Company confirm potential for "significant impact" on earnings
Companies: Red24
Red24 (AIM: REDT) put out a disappointing update today warning of operational setbacks including a key client loss, as well as recent currency moves significantly impacting earnings.
Trading in Singapore has been "disappointing" as Red24 cites the reduced level of recruitment activity in the region. Less recruitment leads to less due diligence work for the Group.
The Travel Safety division has experienced setbacks despite Red24's partnership with Allianz belatedly bearing fruit:
"... red24 has also experienced one unexpected key client loss in this part of the business and one long running contract has now expired."
The loss of a key client and a long-term contract has "impacted overall margins" but on top of this the 30% rise in the South African Rand and the 17% rise in the Singaporean Dollar versus GBP since the Brexit vote have had a further material impact on margins. Much of the Group's costs are in those currencies and the impact is "materially affecting red24's cost base".
"If this currency situation persists for the rest of the financial year, there will be a significant impact on red24's earnings."
"The overall revenue mix of red24's business which is becoming more episodic and less based on long term customer relationships, coupled with an uncertain currency outlook provide grounds for caution as to the outlook of red24's financial performance for the full financial year to 31 March 2017."