Company Announcements

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RA INTERNATIONAL GROUP PLC

("RA International" or the "Company")

Interim Results for the six months to 30 June 2021

RA International Group plc (AIM: RAI), a specialist provider of complex and integrated remote site services to Humanitarian, Governmental and Commercial organisations globally, is pleased to announce its interim results in respect of the six months ended 30 June 2021.

HIGHLIGHTS

Soraya Narfeldt, CEO of RA International, commented:

"Our financial performance for the first half of the year, with revenue and profitability in line with market expectations, is a resilient performance given COVID-19 uncertainty has remained across our markets. We are cautiously optimistic and starting to see encouraging signs that the business environment is improving; depending on timing, this could boost our second half performance, but in any event should bridge to a stronger 2022.

What is less apparent in the numbers we are reporting today is the progress we are making in building a stronger business year on year.  This becomes clear when you consider the significant projects we are winning including Danakali, Cherokee Nation, and USAID. We also have visibility on future contract wins which we see as highly likely we will secure. By the end of this financial year, based on current contract pipeline, we could more than offset the reduction in our order book which we have made in light of the ongoing situation in Mozambique. To not only replace a contract of this scale but to deliver growth would be a real barometer of the success of our strategy, our business development activity across all our customer segments and our reputation as a trusted partner for global, blue-chip organisations. We look forward to updating investors on our progress throughout the second half of the year."

Notes to summary table of financial results:

Enquiries:

Background to the Company

RA International is a leading provider of services to remote locations. The Company offers its services through three channels: construction, integrated facilities management and supply chain, and services three main client groups: humanitarian and aid agencies, governments and commercial customers, predominantly in the oil and gas and mining sectors. It has a strong customer base, largely comprising UN agencies, western governments and global corporations.

The Company provides comprehensive, flexible, mission critical support to its clients enabling them to focus on the delivery of their respective businesses and services. Focusing on integrity and values alongside making on-going investment in its people, locations and operations has over time created a reliable and trusted brand within its sector.

CHIEF EXECUTIVE'S REVIEW

Overview

I am pleased to update the Company's shareholders on our performance for the six months ended 30 June 2021 (the "Period" or "First Half"). The main themes for the First Half have been consistent with the views and outlook we detailed in our full year results update at the end of March. In March, we highlighted our confidence in the level and nature of our business development activity, which is aligned with our customer led growth strategy. The contracts we have secured in the First Half, including the landmark contracts with Cherokee Nation Mechanical, LLC ("Cherokee") and the United States Agency for International Development ("USAID") highlight an increase in business momentum. We are growing our customer base and winning larger, more valuable long-term contracts, expanding into new geographies and demonstrating the value of our relationship-based approach and "one supplier" model.  

We are greatly encouraged by this momentum, which will drive long-term business growth, however we remain cautious in the near-term as COVID-19 continues to be a constraint on new business activity and as a result of the unfolding situation in Mozambique. Despite these challenges, we have delivered a stable performance for the First Half, and, as we look ahead, are cautiously optimistic the impact of COVID-19 is receding, and new business activity is picking up.

We delivered a resilient performance in the First Half, in-line with expectations 

We highlighted in March the continued impact of the pandemic as a health crisis and that of government enforced restrictions and lock-down provisions which remained in place across the world. Whilst we were encouraged by the level of bid activity we were seeing and our ability to continue to win high quality contracts, delays in both awarding and commencing new contracts remained a material factor. This uncertainty informed our approach of adopting a cautious view on our financial performance in the near-term, including for the first half of 2021. The financial performance we are reporting today, with revenue of USD 26.2m and underlying EBITDA of USD 5.0m, is in line with expectations and we see these results as a credible performance as we continue to work in an operating environment where COVID-19 remains a significant factor. As we think about the near-term outlook, we are encouraged both by the continued resilience of our IFM service channel and by the awards of new construction contracts; an important indicator that activity levels are starting to return to more normal levels. We expect to see heightened levels of project starts by existing and new customers and, depending on timing, this could lead to a materially stronger performance in the second half of the year but, in any event, should bridge to a stronger performance in 2022.

We are responding to the evolving situation in Mozambique

Clearly the situation in Mozambique has been a key area of focus for us since the tragic events unfolded in Cabo Delgado province in March 2021. It is not appropriate to provide commentary on this from a people perspective in this report, but it is important we provide shareholders with an update from a commercial perspective. Given the continued uncertainty in the region, which has seen Total suspend activity in the area, we have excluded the USD 60.5m contract from our order book and have reset the order book at USD 129m as at 30 June 2021. We highlighted in March that we expected the situation in Mozambique to have a USD 10.0m impact on revenue in 2021; this remains our expectation. Looking further ahead, in spite of the ongoing instability in the region, we remain confident that by virtue of the considerable multinational commercial investment and the significance to both Mozambique and the international community, the project will come into fruition and we remain well positioned to provide the originally planned services as and when they are required.

We continue to drive long-term value by executing on our customer-led growth strategy

As we have grown over the years, we have relentlessly and successfully focused on the diversification of our business in terms of geography, customer concentration, and service channel. Our customers rely on us and trust us to deliver in the most challenging of circumstances and our track record of delivering large and complex projects, often through our "one-supplier" model, and supporting our customers and their changing requirements is central to our ethos of growing with our customers.  We believe our relationship driven approach continues to set us apart and will drive sustainable growth through further expansion into our very significant addressable markets.

During the Period we announced contracts which highlight the strategy in action. In March 2021, we announced our appointment as teaming partner on two contracts with Cherokee, providing construction related services for the U.S. Department of State in the Middle East and East Asia. These significant contracts build on our initial work with Cherokee in East Africa and highlight how by partnering with large US corporations of Cherokee's standing, we can deliver large and complex projects for the US government and extend our footprint to new geographies. We look forward to further collaboration with Cherokee on new projects and growing this very successful partnership.

We highlighted in our March results the high level of business development activity we are involved in, with new bid activity on contracts ranging from USD 10m to USD 50m being particularly notable. We also highlighted our discussions with large US corporations and governmental institutions as a primary area of focus for our business development activity. The Cherokee contracts referenced above demonstrate the effectiveness of this approach as does our contract with USAID, which we announced in June 2021. This contract sees us working directly with USAID to provide comprehensive life support and maintenance services in one of their compounds in East Africa. The contract is for an initial two-year base period, with the option for two one-year extensions, with a contract value in aggregate of USD 21.5m. Our reputation for delivering integrated services to international standards was instrumental in securing this contract.

We continue to make good progress on our business development activity with respect to the commercial sector, another primary area of focus for us. We announced in June 2021 that we had agreed commercial terms with Danakali. This will be a major milestone contract for RA in that it is a globally significant project and highlights the value of our integrated approach, constructing and providing ongoing IFM support for a 1,200 person camp for the Colluli Mining Share Company ("CMSC") development in Eritrea, East Africa.  We were appointed as preferred contractor in 2020 and have worked closely with Danakali and its partners as they have developed their plans, with the updated scope of work and contract terms highlighting the value of this relationship driven approach. We look forward to providing shareholders with further information on the key commercial terms when all approvals have been obtained, which include the CMSC board.  

Overall, we have demonstrated our ability to win large contracts across our humanitarian, governmental and commercial customer base and the work we have been doing to build relationships with customers across these categories supports a healthy pipeline with a number of similar sized opportunities which are in various stages of adjudication.

Contracts

We were awarded new contracts, uplifts, and extensions to existing contracts of USD 29m in the First Half and expect awards with a higher aggregate value in the second half of 2021.

Contract order book:

At 30 June 2021, 57% of the order book composition was comprised of high value IFM work. The scale of our order book, combined with the contracts at advanced stage negotiation and proven resilience of IFM revenue, provides confidence to continue to make long-term investment decisions, even in these dynamic times.

Current Trading and Outlook 

Our financial performance for the first half of the year, with revenue and profitability in line with market expectations, is a resilient performance given COVID-19 uncertainty has remained across our markets. We are cautiously optimistic and starting to see encouraging signs that the business environment is improving - depending on timing, this could boost our second half performance, but in any event should bridge to a stronger 2022.

What is less apparent in the numbers we are reporting today is the progress we are making in building a stronger business year on year.  This becomes clear when you consider the significant projects we are winning - including Danakali, Cherokee Nation, and USAID. We also have visibility on future contract wins which we see as highly likely we'll secure. By the end of this financial year, based on current contract pipeline, we could more than offset the reduction in our order book which we have made in light of the ongoing situation in Mozambique. To not only replace a contract of this scale but to deliver growth would be a real barometer of the success of our strategy, our business development activity across all our customer segments and our reputation as a trusted partner for global, blue-chip organisations. We look forward to updating investors on our progress throughout the second half of the year.

Soraya Narfeldt

Chief Executive Officer 

07 September 2021

FINANCIAL REVIEW

Overview

Revenue of USD 26.2m and underlying EBITDA of USD 5.0m highlight our financial performance for the Period, in line with external expectations. We see this as a resilient performance, with the stability of our IFM service channel remaining a key feature of our business.  While Construction and Supply Chain revenue continues to be impacted by COVID-19, we are seeing encouraging signs that the business environment is improving. The most promising is that we have commenced works on all newly awarded construction contracts. Gross margin for the Period was stable at 29.2% (H2 20 29.2%, H1 20 29.1%) with improvements expected once the operating environment normalises. Cash generation for the Period was lower than comparative periods reflecting an adverse USD 8.3m movement in working capital. This primarily resulted from an increase in inventory balances caused by the suspension of works in Mozambique in March. These movements are seen as temporary and are expected to begin to reverse in the next six months as inventory is reallocated to new and ongoing projects.  

Revenue

Reported revenue for H1 21 was USD 26.2m (H2 20: USD 29.1m, H1 20: USD 35.4m). The decrease from prior period comparators reflects lower revenues from our Construction and Supply Chain channels whilst IFM revenue remained stable. We are encouraged by a recent uptick in construction contracts being awarded, which although relatively small in terms of contract value, are an important indicator of returning to a more normal operating environment, which if it persists, should lead to significant growth in Construction revenue in the short term.

The weighting of revenue by customer type remained stable. At 52%, Commercial and Government work represents approximately half of our revenue (H2 20: 53%, H1 20: 51%). Our strategic goal is to diversify our customer base and revenue streams over time.  

Revenue by service channel:

Profit Margin

Gross margin in H1 21 was 29.2% (H2 20: 29.2%, H1 20: 29.1%), reflecting stable profit margins compared with prior period comparators. The stability in gross margins reflects an increase in the percentage of IFM revenue, offset by the addition of certain new contracts which have lower margin in the initial phase of deployment but are expected to increase over time, and also lower occupancy in our hotel facility in Somalia. Gross margin is not expected to return to pre-COVID levels until such time as more normal levels of customer activity resume and operational inefficiencies caused by COVID-19 ease.

Reconciliation of profit to Underlying EBITDA:

Underlying EBITDA margin in H1 21 was 19.2% (H2 20: 21.2%, H1 20: 22.8%) reflecting the variance in revenue and an increase in administrative expenses. Administrative expenses increased modestly in the Period to USD 5.0m from USD 4.3m in the prior period, resulting from investment in our project management and support functions to underpin anticipated future growth of the business. Excluding this investment, underling EBITDA margin would have been comparable to the prior period.

During the Period, the Company incurred non-underlying costs of USD 1.2m (H2 20: USD 2.2m, H1 20: USD 0.8m). This balance includes an impairment charge of USD 0.8m relating to assets that were damaged as a result of the hostile activity in Mozambique.  We are actively working with our insurance providers to identify the value of a possible recovery and taking all practical steps to safeguard assets still in the Palma area, including relocating assets from the region.

Non-underlying items

Earnings Per Share

Basic earnings per share was 0.6 cents in the current period (H2 20: 0.9 cents, H1 20: 2.9 cents) and is equal to diluted earnings per share.  

Cashflow

Net cash outflows from operating activities of USD 3.6m in the Period reflects a marked decrease from the comparators with net inflows of USD 12.0m and USD 9.1m respectively. The decrease is primarily attributable to temporary working capital movements which impacted cash negatively by USD 8.3m. This compares with a USD 7.1m working capital cash benefit in H2 20. The negative working capital movements for the Period primarily relate to the addition of USD 4.0m of inventory which was in transit to Mozambique at the time of the attack and increased accounts receivable and decreased accounts payable balances. The inventory relating to Mozambique is being reallocated to new and existing projects which is expected to result in working capital beginning to reverse in the next six months.

Capital expenditure ("capex") for the period of USD 3.3m primarily relates to investment in Mozambique. As previously highlighted, overall capex for the current financial year is expected to be markedly lower than prior years (2020: USD 24.5m, 2019: USD 12.4m), with 2020 in particular reflecting significant investment in our Mozambique project. Given our current portfolio of projects we anticipate 2021 capex to be approximately USD 5-7m.

Balance Sheet and Liquidity

Cash as at 30 June 2021 of USD 10.1m reflects a USD 7.5m decrease from year-end. The decrease in cash is attributable to the working capital movements outlined above, which are expected to begin to reverse in the next six months.

Net assets at 30 June 2021 were USD 70.2m (H2 20: USD 72.1m, H1 20: USD 71.8m), with fixed assets comprising the majority of the total balance sheet following significant capital expenditure in 2020.

Breakup of net assets:

Within non-current assets is USD 16.7m of buildings, infrastructure, and equipment in Palma, Mozambique. We are currently working to relocate high value items to ensure their continued security and upkeep. A full review of the value of these assets is planned for the second half of 2021.

Dividend

A dividend of 1.35p per share totalling USD 3.2m was declared and authorised during H1 21 (H2 20: nil, H1 20: USD 2.7m) and was subsequently paid on 8 July 2021.

The Board's intention continues to be to adopt a progressive dividend policy and to increase the dividend in future years while retaining sufficient working capital to meet the needs of the business and to fund continued growth. The Board believes the continued growth in our customer base and the pursuit of a one-supplier model will provide a basis for continued earnings growth in the future

Shares in Issue and Treasury Shares

In the First Half, 157,493 ordinary shares were transferred out of treasury in settlement of certain employee share options. As at 30 June 2021, the total number of ordinary shares in issue and admitted to trading on AIM was 173,575,741, comprising 1,870,058 ordinary shares held in treasury and 171,705,683 ordinary shares with voting rights.

Andrew Bolter

Chief Financial Officer

07 September 2021

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

The attached notes 1 to 7 form part of the Condensed Consolidated Interim Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2021

1          CORPORATE INFORMATION

The principal activity of RA International Group plc ("RAI" or the "Company") and its subsidiaries (together the "Group") is providing services in demanding and remote areas. These services include construction, integrated facilities management, and supply chain services. RAI was incorporated on 13 March 2018 as a public company in England and Wales under registration number 11252957. The address of its registered office is One Fleet Place, London, EC4M 7WS.

2          BASIS OF PREPARATION

The financial information set out in these condensed consolidated interim financial statements does not constitute the Group's statutory accounts within the meaning of section 434 of the Companies Act 2006.

The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2021 have been prepared in accordance with IAS 34, 'Interim Financial Reporting'. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of RAI for the year ended 31 December 2020. The unaudited financial information has been prepared using the same accounting policies and methods of computation as the Annual Report for the year ended 31 December 2020. The same accounting policies and methods of computation will be used to prepare the Annual Report for the year ended 31 December 2021. The financial statements of the Group are prepared in accordance with IFRS.

3          SEGMENT INFORMATION

For management purposes, the Group is organised into one segment based on its products and services, which is the provision of services in demanding and remote areas. Accordingly, the Group only has one reportable segment.  The Group's Chief Operating Decision Maker ("CODM") monitors the operating results of the business as a single unit for the purpose of making decisions about resource allocation and assessing performance. The CODM is considered to be the Board of Directors.

Operating segments

Revenue, operating results, assets and liabilities presented in the financial statements relate to the provision of services in demanding and remote areas.

Revenue by service channel:

Revenue by recognition timing:

Geographic segment

The Group primarily operates in Africa and the CODM considers Africa and Other to be the only geographic segments of the Group. The below geography split is based on the location of project implementation.

Revenue by geographic area of project implementation:

Non-current assets by geographic area:

Revenue split by customer:

4          NON-UNDERLYING ITEMS

Asset impairment

These costs relate to the write off of inventory and fixed assets stolen or damaged beyond repair following the widescale attack in Palma District, Mozambique in March 2021.

5          EARNINGS PER SHARE

The Group presents basic earnings per share ("EPS") data for its ordinary shares.  Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

6          DIVIDENDS

During the interim period, a dividend of 1.35 pence (USD 0.02) per share (171,662,973 shares) totalling GBP 2,317,000 (USD 3,206,000) was declared and authorised (H2 20: nil, H1 20: 1.25 pence (USD 0.02) per share (173,575,741 shares) totalling GBP 2,170,000 (USD 2,674,000)). The dividend declared and authorised during the interim period was paid to ordinary shareholders on 8 July 2021.

7          APPROVAL OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The condensed consolidated interim financial statements were approved by the Board of Directors on 6 September 2021.