Company Announcements

This announcement contains inside information

RA INTERNATIONAL GROUP PLC

("RA International" or the "Company")

Interim Results for the six months to 30 June 2022

RA International Group plc (AIM: RAI), a specialist provider of complex and integrated remote site services to organisations globally, is pleased to announce its interim results for the six months ended 30 June 2022.

HIGHLIGHTS

·    Revenue of USD 29.2m (H2 21: USD 28.4m, H1 21: USD 26.2m) and underlying EBITDA of USD nil (H2 21: USD 1.6m, H1 21: USD 5.0m), in line with external expectations for the period ended 30 June 2022

·     Positive run rate of new contract wins for the year to date with USD 35m awarded in the year to August 2022 compared with USD 40m for the full 12 months of 2021

·    Order book of USD 95m as at 31 August 2022 (H2 21: USD 100m, H1 21: USD 129m) provides good forward visibility despite the continued low level of tendering of larger, long-term contracts in the humanitarian sector

·   The new contract award with the UK Ministry of Defence, announced separately today, demonstrates good progress in deepening our relationships with western governments. This is a global framework agreement, with a base term of 5 years and a contract value of up to GBP 35m (not included in current order book)

·      USD 12.0m debt financing completed in May 2022 supports our liquidity position to fund existing and visible project activity

Soraya Narfeldt, CEO of RA International, commented:

"We are making good progress in securing high quality overseas work with the relevant departments of the UK and US Governments, in line with our refreshed strategy. We see this as a significant opportunity given the scale of these addressable markets and believe, over time, RA International will be increasingly well positioned as a differentiated provider of specialist services to government clients, complementing our work with humanitarian organisations and the international development community. Our pipeline activity is healthy and growing within the areas we are targeting, however the timing of contract awards and project starts remains uncertain. We are not immune to the macro and general inflationary environment and this informs our cautious view on our nearer-term financial performance, particularly on margin. We are mitigating these pressures where we can through commercial arrangements and other supply chain initiatives and remain focused on converting our robust pipeline to support the attractive growth opportunity we have ahead."

Notes to summary table of financial results:

¹ Underlying EBITDA is calculated by adding depreciation, non-underlying items, and share based payment expense to operating profit.

²Net debt/cash represents cash less overdraft balances, term loans and notes outstanding.

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 two main client groups: humanitarian and development agencies and western government organisations focusing on overseas projects. It has a strong customer base, largely comprising UN agencies, UK and US Government departments 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

We are making good progress in executing on our priorities

As we outlined to investors in our last results statement in late May 2022, we have a significant opportunity to grow by deepening and strengthening our relationships with the relevant departments of the US and UK Governments. We are doing this from a position of some strength with an established platform as a trusted partner which has seen government sector revenues grow from 6% of our revenue in 2014 to 47% by 2021. We are strengthening our market position as a differentiated and specialist remote site service provider to these clients by aligning our resources more clearly with our business development activities in this sector and through building our track record in delivering projects as a prime contractor. This complements our long-term relationships with humanitarian agencies, and we are excited about the opportunity we have to scale the Company significantly through our differentiated and integrated offering supporting clients across these sectors. We also believe the fragmented market environment plays to our strengths: where international companies' use of local companies leads to project inefficiencies; where our track record and past performance is second to none; and where our one-supplier model gives us a clear cost advantage.

We are pleased with the progress we have made in the period in scaling our relationships with relevant UK and US Government departments. Through RA Federal Services, LLC ("RA Federal") our US subsidiary, we now have the US credentials to deliver full scale capability to the relevant US Federal Government budget holders as a prime contractor. RA Federal is now operational and is delivering contracts on behalf of the US Government as a prime contractor. We will continue to invest in our US capability to spearhead further growth in this significant market.

On the UK side, we have today announced the award of a contract to provide operational support capability to the UK Ministry of Defence as lead contractor. This is a significant award for RA International and will lead to the Company working closely with British military operational headquarters, the Permanent Joint Headquarters (PJHQ), for the next five years, with an option to extend for a further two years. The win is testament to our capability to deliver operational support to the British military across the world; providing our expertise in project management, engineering, supply chain management, logistics and project delivery to support military planning, operations and training. The contract is structured as a global framework agreement, with a contract ceiling of GBP 35 million which will be drawn down as tasks are issued. The contract start date is effective from 1 December 2022 and we will be increasing the size of our UK operations to help facilitate and oversee the delivery of this contract.

In previous updates we have highlighted the opportunity we have to develop valuable partnerships and how this continues to be central to our business development activities. We remain active in delivering projects for a number of large US defence contractors and are in active discussions with other companies which could provide significant global opportunities. At the right time, we also see the opportunity for organic growth to be accelerated by bolt-on M&A further strengthening our position in underserved markets.

Our financial performance is in-line with external expectations and reflects the prevailing environment

As we look to grow in-line with our strategy, we are also focusing on the near-term performance and overall stability of the business. The financial performance we are reporting for the first half is in-line with external expectations. It does also highlight how the operating environment and inflation are putting pressure on gross margin across our Integrated Facilities Management ("IFM") and Construction sectors, as outlined in Andrew's Financial Review.

We have taken steps to strengthen our liquidity position, with our loan note programme refinanced out to late 2024, and are confident we have the financial capacity to bid for and mobilise multiple large projects simultaneously. In addition, we are recovering value on the Mozambique related assets we impaired in FY21 and these results highlight the low level of capex which is required when we are not constructing camp facilities where ownership will be retained by the Group. 

Our order book of USD 95m as at 31 August 2022 provides good forward visibility 

We were awarded new contracts, uplifts, and extensions to existing contracts of USD 35m in the first eight months of 2022.

Contract order book:

We have maintained the order book at or around USD 100m at a time when the level of market activity has been subdued. The nature of project tendering in the humanitarian sector is a good example of this. We conservatively estimate there are at least USD 50m of contracts which under normal conditions would be awarded in the next three months, and which we would expect to have a reasonable chance of winning. This said, under current conditions, the timeline of award is very uncertain with the default position remaining contract extensions rather than new awards. If we look back to our contract awards in a pre-Covid environment, in 2019, we announced three humanitarian contracts with a combined value of USD 28m. These are the types of new contracts which have not been awarded over the last two and a half years, constraining our order book momentum. In this context, we see the higher run-rate of contract wins of USD 35m in the year to August 2022 compared with the USD 40m for the full 12 months of 2021 as encouraging.

IFM projects represent 53% of order book, with construction 42% and supply chain 5%. New contract activity has been weighted to construction projects with many expected to be the first phase of much larger contracts.

Overall, we are committed to building a high-quality and de-risked pipeline through developing our relationships with western government and humanitarian clients, either as prime contractor or through a partnership approach where it makes more commercial sense.  Going forward, we see scope for accelerated contract awards through our targeted business development and as and when the humanitarian sector returns to more normal tendering patterns. 

Summary and outlook

We are making good progress in securing high quality overseas work with the relevant departments of the UK and US Governments, in line with our refreshed strategy. We see this as a significant opportunity given the scale of these addressable markets and believe, over time, RA International will be increasingly well positioned as a differentiated provider of specialist services to government clients, complementing our work with humanitarian organisations and the international development community. Our pipeline activity is healthy and growing within the areas we are targeting, however the timing of contract awards and project starts remains uncertain. We are not immune to the macro and general inflationary environment and this informs our cautious view on our nearer-term financial performance, particularly on margin. We are mitigating these pressures where we can through commercial arrangements and other supply chain initiatives and remain focused on converting our robust pipeline to support the attractive growth opportunity we have ahead.

Soraya Narfeldt

Chief Executive Officer 

30 September 2022