RA International Group PLC (LON:RAI), a leading provider of services to remote locations in Africa and the Middle East, has today announced its interim results in respect of the six months ended 30 June 2018.
INTERIM HIGHLIGHTS
· Admission to trading on AIM on 29 June 2018 raising gross proceeds of £18.8m (approximately US$24.7m)
· Half yearly revenue of US$ 23.9 m and EBITDA(1) of US$ 7.4m
· During the period, total contracts awarded of approximately US$ 33m including a 5-year contract with UNICEF providing, accommodation, catering, cleaning services and offices for their staff
· Net cash of US$ 28.0m at 30 June 2018
· Acquired RA SB Ltd., a provider of remote site services in Sudan, in line with strategy of further geographical expansion in Africa
· Commenced a US$ 5.2m construction and services project in Oman for the UK MOD. Besides supporting the Company’s geographical diversification efforts, the successful mobilisation of this contract demonstrates RA International’s ability to support UK Government agencies worldwide
(1)EBITDA is earnings before interest, tax, depreciation and the deduction of exceptional items detailed within the Condensed Consolidated Income Statement.
POST PERIOD HIGHLIGHTS
· Company now debt free with US$ 0.6m of term loans settled in H1 18 and remaining US$ 1.3m settled by 31 August 2018
· Contracted revenue backlog of US$ 114m at 31 August 2018 with US$ 63m of contracts awarded since 1 January 2018
· The average term of ongoing contracts is 2.2 years or 4.2 years when weighted by contract value
· Five-year contract of US$ 30m awarded by the United Nations Support Office in Somalia, in line with the Company’s focus on securing larger and longer-term contracts supporting key customers
· Regional project Management Office established and opened in Nairobi, Kenya, to provide technical project support leading to future project efficiencies around Africa
Soraya Narfeldt, CEO of RA International, commented:
“The Company is delivering on its strategy of geographical expansion and securing larger and longer term contracts. We have seen a significant increase in the bid pipeline since admission to trading on AIM in June, and we expect this to translate into contracts in the second half of this year and beyond.
“We are now focussing on larger contracts, and being a publicly quoted company will enhance our status and competitive position. We are grateful to the support shown by shareholders since June and look forward to the next phase of RA International’s development.”
Background to the Company
RA International is a leading provider of services to remote locations in Africa and the Middle East. It specialises in five service verticals: construction; integrated facilities management; operation and maintenance; accommodation; and supply chain logistics. It has a strong customer base, largely comprising UN agencies, western governments and global corporations.
The Group provides comprehensive, flexible, mission critical support to its clients enabling them to focus on the delivery of their respective businesses and services. RA International’s focus on integrity and values alongside on-going investment in people, locations and operations has over time created a reliable and trusted brand within its sector.
CHIEF EXECUTIVE’S REVIEW
Admission to AIM
Admission to AIM was an important step in the Group’s development, enabling us to raise additional capital to support our strategic objectives of broadening our geographical presence and undertaking larger, multi-year contracts with both existing and new customers, and in new sectors such as mining and oil and gas. By becoming a public company we are able to build on our existing strong reputation within our market place and provide additional confidence to customers when we bid for larger contracts.
The funds we raised at the time of Admission in addition to our existing cash resources, will be utilised to fund the following:
· strengthen the Group’s balance sheet enabling us to meet customer demand to bid on larger scale contracts within our core competencies;
· promote a client multiplier effect, adding to the Group’s ability to upsell additional services to existing clients. Opportunities for upselling have been identified across all five verticals; and
· enter new territories and sectors through leveraging existing relationships and reputation.
Contracts
The Company reported backlog revenue at 31 August of US$ 114m compared with US$ 112m at 31 December 2017, with US$ 63m worth of new contracts awarded this financial year to date. The average term of ongoing contracts is 2.2 years or 4.2 years when weighted by contract value.
During the period, we have delivered on our long-term strategy of providing high quality and reliable service to generate trust with our customers. We have built on our existing relationship with the United Nations, resulting in a 5-year contract with UNICEF for accommodation, offices, catering and cleaning services. Following this award, the UN High Commissioner for Refugees (UNHCR) renewed their contract with RA International for similar services in Mogadishu for a long-term period.
We announced on 16 August 2018, post period end, that the Company successfully bid and was selected by the United Nations Support Office and the African Mission in Somalia to deliver a power infrastructure project worth US$ 30m over 5 years.
The Company continues to actively bid on future contracts with larger contract values and longer terms. Additionally, we expect to continue to win follow on work from our key clients based on the quality and execution of our projects. A prime example of this, was the contract win for the UK MOD in Oman. This was a customer led contract win which expanded our geographical footprint. Further contract awards from the UK MOD and FCO demonstrate a continued confidence in RA International as a service provider to UK Government agencies.
The Company’s strategy for US Government business development is to partner with companies for each of the Africa-centric Government programs and support them in winning work across the continent. In addition, the Company has partnered with a firm who specialise in Overseas Building Operations for the US Department of State and is bidding on multiple projects at present.
Since the Company’s Admission to AIM in June it has also bid or is in the process of bidding for large construction and service contracts in the mining, oil and gas sector.
While there are a number of factors that influence the timing of contract awards and the recognition of revenue, we are confident that a proportion of our significant pipeline will contribute to our full year results for 2019. We maintain close relationships with our customers and look forward to providing updates on a number of contracts during the remainder of the year.
Operations
We have completed a number of key operational projects so far in 2018, including the acquisition of RA SB Ltd. in Sudan which adds an additional geographic territory to our already strong African coverage. Through this acquisition we have been able to enter into a support contract within the mining, oil and gas industry.
During the period, we appointed a Legal Officer and Group Compliance Manager to work at Group level, and further enhanced our operating capacity through the hiring of a new Group Supply Chain Manager and Head of Engineering. We also opened a Project Management Office in Nairobi, Kenya, on 10 September 2018 to support ongoing project work in the region. It is anticipated that the consolidation of technical project support in Kenya will lead to future efficiencies when executing projects across Africa.
Overall, the Company has reduced its East Africa concentration, increasing projects in Central African Republic, Oman and Sudan. We have increased local hires from 62% in 2016 to 67% in 2017 and in 2018 we are very pleased to have 70% of total employees of RA International being local staff.
The UN is a significant customer for us and to ensure we continue to meet the agency’s high Sustainable Development Goals (SDG), we have initiated work on developing a new Corporate Social Responsibility (CSR) strategy. This will be done by formalizing our sustainability work and pursuing a new structure that will revolve around the SDG, with the intention of creating lasting long-term impact for our stakeholders and the environment.
Strategy for growth
There are four core elements to our strategy to enhance our growth plans:
1. Diversify our customer base;
2. Diversify our geographic reach;
3. Bid for larger, longer-term contracts which we have started to submit since our Admission in June; and
4. Cross sell our services to new and existing customers.
Market Developments
Overseas Development Aid (ODA) expenditure by international governments is driven by a number of aims including providing stability in conflicted regions, promoting democracy, contributing to counter terrorism and law enforcement efforts, as well as humanitarian aid to alleviate short term humanitarian crises. ODA can be delivered bilaterally, directly by individual governments, or multilaterally, through a multitude of organisations such as UN agencies, and charitable organisations. RA International typically undertakes contracts for western governments and international agencies to help deliver ODA in remote locations, as well as acting for international companies.
In 2016, UN agencies and USAID spent approximately US$ 4.4 billion and US$ 3.1 billion respectively in the Central African Republic, the Democratic Republic of Congo, Eritrea, Ethiopia, Libya, Mali, Somalia, South Sudan and Sudan. These are countries in which the Group is presently working or can provide its services at short notice. In the same year the UK, which is the second largest contributor by monetary value in overseas aid to Africa, spent approximately £2.9 billion in ODA to Africa. In aggregate, over US$100 billion in planned expenditure has been announced by the US, UK, United Nations and the mining sector for investment in Africa in the next three years. RA International believes that a proportion of this planned expenditure will be directly related to the services the Company is able to deliver.
The US is the largest contributor by monetary value in overseas aid to Africa and the majority of the US Government funds spent is through Indefinite Delivery/Indefinite Quantity (IDIQ) contracts. IDIQ contracts are awarded, after a pre-qualification round, to a group of 3 to 5 companies who compete for Task Orders over a 5 to 10 year period. For the most part, only US companies can qualify for these IDIQ contracts because of security clearance requirements. Most of these companies that qualify to bid on Task Orders do not have a large presence in Africa and require a partner to execute the primary contract scope or provide support services. This presents a significant opportunity for RA International given the scope of our service offering, geographical reach, and experience successfully completing US Government projects.
Current Trading and Outlook
At RA International, we are committed to delivering our projects to a high standard and on time. Our contract delivery in the first half of the year has remained excellent. Looking to the future, both the size and contract length of the bids we are working on has increased. We are continuing to diversify our customer base and deliver geographical expansion. The management undertook a huge challenge in the first half of the year with the Admission to AIM and we have been delighted with the support we have seen from the London market. We look forward to the second half of 2018 with confidence.
Soraya Narfeldt
Chief Executive Officer
19 September 2018
