TIDMREDT
RNS Number : 9298E
Red24 PLC
09 November 2015
RED24 PLC
HALF YEARLY REPORT FOR THE SIX MONTHS TO 30 SEPTEMBER 2015
Red24 plc ("red 24" or the "Group") is pleased to announce its
unaudited results for the half year to 30 September 2015.
Highlights:
-- Acquisition of RISQ Worldwide completed 1 July 2015 and trading ahead of expectations
-- New travel assistance clients replace 75% of the revenues
lost with HSBC including contracts with Allianz and other major
businesses
-- Significant investment in US based product safety team and launch of red24 Academy
-- Loss of HSBC revenues and lower levels of Response activity
held back revenues to GBP2.96 million (H1 2014: GBP3.27 million),
down 10%
-- Profit before tax decreased by 29% to GBP346k (H1 2014:
GBP487k) impacted by the above and loss on foreign currency hedging
activities
-- Earnings per share decreased by 33% to 0.55p (H1 2014: 0.81p)
-- Interim dividend of 0.25p, a 9% increase
Simon Richards, Chairman, commented:
"In many ways this year was always going to be challenging for
red24 and, whilst we have made great strides in replacing our lost
HSBC revenues with new contracts with Allianz and others, we have
also faced a tough comparable period in which we gained from
particularly strong Response activity in Libya.
In other ways the first half has been hugely exciting and has
established important growth drivers for us going forward; we
completed the acquisition of RISQ which is performing strongly,
invested in the development of our US based Product Safety Team and
launched the red24 Academy.
This level of investment may hold back the results in the short
term but places us on a firm growth path for the future. Our
confidence in these plans underpins our decision to increase the
interim dividend by 9%."
An interview about these results with red24 Chief Executive
Officer, Maldwyn Worsley-Tonks, can be accessed here:
http://brrmedia.co.uk/event/140682?popup=true
Enquiries:
Red24plc Tel: 0203 291 2424
Simon Richards, Chairman
Maldwyn Worsley-Tonks, Chief Executive Officer
finnCap Tel: 0207 220 0500
Julian Blunt, Corporate Finance
Tony Quirke, Corporate Broking
Yellow Jersey PR Ltd Tel: 07768 534641
Philip Ranger, Aidan Stanley
Notes to Editors
red24 is a crisis assistance company that provides a range of
security and business support services, offering preventative and
reactive advice to help organisations and individuals to avoid or
manage security and business risks to themselves, their families
and their businesses. Its products and services are distributed
through leading international financial service companies.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present our half year report, which shows the
significant investment we have made to build the medium term
success of the business. I am also pleased to announce an increase
in our interim dividend to 0.25p which will be paid on 25 February
2016 to those shareholders on the register at 29 January 2016.
Financial Overview
Our last full year results, reported on in June, exceeded
expectations as we responded to the news of the loss of the HSBC
contract by cutting costs rapidly and by putting resources into
diversifying the customer base. As a result we enjoyed the last few
months of revenue from HSBC with few of the costs, while
profitability for that period was further enhanced by some currency
gains.
The first half of this year saw our revenue from HSBC drop by
GBP600,000 compared with the first half of last year, and,
likewise, saw a lower level of Response activity than the prior
year which saw a major evacuation event in Libya producing over
GBP500,000 of revenue. Against this background the overall revenue
decline of just 10% to GBP2,957,000 (2014: GBP3,269,000) was
creditable and shows we are making significant strides in
developing other sources of business.
The impact of the above on profit before tax was pronounced, due
to the fixed cost nature of our Crisis Response and Management
Centre in Cape Town, and to the low level of variable cost
associated with the HSBC contract. In addition we were adversely
affected by a GBP100,000 loss on Rand/Sterling currency hedging
activities during the first half, As a result, profit for the half
year has fallen by 29% to GBP346,000 from GBP487,000.
The first half saw a three month first time contribution to
revenue and profits from the RISQ Worldwide acquisition which was
completed on 1 July 2015. RISQ has bedded in well with our other
activities in the Asia Pacific region. The costs of the acquisition
have been expensed.
Late in the first half we undertook significant investment in
the business with the recruitment of a US based Product Safety team
and the launch of the red24 Academy. Whilst both are expected to
boost sales in the medium term, their associated costs have had
some impact on the first half.
Earnings per share were further affected by a relatively high
tax charge due to an increase in the proportion of our profit
earned in South Africa, where the tax rate is 28%. This is slightly
mitigated by the purchase of shares in the company by the Employee
Benefit Trust in the last financial year. The Trust now holds
1,050,000 shares and this serves to reduce the number of shares in
issue for the purposes of the earnings per share calculation.
Net cash has decreased by 16% following the acquisition of RISQ;
although the receipt of the second installment from the sale of our
interest in Linx has offset some of this investment. The balance
sheet continues to be strong and provides a sound basis for taking
advantage of any other suitable acquisition opportunities that may
arise.
Outlook and risks
The prospects for future revenue growth look brighter than they
have for some years and we anticipate significant medium term
growth in revenue from our acquisition of RISQ, from our new
product safety team in the USA and from our partnership with
Allianz. However, in the short term, the recent investment we have
made in our business is likely to continue to impact on the current
year profitability. Notwithstanding this, our confidence in the
future prospects of red24 are borne out by today's dividend
announcement. The business continues to perform steadily, the
balance sheet is strong and the Board considers that the appraisal
of key risks and uncertainties contained in the full year report
remains valid.
Staff and Board
The Board continues to be grateful to staff for their industry
and application and they remain crucial to the quality of service
provided and to creating an environment where we can attract good
quality people to work for us.
Simon Richards
Chairman
9 November 2015
CHIEF EXECUTIVE'S REPORT
I am pleased to report that, in this half year we have made
significant advances in meeting our strategic objectives for the
medium term growth of the business. On 1 July we completed the
acquisition of RISQ Worldwide, a Singapore based investigations
business and its results, which are included here for the three
months after acquisition; a quarter in which it contributed
GBP285,000 of revenue and a 9% pre-tax profit on that revenue.
Organically our travel assistance business has won a significant
number of new clients and this has replaced 75% of the lost HSBC
revenue.
Business model
The heart of the red24 business model is our 24/7 Crisis
Response Management Centre (CRM) in Cape Town. This state of the
art response centre is staffed 24 hours a day, 365 days a year by a
dedicated team of multi-lingual customer service representatives,
regional analysts and experienced security professionals. The
centre enables our experts to give accurate impartial, up to the
minute information and advice to our clients. Across the group
clients are offered escalating levels of assistance that are
appropriate to the threat they face.
Travel assistance
Our travel assistance service has been significantly enhanced by
the investment in our travel tracker product, which has placed it
onto a new technical platform that will make it both easier to
interface with new clients and with new travel data-bases. The
product was launched at the business travel show in London in
February 2015 and met with a most encouraging response from FTSE350
companies and higher education establishments. We think that this
will assist materially in ensuring that this revenue stream is
maintained in 2016, notwithstanding the loss of business from
HSBC.
In this period, gaining contracts with Allianz has been a
significant development and has opened a large potential market for
our travel services and 2016 should see a significant increase in
our travel assistance business across the globe.
In October 2015 we launched our on-line training platform, the
red24 Academy. Initial modules are aimed at the business traveler,
but the platform is capable of supporting training requirements
across all our revenue streams and suitable courses will be added
as they receive appropriate external accreditation.
We were pleased to be awarded the title of Risk Management Firm
of the Year, 2015, by Finance Monthly and believe that the period
under review has seen our reputation continue to grow.
Special risks
Our special risks business had a quiet half year and dealt with
few significant incidents We continue to publish our respected
"Threat forecast" and have added new books of business over the
year. The office we set up in Munich, primarily to service this
unit, has created a number of promising opportunities, and has
brought on books of business with German insurers and opened sales
channels to their clients.
Consulting and response
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:00 ET (07:00 GMT)
Throughout the year this unit has been busy with requests for
close protection work and for evacuation planning services. Last
year a Far Eastern client requested a large evacuation from Libya
involving several hundred of their staff. This was successfully
completed and remains our largest operation to date, generating
revenues a little in excess of GBP500k. This year, the largest
response to date has been in Nepal, following the earthquake, and
this produced revenue of GBP210k.
Product safety
Red24 Assist our product safety brand has had a busy half year
and this is expected to accelerate in the second half year
following the recruitment of a US product safety team to provide
additional resource to US insurers and to provide capacity to
service the business to business market there. In the summer we
responded on a serious food contamination case for a manufacturer,
not through an insured incident, and we believe there is
significant opportunity in helping food businesses manage their
product safety risks.
Investigations
The acquisition of RISQ Worldwide, which was completed on 1
July, has brought with it an improved geographic coverage to the
group and an increase in our range of services. RISQ specialises in
Employee Vetting and Business Investigations as well as supporting
our consulting and response business. Both these specialisms had
busy quarters and there appears to be significant demand for our
services from European companies investing in Asia, where we have
been marketing these in conjunction with Allianz. RISQ moved to
larger premises in May and have taken on additional staff to manage
this work, benefiting from the increased working capital that the
group can make available.
Results
The CRM represents a substantial investment and a relatively
high fixed cost with the result that the gain or loss of a major
contract makes a significant difference to our overall
profitability. This half year is the first in over ten years where
we have not had a contract with HSBC to underpin a significant part
of this fixed cost and this has led to a short term dip in
profitability.
Looking forward
The addition of RISQ, the addition of a new product safety team
and the addition of Allianz as a major client offer significant
growth opportunities to the group over the next two to three years
and we are enthusiastic about the prospects for the business over
that time horizon. We are confident that steps taken to mitigate
the short term dip in revenue from the loss of the HSBC contract
will result in a far stronger and more diversified group in the
medium term.
Maldwyn Worsley-Tonks
Chief Executive
9 November 2015
Key performance indicators
The key performance indicators for the group are those that
communicate the financial performance to shareholders and are
summarized as follows:
Six month periods 2015 2014
GBP'000 GBP'000
Financial
Revenue 2,957 3,269
Gross profit 2,164 2,302
Profit before
tax 346 487
Available cash 2,877 2,421
Earnings per
share (pence) 0.55p 0.81p
Dividend per
share (pence) 0.25p 0.23p
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 September 2015
Unaudited Unaudited
6 months 6 months Audited
ended ended 12 months
30 September 30 September ended
Continuing operations Note 2015 2014 31 March
GBP'000 GBP'000 2015
GBP'000
REVENUE 4 2,957 3,269 5,947
Cost of sales (793) (967) (1,529)
GROSS PROFIT 2,164 2,302 4,418
Administratve expenses (1,814) (1,805) (3,341)
OPERATING PROFIT 350 497 1,077
Net finance expense (4) (10) (11)
PROFIT BEFORE TAXATION 346 487 1,066
Income tax expense 2 (81) (93) (178)
-------------
PROFIT FOR THE PERIOD
attributable to the
owners of the parent 4 265 394 888
------------- ------------- -----------
Earnings per share 3
Basic 0.55p 0.81p 1.83p
------------- ------------- -----------
Diluted 0.54p 0.80p 1.82p
------------- ------------- -----------
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
6 months 6 months Audited
ended ended 12 months
30 September 30 September ended
2015 2014 31 March
GBP'000 GBP'000 2015
GBP'000
Profit for the
period 265 394 888
Other comprehensive
income for the
period net of
tax
Revaluation of
property - - 19
Currency translation
differences (102) (18) (3)
Total comprehensive
income for the
period net of
tax 163 376 904
--------------- ----------------- -----------
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 September 2015
Unaudited Unaudited Audited
30 September 30 September 31 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
Note
ASSETS
NON-CURRENT ASSETS
Intangible assets 5 1,429 351 432
Property, plant
and equipment 660 713 756
Deferred tax asset 49 36 51
Trade and other
receivables 4 8 6
2,142 1,107 1,246
----------- ------------- ---------
CURRENT ASSETS
Trade and other
receivables 1,195 1,482 905
Cash and cash equivalents 2,877 2,421 3,418
4,072 3,903 4,323
----------- ------------- ---------
Assets held for
sale 125 250 250
TOTAL ASSETS 6,339 5,260 5,819
=========== ============= =========
CAPITAL AND RESERVES
Called up share
capital 490 490 490
Share premium account 224 224 224
Other reserves (80) (34) (80)
Retained earnings 3,759 3,239 3,623
Valuation reserves (83) (15) 19
EQUITY ATTRIBUTABLE
TO OWNERS OF THE
PARENT 4,310 3,904 4,276
----------- ------------- ---------
NON-CURRENT LIABILITIES
Deferred tax liabilities 130 5 44
Other payables 393 - -
Borrowings 174 220 215
697 225 259
----------- ------------- ---------
CURRENT LIABILITIES
Trade and other
payables 1,153 992 1,180
Corporation tax 162 122 86
Borrowings 17 17 18
1,332 1,131 1,284
----------- ------------- ---------
TOTAL EQUITY AND
LIABILITIES 6,339 5,260 5,819
=========== ============= =========
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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For the six months ended 30 September 2015
GBP'000
Share Share Other Retained Valuation Total
capital premium reserves earnings reserves
Balance at 1 April
2015 490 224 (80) 3,623 19 4,276
Comprehensive
income
Profit for the
period - - - 265 - 265
Other comprehensive
income - - - - (102) (102)
------------ ------------ ------------ --------- ----------------- -----------
Total comprehensive
income - - - 265 (102) 163
------------ ------------ ------------ --------- ----------------- -----------
Transactions with
owners
Dividends paid - - - (129) - (129)
Total transactions
with owners - - - (129) - (129)
------------ ------------ ------------ --------- ----------------- -----------
Balance at 30
September 2015 490 224 (80) 3,759 (83) 4,310
============ ============ ============ ========= ================= ===========
GBP'000
Share Share Other Retained Valuation Total
capital premium reserves earnings reserves
Balance at 1 April
2014 490 224 54 2,936 3 3,707
Comprehensive
income
Profit for the
period - - - 394 - 394
Other comprehensive
income - - - - (18) (18)
------------ ------------ --------- --------- ----------------- -------------
Total comprehensive
income - - - 394 (18) 376
------------ ------------ --------- --------- ----------------- -------------
Transactions with
owners
Dividends paid - - - (112) - (112)
Purchase of own
shares - - (71) - - (71)
Share based payments - - (17) 21 - 4
------------ ------------ --------- --------- ----------------- -------------
Total transactions
with owners - - (88) (91) - (179)
------------ ------------ --------- --------- ----------------- -------------
Balance at 30
September 2014 490 224 (34) 3,239 (15) 3,904
============ ============ ========= ========= ================= =============
GBP'000
Share Share Other Retained Valuation Total
capital premium reserves earnings reserves
Balance at 1 April
2014 490 224 54 2,936 3 3,707
Comprehensive
income
Profit for the
period - - - 888 - 888
Other comprehensive
income - - - - 16 16
-------- -------- --------- --------- --------- -----------
Total comprehensive
income - - - 888 19 904
-------- -------- --------- --------- --------- -----------
Transactions with
owners
Dividends paid - - - (222) - (222)
Purchase of own
shares - - (122) - - (122)
Share based payments - - (12) 21 - 9
-------- -------- --------- --------- --------- -----------
Total transactions
with owners - - (134) (201) - (335)
-------- -------- --------- --------- --------- -----------
Balance at 31
March 2015 490 224 (80) 3,623 19 4,276
======== ======== ========= ========= ========= ===========
UNAUDITED CONSOLIDATED CASH FLOW
For the six months ended 30 September 2015
Unaudited Unaudited
6 months 6 months Audited
ended ended 12 months
30 September 30 September ended
2015 2014 31 March
GBP'000 GBP'000 2015
GBP'000
Operating activities
Profit before tax 346 487 1,066
Adjustments for:
Investment income (7) (2) (13)
Finance costs 11 12 24
Depreciation & amortisation
charges 93 34 99
Share based payments - 4 9
Exchange losses 4 12 14
Income tax expense (81) (125) (223)
(Increase)/decrease
in receivables (101) (236) 355
(Decrease)/increase
in payables (464) 140 311
Net cash (outflow)/inflow
from operating activities (199) 326 1,642
------------- ------------- -----------
Investing activities
Interest received 7 2 13
Purchase of intangibles (79) (92) (217)
Purchase of property,
plant & equipment (19) (17) (46)
Purchase of subsidiary
net of cash acquired (195) - -
Trade investment
sale 125 122 122
Net cash (outflow)/inflow
from investing activities (161) 15 (128)
------------- ------------- -----------
Financing activities
Own shares purchased - (71) (122)
Dividends paid (129) (112) (222)
Interest paid (11) (12) (24)
Bank loans repaid (9) (9) (19)
Net cash outflow
from financing activities (149) (204) (387)
------------- ------------- -----------
Net change in cash
and cash equivalents (509) 137 1,127
Cash and cash equivalents
at beginning of
period/year 3,418 2,303 2,303
Effect of foreign
exchange rate changes (32) (19) (12)
Cash and cash equivalents
at end of period/year 2,877 2,421 3,418
============= ============= ===========
Notes to the unaudited financial information:
1. Accounting policies
Basis of preparation
This report was approved by the directors on 9 November
2015.
From 1 April 2007, the Group has adopted International Financial
Reporting Standards ("IFRS") and the International Financial Report
Interpretations Committee ("IFRIC") interpretations in the
preparation of its consolidated financial statements.
The financial information for the six months ended 30 September
2015 is unaudited and does not constitute statutory accounts within
the meaning of Section 435 of the Companies Act 2006. Statutory
accounts for the year ended 31 March 2015 on which the auditors
gave an audit report that was unqualified and did not contain a
statement under Section 498(2) or (3) of the Companies Act 2016
have been filed with the Registrar of Companies. The results for
the year ended 31 March 2015 disclosed in this report are an
abridged version of the company's audited financial statements. It
does not constitute the Financial Statements for that period.
Copies of the statutory accounts may be obtained from the Company
and are also available on our website at www.red24.com .
Principal accounting policies of the Group
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