Interim Results for the six months to 30 June 2024

17 September 2024

RA INTERNATIONAL GROUP PLC

("RA International", "RA" or the "Company")

Interim Results for the six months to 30 June 2024

RA International Group plc (AIM: RAI), a specialist provider of complex and integrated remote site services to organisations globally, announces its unaudited interim results for the six months ended 30 June 2024.

The Group's performance in the first half of 2024 reflects a temporary less favourable sales mix, strategic investments in ongoing construction projects, and delays in revenue recognition and mobilisation on certain projects into the second half of the 2024 year.

H1 2024 results

·    Revenue remained broadly consistent with the previous two periods at USD 30.5m (H2 23: USD 27.9m, H1 23: USD 30.4m), delivering an EBITDA Loss of USD 1.4m (H2 23: Profit USD 5.5m, H1 23: Profit USD 0.8m).

·    Gross profit margin fell to 8.2% (H2 23: 17.6%, H1 23: 11.8%) primarily due to a less favourable sales mix within supply chain services, with sales weighted towards lower-margin logistics work related to the one-off assets sales in 2023.

·    Cash of USD 9.9m on 30 June 2024, reduced by USD 6.9m on the previous period (H2 23: USD 16.8m, H1 23: USD 12.2m), due to the loss during the period as well as the strategic decision to make a substantial forward investment in inventory for ongoing construction projects in order to benefit from reduced costs.

·    In line with the decrease in cash, net debt^* increased to USD 5.9m (H2 23: net cash USD 1.1m, H1 23: net debt USD 1.8m).

Operating highlights

·    Successfully completed and handed over the first task order at the US Navy Base in Diego Garcia. To date, RA has received five task orders valued at USD 8.9m, with USD 7.0m of work remaining.

·    Received the first task order through UK Integrated Security Fund ("ISF") - formerly the Conflict, Stability and Security Fund - due to be delivered in H2 24. The change in the UK Government has led to delays in orders coming out of the ISF; however, with the new administration in place, we are seeing an increase in task-order activity and are progressing with several bids.

·    Increased contract activity from RA FS following its restructuring in 2023, with revenues received during the period on projects in Suriname and Thailand. Contracts have been awarded for projects in the new territories of Zimbabwe, Ghana and the Maldives, with revenues to be recognised in H2 24 and into 2025.

·    The Group has a number of long-term, high-value bids in progress across all customer groups, extending existing contracts and building opportunities with new clients and in new territories.

Soraya Narfeldt, CEO of RA International, commented:

"Following a significant turnaround last year, we continue to build foundations to ensure we resume our path towards profitability. Today's separately announced contract award with the MOD is a direct result of the hard work that is being accomplished to achieve long-term visibility and stability for the business.

The H1 24 results reflect a less favourable sales mix and delays on contract awards and mobilisation of new projects, impacting cash flow and profitability, as well as substantial forward investments in preparation for the delivery phases of ongoing construction projects scheduled for H2 24 and beyond.

We continue to focus on cost control and financial management. The Board is confident in the Group's ability to meet its debt obligations and will repay USD 2.3m in November 2024 as per the terms of the loan note agreement. The remaining USD 13.5m is scheduled to mature in January 2027. 

The Group is pursuing various opportunities with commercial clients and is awaiting adjudication on two large bids with UN organisations. Through its framework positions, the Group is experiencing increased task order activity in the UK and US. Additionally, the funds allocated to these frameworks have increased significantly since they were first announced. 

While we remain cautious about our financial performance for the full year, we believe that with our current projects, business pipeline, and bid activity, we are well positioned for a marked improvement in H2. We remain committed to our strategic priority of returning the business to sustained profitability. Through our actions, we are confident that we are building a more resilient and sustainable business."

^*Net debt represents cash less overdraft balances, term loans and notes outstanding.

Enquiries:

About RA International

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 Officer's review

After the significant turnaround highlighted in our 2023 Annual Report, the Group's performance in the first half of 2024 reflects a less favourable sales mix, delays in contract awards and mobilisation, and forward investments in several contracts as we increase the range and value of our services. Revenues from these contracts will be recognised in the second half of the year and into 2025.

We remain committed to our strategic priorities: targeting sustained profitability, improving the Company's liquidity position, and building a stronger pipeline. Our actions in the last two years support these priorities; we have retained our existing client base, are building exciting new government and commercial relationships and, through frameworks, have access to multiple opportunities.

Financial review

As outlined in the table below, Group revenue was USD 30.5m, broadly consistent with the previous periods (H2 23: USD 27.9m, H1 23: USD 30.4m).

Gross profit margin in H1 24 was 8.2% (H2 23: 17.6%, H1 23: 11.8%). The decrease was due to the provision of a high proportion of one-off low-margin logistics projects to a new commercial client in Ethiopia, to which the Group sold assets last year.

Strict cost controls continue to be maintained, with administrative expenses increasing marginally to USD 5.9m (H2 23: USD 5.9m, H1 23: USD 5.7m), despite inflationary pressures and activity in new territories that necessarily require increased activity.

As a result of the above, the Group delivered an EBITDA Loss of USD 1.4m (H2 23: Profit USD 5.5m, H1 23: Profit USD 0.8m). The loss before tax for the period was USD 4.4m (H2 23: Profit USD 2.6m, H1 23: Loss USD 2.5m).

As of 30 June 2024, cash stood at USD 9.9m, a decrease of USD 6.9m from the previous period (H2 23: USD 16.8m, H1 23: USD 12.2m). This reduction is attributed to the loss incurred during the period, as well as the strategic decision to make a substantial investment in inventory intended for ongoing contracted construction projects, scheduled for completion is 2025. The inventory is secured under the terms of the contracts, and the early investment has allowed the Group to benefit from cost savings related to bulk purchases and logistics.

Net assets on 30 June 2024 were USD 20.6m (H2 23: USD 24.9m, H1 23: USD 22.5m), decreasing from 2023 year-end in line with the net loss generated.

Basic loss per share was 2.5 cents in the current period (H2 23: Earnings 1.5 cents, H1 23: Loss 1.4 cents) and is equal to diluted earnings per share for the current period.

Net debt at the year-end stood at USD 5.9m (H2 23: Net cash USD 1.1m, H1 23: Net debt USD 1.8m).

At the end of the period, the Group had USD 15.8m of loan notes, of which USD 2.3m will be repaid in November 2024 in accordance with our terms. The remaining USD 13.5m will mature in January 2027. The Board is committed to reducing debt levels and is confident in the Group's ability to meet its debt obligations.

Contract awards, uplifts and extensions, and new business pipeline

The change in the UK Government has led to delays to orders coming out of the UK Integrated Security Fund ("ISF") - formerly the Conflict, Stability and Security Fund - on which we secured a leading position in September 2023.  Nonetheless, we were pleased to have been awarded our first project for the ISF during the period for a total value of USD 0.6m, which will be completed in H2 24. With the new administration in place, we are confident that we will begin to see an increase in task-order activity and are progressing with several bids.

We continue to deliver construction services at the US Navy Base at Diego Garcia and have successfully handed over our first task order in H1. Since the initial contract award, the scope and value of the framework has increased from an initial ceiling of USD 249.0m to USD 348.5m, of which we have been awarded five task orders totalling USD 8.9m, with USD 7.0m of work remaining, which we expect to complete in 2025.

Following the restructuring of the RA FS board in 2023, we are seeing an increase in bid activity and project delivery. The business earned revenue on projects in Suriname and Thailand and added projects in Ghana, Zimbabwe and the Maldives to our operations. RA FS continues to have significant opportunities for growth.

During the period, we experienced an increase in opportunities with commercial clients. Following asset sales of USD 1.8m to a commercial mining client in Suriname in May 2023, our activities with this client have grown to USD 5.3m, with further growth expected. This expansion includes supply chain work, construction supervision, and interim Integrated Facilities Management (IFM) services for a 700-room remote camp. The development of this client relationship exemplifies our business model of building relationships over time, offering an increasing range of services, and demonstrating our capabilities. A critical factor in our success is our commitment to hiring, training, and developing local talent and the positive impact of our advocacy for - and integration with - local communities. We are currently in advanced discussions with the client to increase our service provision, and local labour participation and community engagement are key and welcome features in our offering.

A similar opportunity has arisen following another asset sale last year to a commercial operation in Ethiopia. For this, we provided logistics and supply activities in H1 23, together with construction support, and are now in discussions regarding a potential full IFM service.

During the period, we received contracts and contract extensions totalling approximately USD 24m with USD 13m to be delivered in H2 24 and beyond. In addition, we have two bids pending adjudication with the UN, including the renewal of an existing contract in Somalia. The order book at the end of the period stood at USD 43m (H2 23: USD 49m, H1 23: USD 71m). As previously stated, the order book no longer fully captures the scope and potential of the projects we are pursuing through our framework agreements. However, securing one or both of the contracts currently pending adjudication would significantly replenish it.

We are pleased to announce separately today a three-year contract (with two additional Option years) with the MOD to provide Facilities Management services across an East African country valued between USD 15m and USD 18m in aggregate over the five-year period. The contract underscores the MOD's confidence in RA International and its proven capabilities and expertise in managing critical operations in challenging environments and will further solidify the Company's position as a trusted partner to government entities.

Summary and outlook

We remain committed to building a high-quality, de-risked pipeline by strengthening our relationships with western Governments and humanitarian clients. With the new administration in the UK, we are witnessing increased activity from our UK framework agreements. While the upcoming US election may introduce uncertainty and potential delays, we have not yet experienced any setbacks. RA FS continues to progress in securing contracts and is actively pursuing several opportunities. Moreover, the funds available through framework agreements are increasing significantly, presenting us with additional opportunities.

We currently have two large, long-term bids with UN organisations, which, if secured, will substantially rebuild our order book. We are also seeing early indications that the UN bid cycle is returning.

Our recent successes with commercial clients have opened up several new opportunities across all our service channels, including IFM. This enables us to add meaningful value to local communities and support clients in meeting their own social value commitments.

We continue to expand our territory coverage, although we are cautiously selecting projects that we believe we can realistically deliver. In some instances, this approach has led us to decline certain opportunities.

Given the opportunities and contracts outlined above, the Board expects a significant improvement in financial performance in H2 24. While we remain cautious about our full-year financial performance, we believe that our current projects, business pipeline, and bid activity position us well to achieve our strategic goals.

Soraya Narfeldt

Chief Executive Officer

17 September 2024

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2024

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2024