Red24 Share Discussion Threads

[davidosh] 23/9/2013 18:07

REDT were one of the top performers in the SLINKY list....

[pjhutchy] 23/9/2013 17:50

Looks like we are on a well deserved break out. May add tomorrow

[norbert colon] 18/9/2013 19:58

Yes, I noticed that - either a fall back to 12 - 13p (as normal) or a move to 20p - hopefully the latter for once.

[pjhutchy] 18/9/2013 18:53

We could break out nicely soon.

[davydoo] 07/8/2013 10:47

Thank you Sladdjo

'The end game, if goes well, would be for Redt to take over Linx'

This is exactly what I had hoped when i saw the deal for Arc. Seems a very low risk way to pursue a takeover. Another sign of the management prudence i see.

Hopefully any takeover will also help to address the other point you mentioned re institutional purchasers

'small amount wouldn't move their (the funds) respective values'

I often hear £50m cited in the fund management industy as an entry point, so some way to go yet.

[integer] 06/8/2013 17:23

sladdjo - thanks for the AGM feedback, couldn't make it to the meeting myself this year. Looks very promising.

[sladdjo] 06/8/2013 16:23

Notes from today's AGM:

As mentioned in the update this morn, ytd trading going well and ahead of expectations, but mainly due to response work. REDT has recently signed a number of small contracts, but nothing material and hence hasn't published an RNS on them.

The resolution to repurchase 500,000 shrs is mainly for staff who wish to sell their shares and is there in case the market can't take them. However, Maldwyn noted as an aside that several institutions had looked at Redt and liked the story, but weren't prepared to purchase shares on the market as they small amount wouldn't move their (the funds) respective values. So there may be an opportunity to directly link staff sales to investors, if the numbers match.

David Gill was present and spoke about the tie-up between Redt and Linx. He feels that Ark and Perpetuity (Linx's training program) are 2 of the largest security training programs, altho their mrkts don't overlap much. Hence he hopes to combine them, maintaining their respective names/brands but creating efficiencies throu economies of scale. Also notes that Linx is similar to Redt in that it provides Crisis Mgmt to large comps (in particular Weetabix, Samsung & Royal Mint) and hopes to make resources available to Redt. The end game, if goes well, would be for Redt to take over Linx.

[rp19] 06/8/2013 12:29

Positive update, longer term prospects look good.

[mctmct] 01/8/2013 09:49

Agreed. Strategic and tidy.

[davydoo] 01/8/2013 07:12

At first sight seems a clever deal.

[rp19] 16/7/2013 13:27

Nice move up today. AGM Statement due Tue 6th Aug.

[battlebus2] 13/6/2013 11:38

Many thanks davidosh and once again sorry for the o/t.

[davidosh] 13/6/2013 11:36

Matthew Boulding from SAL was the last one to present although originally scheduled to be first one up he was unavoidably delayed. He had spent 7 hours waiting in Palma airport due to the French air traffic controllers strike so you would expect him to be jaded but he performed well. There will be a full report in the Pub shortly.

All four presentations and quality of companies and Q&A that followed were top drawer last night I thought. The room was nearly full with about 55 in attendance.

[battlebus2] 13/6/2013 10:19

Thanks davydoo.

[davydoo] 13/6/2013 10:12

Sorry battlebus I had to leave before SAL presented

[battlebus2] 13/6/2013 09:38

Sorry for the off topic but could some attendee post a review of SAL on that thread, many thanks.

[davidosh] 13/6/2013 09:20

Excellent review of the presentation David....Can you post on TMF too ?

[davydoo] 13/6/2013 08:51

I don't know GHF unfortunately I wasn't able to stay until the end and catch up with anyone from Finncap.

[glasshalfull] 13/6/2013 07:23

Much appreciated davydoo.

I'm also fairly informed re. the business but there were a few nuggets I took from your post and concur that the HSBC extension should have been RNS'd. Surely a material transaction?

I've not had sight of finnCap's forecasts in light of results. Any mention on whether they have altered forecasts of 1.6p EPS for this year. I'd have hoped that they might have been nudged up to 1.7p on basis that they should achieve 10% organic growth & tax a non-issue in respect of EPS going forward.

Thanks for taking the time to update.

Kind regards,
GHF

[davydoo] 13/6/2013 06:45

I attended the Red24 presentation at Mello last night and had a chance to talk afterwards with the chairman and major shareholder Simon Richards. My thanks to davidosh and the other organisers for an excellent event.

The CEO Maldwyn Worlsey Tonks gave the presentation, thankfully he focused on the business and not the numbers as these were available for all to see from Tuesday's results and have already been well summarised here by Glasshalful

My perspective is from that of a shareholder of 3 years, I would be very interested to hear from anyone who attended last night who was new to Red24.

-The company is repositioning itself towards 'crisis management assistance' and away from security. This fits with its growing portfolio of food, recall and environmental services and is intended to distance themselves from market perceptions of security as guarding, physical locks etc.

-Advice Support Response. This was described as the model to build products for clients. I understood this as a someone who knows the company, but im not sure this would have come across well to a potential investor just asking 'so what do you do?' ultimately red24 are a small company but doing many things in many places. One minute they talked about 1.5m HSBC customers the next hiring 1 person to run a new product. Id be interested to hear how this came across to potential investors.

-Talent. Described the approach to in source talent, build a service, retain global contractors and roll out to underwriters. Interestingly theyre being asked by insurers to do things, and then taking it to other insurers. Whilst intuitively insurers wanted exclusivity they subsequently realise they get a better service and price if shared with other insurers. In a market where competence and confidence must be crucial this bodes well for future services.

-HSBC. Confirmed significance of contract extension.(warranted a standalone RNS I think) 20% of current revenues, down from a previous high of 50%, which is testament to the growth in other areas. Implied 4 year extension which I presume means the 1 plus 3. HSBC pay monthly in advance. Now an 8 year long relationship (boy did HSBC take a risk previously) and are looking at introducing to other countries.

-Security response. (£1.2m revenue in 2012, £568k in 2013) is only budgeted for modestly as they have no control over events. Interestingly what I had assumed was Arab Spring related response revenue in 2012, was actually largely achieved from Mali (pulling people out, in and out again of gold mines) and DRC. Although they still got 400 people out in the Arab spring. Growth forecasts from Finncap may appear modest but at least can be beaten by any increase to response work. This is much better than warning the market because no events occurred. One of many prudent measures I sense throughout the management.

-Acquisitions being considered however I would suggest unlikely in short term, the process of in sourcing niche talent to run a new product line and then expanding it to many underwriters seems to be working and they see further opportunities this way.

-Cash. £2m might seem idle to a small cap promising growth, but for me another sign of the prudence of management. £1m is needed as a cash reserve to prove to insurers they have the financial capacity to respond and meet obligations. e.g. Chartering a plane to go into Syria needs paying before they'll take off whereas the insurer may take many months to pay back to red24 as part of the claims process. Although they've hired credit controllers in an attempt to improve receiveables. Also a poor financial position in the past has caused them to fail due diligence from major banks/credit card/insurers. This is understandable, and I feel that the 5 year track record they now have will be significant to winning new contracts.

-Green24 yet to add revenue, however it has very low overheads (1 person) and they intend to continue for at least another 18 months. Described the low intensity of managing an environmental website where articles can be valid for a long time compared to a security website where changing situation may make information only useful for a few hours. They are seeing growth in environmental consultancy work. I always expected Green24 to work this way, not as a website with a subscription revenue, but as a back up to credibility in the environmental space. An environmental crisis is much like a food recall or KRE event, it is the management and response skills that are needed.

-Major contracts. Fascinating to understand more about the way they contract. HSBC pay a fixed fee for an all inclusive service. AIG pay a retainer, and then pay again if response is required. This is potentially a big risk for Red24, they are in effect acting as insurers themselves and have to cover the risks and costs of 1.5m HSBC customers. Thankfully HSBC premier customers on the whole are not a wild bunch, so its more like the odd police altercation in Bangkok than kidnaps in Somalia.

-EPS. Simon confirmed the limited growth in EPS due to the increasing tax charge. This is nearly exhausted and so they expect any future rise in profit to be fully reflected in a rise to EPS. I think its important to understand this now, will future analysts or private investors look deep enough? or just see a stalled and then rising eps.

-Arc Training. Only mentioned briefly, I suspect its largely stand alone, described the limited 20% margin compared to other business areas. I did wonder whether it could be sold, however it delivers a consistent revenue stream and I suspect supports the wider credibility of the firm, and keeps them very well connected. How many people out there managing the security of major organisations must've been through an Arc course? it would be hard to measure, but one of those 'dividends' you don't see on a P&L.

-Employee Share Plan. Afterwards I suggested to Simon they should make more of this to investors. They have a deep employee share ownership going back many years. Something that I have never seen in other micro caps and is worth shouting about.

-Timing. This to me is the most significant prospect for Red24 now. The financial position should no longer scare off any decent due diligence. This might've taken 5 years but they haven't stopped talking to potential clients (only so many big banks/credit cards/insurers out there) when a credit card offer an added service/benefit to members they don't do so lightly, and usually do so for at least 3-5 years. This means even if a red24 service is liked they may have to wait until next review of added services in many years time to do a deal.

I'm sure there's more I can add, I will if I think of anything significant. apologies for any typos/errors, it's still early.

I hope its useful and very interested to hear comments from other attendees

[integer] 12/6/2013 23:52

any feedback or insight from the RED24 session at Mello tonight?

Unfortunately I could not attend.

[glasshalfull] 11/6/2013 22:22

Snapshot

Price 14.37p
Shares in issue 49 million
Current market cap £7 million
Net Cash £1.6 million (following £800k spend on acquiring freehold of their Cape Town office)
EV £5.4million

Net Cash position:-

2009 - £328k
2010 - £938k
2011 - £1.2 million
2012 - £2.07million
2013 - £1.6 million*

H1 2013 saw REDT purchase freehold of their S African HQ for £800k & removing £80k annual rental payment.

Progressive Dividend:-

2009 - nil
2010 - 0.15p (maiden dividend)
2011 - 0.24p (+60%)
2012 - 0.32p (+33%)
2013 - 0.4p (+25%)

and 0.2p dividend announced today (technically Final dividend for 2013) as they move to interim & final dividend payouts for 2014

5- years profitable growth:-

PBT

2009 - £537k
2010 - £628k (+17%)
2011 - £742k (+18%)
2012 - £863k (+16)
2013 - £940k (+9%)

EPS growth affected by utilisation of tax losses, with tax showing incremental increase each year:-

EPS (diluted)

2009 - 0.95p
2010 - 1.4p (47% growth) - nil tax
2011 - 1.50p (7% growth) - 2.4% tax
2012 - 1.53p (1.5% growth) - 13.5% tax
2013 - 1.54p (-) 19.4% tax

Also worth pointing out that the company has not had recourse to the market to raise funds in the last 5 years and have focused solely on organic growth.

One of my main concerns was alleviated today with news that the HSBC contract is tied up until 2017. I believe that the AIG and HSBC contracts amount to c.£2m per annum. This underpins the growth ambitions of the company and move into other markets such as the cyber-crime service for insurers, where they remarked having went live with their first insurer in April 2013.

Outlook was also very positive & I'll be interested to see finnCap's forecast in light of these strong results.

Well done to davidosh in organising an investors presentation and we PI's owe him a debt of gratitude for his sterling efforts in bringing these events together.

Unfortunately I cannot attend & recognise I'll be missing an excellent opportunity to meet the RED 24 team and hear of their plans. Hope some PIs from the thread can attend and as always would appreciate any feedback or perhaps broker note (many of you have my email) & any change to previous forecasts if anyone is in a position to report back.

Regards,
GHF

[davidosh] 11/6/2013 20:14

It can be quite close to the wire sometimes. I knew REDT were hoping to get their results out for today but Accumuli ACM who were also invited to the event cannot now present as their results will be next week. I have therefore had to replace them with Anpario at short notice.

[davydoo] 11/6/2013 19:57

Really glad the results were out a day before their Mello attendance. Will hopefully mean they can talk freely. Always depressing when questions are answered with a stock blackout period reply. Well coordinated davidosh.