Full-year results from the Human Screen

How many years of feast follow a famine? red24 has been feasting for four, then again the famine lasted nine years.

Highlights

• Adjusted operating profit up 18%
• Return on tangible assets: 24%
• Adjusted net profit of ''776,089 compared to net cash flow of ''1.1m (''1.1m after net capital expenditure)
• Net cash flat up 73% at ''2.1m (''1m approximate capitalised operating lease commitments of ''1.1m)
• Per-share dividend up 33%

The Human Screen comments:

The Human Screen is a sample of one, so you should treat his observations accordingly, but back when his home was insured by Hiscox, he was a perplexed customer of red24.

He’d engaged Hiscox to replace his possessions should they be nicked, or more likely considering the weather this summer, washed away in a flood. Bundled with his insurance policy was a dedicated hotline offering information on the security situation in 130 countries, and, should he find himself at the mercy of criminals or terrorists, the hotline would help.

Had a red telephone actually been installed in the Human Screen’s house he might have used it, but instead he saw red24 as another sign that Hiscox’s insurance policies, which target the affluent, were more than he needed.

It must have some happy customers though as red24 has strung a sequence of four profitable years together since it dispensed with its chief executive and nearly half and the current ceo, Mal Worlsey-Tonks took charge.

His streak put an end to nine years of losses following red24′s formation in 1999.

As well as providing travel and security services to banks and insurance companies red24 provides companies seeking protection for their employees and businesses with services from training and risk assessments, to close protection, crisis management and evacuation.

During the Arab Spring, the company ‘extracted’ 400 people, so there is more to than a ‘phone line.

Growth in earnings per share has been held back by increasing tax charges as red 24′s tax bill normalises after the years of losses, which may mean the company’s underlying growth is not apparent to some investors (the kind that doesn’t read the annual report) but the Human Screen is concerned about red24′s dependence on two key customers, HSBC and AIG, mentioned in successive annual reports:

…the dependence on one or two key accounts for a significant proportion of our revenue remains a key risk but the Board is endeavouring to reduce this risk by broadening the customer base.

If he can get past that, he thinks it’s a bargain on an unlevered post-tax earnings yield of 17.5%

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