even into 2027 in some of them. You know, it's a bit of a waiting game and a patience game.
You have a strong pipeline because you know when renewals are coming out from competitors that you can then look at target, and you're gonna build those relationships over time. With enterprise, which we always go back when you look at the macro, you know, we've grown the business from, you know, GBP 20 million, GBP 30 million revenue-
Yeah
To well over GBP 130 million, you know, since we bought the business back in 2012, 2011. But it's relatively small market share, so you kind of sub-10% with addressable market 4%. There's a lot to go after. In the U.K., that's even before you go into the European-wide and international opportunities. Enterprises, there's significant opportunity.
Oh, James.
James.
Yeah.
On the EBITDA margins.
Oh, sorry.
On the margins.
The EBITDA margins, sorry. Yes. No, absolutely. So I have asked for them to go up. I'm not 'cause if I tell you what I've asked for, there's what I've asked for and what I think is gonna get delivered against what I've asked for, and they're not necessarily quite the same number. But yes, it's not a case of maintaining EBITDA. You know, I think our EBITDA margin should be going up, because, well, it's all the things we talked about. It's rationalization, it's synergies, it's, you know.
Yeah
Offshoring. Yeah.
Yeah. Remunerated on GP as well.
Yeah.
EBITDA and then, you know, when you look at the sales team, they've got their commission structures.
Yeah.
Revenue is important, but also the right gross profit margin, right? 'Cause you can chase revenue quite easily in a low margin. You've got to balance it out, so they know they need to grow GP. James.
Thank you. Yes. I thought I'd just ask about Zoom.
Yeah.
You mentioned it very briefly.
Yes
It'd be good to understand was that inbound? How did that start? If you could just maybe elaborate on that more. Thank you.
Was it inbound? Was it out? I can't quite remember. I think there was a sort of mutual reaching out. You know, without kinda going into it, all of the people that you think we should be talking to, if we are seriously the major kind of European distributor of cloud comms platforms, we are talking to a greater or lesser extent. We've been talking to Zoom for a long time. We got Provider Exchange nailed down last week, which just took far too long on both sides for a whole host of reasons. That will then be orderable on the portal probably towards the end of Q2. I mean, I'm being told it's Q2. I mean, Q2 is like next week, so it's not gonna be then.
Yeah. You know, and we're quite excited about that. We're excited to see what that actually means. That means if you are a Zoom customer and you wanna make and receive phone calls using phone numbers using Zoom, Gamma can now do that for you, whereas we couldn't do that for you last week. You know, the conversation with those guys just carries on as to where that partnership could go.
Gareth.
Hi. Gareth Evans from Progressive. It's good to hear, Andrew, about the plans for the CMD. You sort of hinted about some focus on gross profit and Bill mentioned potentially looking at return on capital, although sadly you won't be here to do that work. That was the hint. I just wonder, are those the main two areas you'll be focusing, or are there other aspects of the business that you might lead us to focus on at that event?
Yeah, I think there's probably a couple of things I want to do. And again, I'll, you know, we'll take feedback on this. Consciously, we haven't done a CMD for a while, I suppose, is the first point. I think there is work that we can do, which I think is primarily focused at you as an analyst community, which is responding to the, you know, I think the quite reasonable point that, you know, you go back 10 years and we used to talk about Horizon seats, and we talked about SIP trunks, and you could model a business that way.
Now we've got more and more cloud platforms and more and more things going on, and we just kinda throw a whole bunch of data at you, and everyone's kinda going, "What am I supposed to do with this, and how am I supposed to model a business?" I think what we'll do is we'll sort of pull away from all of that and say, "Actually, what I think we need to do is just look at the GP that's coming at different parts of the business," because actually it becomes quite difficult. You know, we know we're gonna sell more cloud seats in the U.K., but it's quite difficult to know is that gonna be PhoneLine+? Is it gonna be Webex? Is it gonna be RingCentral? Is it gonna be Horizon? Actually, do we kinda care what it is?
Because the GP per seat is pretty similar on or at least some of those. Maybe we just focus on the GP we make from cloud seats in the UK, and I think we can spend some time together and think about modeling the business that way. As I say, that's mainly kind of very analyst-focused, just getting into the nuts and bolts of how we think about the business internally. I think in terms of, you know, more traditional CMDs that people have asked us about is probably understanding a little bit more maybe about Germany, maybe understanding a little bit more about the service provider business, maybe understanding exactly what is going on in the U.K. SME space. Those are the sort of topics that we're kind of thinking about.
As I say, I think one thing that I am getting, you know, quite a lot of feedback on is just there's a lot of KPIs out there. Your business is now more. So I just wanna kinda simplify all of that down and maybe say that that's how we should think about modeling it. We'll then give you the data to model it, and we can kinda move forward that way, hopefully.
That's great. Sounds good. Thank you.
A question from online.
Oh, I was gonna say.
Well, James, you work for us.
This is James. He works for us.
Yeah. He's gonna ask me a killing question.
James is the one that asks us who asks the questions.
Online, yeah.
Regarding Ethernet price pressures, you mentioned the number of alternative networks now competing to provide fiber. Do you expect this competition to grow bigger as they get scale? Are they just local or also trying to address nationwide tenders?
Well, do you wanna have a go?
I can have a go.
It was probably always going to be you, yeah.
Well, I think, well, you know, first of all, lots of alt-nets out there. We've seen Virgin Media O2 with Netomnia, obviously CityFibre out there, lots of kind of partnerships being formed, Sky, CityFibre. I think it's consolidated. I think it's well known, many of the analysts will have their own view, there's consolidation in the market. I started my career at Goldman Sachs's when NTL and Telewest was stuck. I think we've got this situation where there's been significant investment, I would say overbuild, when you start looking at it, and so at the moment there's been promises made of customers and what they've got and they've built, and the customers haven't fully come because of the overbuild. It comes down to pricing pressures to hit the targets.
I think we're in this spot over the last year, and we're forecasting 2026, hence we talked about the Ethernet pricing, where that will continue. That market will consolidate and then I think over time it will solidify, and there will be, my own view, some players, it's gonna be far less than the number of players that are currently out there. The rural players will probably stay, but the names that probably everyone knows in this market will probably be the one, the main players left, in that. I'll let others forecast that. I think there will be stability at some point, probably not in 2026, but after that in pricing.
Yeah, I mean, I think my take is basically economics. You know, pricing can't go down forever. At the moment, people are trying to fill up networks, and frankly, the reason they're trying to fill up networks is to make themselves more attractive, I think, for people buying them. I mean, all logic would say once that consolidation's happened, and it's got to happen, the pricing has to go back up, otherwise the economics just don't work. We would kind of see it as temporal, but I think to Bill's point, I'm not sure how to. I don't know if that's a this year thing, next year, three years, four years, quite how quickly that consolidation is gonna happen. Consolidation must come. I think we'd all agree on that.
It started with Netomnia.
You know, the pricing has to go up 'cause otherwise the models just don't work. That straightforward.
Good question, James.
Do we have any last questions?
That's it from online.
Okay. Well, thank you very much indeed for coming this morning. Again, we really appreciate it. Again, thank you to Bill for the last four years. Just to leave you with a thought, we think fantastic FY 2025. We're looking forward to 2026 with lots of optimism, particularly taking enterprise outside of the U.K., taking service provider global. Germany's going very, very well, and we think the U.K. is doing pretty well. Certainly once this PSTN switch off comes and goes, we expect the U.K. to return to good growth in 2027 and 2028. Thank you very much indeed for your time this morning. We are probably around for a few minutes.
Yep
If people did wanna chat. Thank you.
Thank you.