So here is the scene: you are on holiday in some distant land, and your partner fails to reappear from a brisk walk around town. Then you get a call. Your partner has been kidnapped – and if you don’t come up with a large brown envelope full of used notes, the consequences will be dire.
It couldn’t happen to you? Don’t be too sure. Kidnapping is on the rise – and not just in bandit states across Africa and South America.
Earlier this month, for example, the police authorities in the Philippines warned against a rise in kidnapping cases as the year winds down. Senior superintendant Isagani Nerez, chief of the Police Anti-Crime and Emergency Response unit, said there was increasing incidence of this particular crime toward the Christmas season.
You might think that such a method of securing funds for the Christmas festivities lacks something of the seasonal spirit. But in fact these kidnappings seem to have more to do with disposing of the competition. “Aside from ransom”, said Nerez, “the usual motive for kidnapping is business rivalry.”
This is just one illustration of a disturbing trend. A few years ago the British insurance company Hiscox estimated that the number of kidnappings around the world was increasing by close to 10% per year. The most realistic estimate of the total number of incidences was around 25,000 kidnappings every year – with Colombia, Brazil and Mexico topping the list.
And this leads me to today’s penny share story.
When military training really pays off
Security is a big industry and these days has a broad scope. Companies such as NCC Group (LON:NCC), for example, are concerned with the security of computer networks. In the physical security arena there are big diversified players such as G4S (LON:GFS). Smaller fry include Westminster Group (LON:WSG) – I have described them in this column before. The is is the place to work if you like sophisticated boys’ toys. Touting armoured cars and James Bond-style surveillance systems, Westminster is largely run by square-jawed ex-army types.
This type of business seems to be a natural home for those leaving the forces. When I met the chief executive of security group Red24 (LON:REDT) I found him towering over me. He looked as if he would like nothing better than to give me a sharp clip with the regimental swagger stick. Maldwyn Worsley-Tonks is a former lieutenant-colonel in the British Army, so I did my best to sit up straight and pay attention.
Red24, Worsley-Tonks explains, is in fact at the ‘soft end’ of the security business. By this he means that it does not, for example, provide bodyguards in Iraq. But it will send somebody along to help out when your partner gets kidnapped.
The comfort of having somebody experienced in such a situation is one part of the service. The other is obviously to negotiate the safe release of the hostage.
These are services that banks and insurance companies are unable to offer. They are determined to extricate themselves from such activities as much as possible. So they turn to the likes of Red24.
The ex-army men doing the banks’ dirty work
Kidnaps are on the rise, Red24 has been helping insurance groups sort them out – while also holding the hand of travellers who get into difficulties in remote countries. “Students and missionaries are the worst”, says Worsley-Tonks.
But it’s also seeing a thriving business in another problem area for banks and insurance groups – identity theft. Online fraud – ranging from identity theft to credit-card abuse and organised crime – cost the global economy £52bn last year, according to research house Global Uncertainties.
Along with a training division, Red24 is now making decent money as the ultimate provider of some of these services offered by banks and insurers. It has long term contracts with the likes of HSBC and AIG travel Assist, and believes that there is plenty of scope for organic growth.
Broker Seymour Pierce is predicting earnings per share of 1.4p in this financial year, so at 8.75p the shares, which pay a dividend, are hardly on an expensive rating. It looks like a smart way to make the best of a bad situation!
• This article was first published in Tom Bulford’s twice-weekly small-cap investment email
The Penny Sleuth.