TIDMRAI
RNS Number : 9565J
RA International Group PLC
17 April 2020
RA International Group PLC
("RA International" or the "Company" and, together with its
subsidiaries, "the Group")
Results for the year ended 31 December 2019
A year of strong progress
RA International Group PLC (AIM: RAI), a leading provider of
services to remote and challenging locations around the world, is
pleased to announce its results for the year ended 31 December
2019.
2019 2018
USD'000 USD'000
Restated(1)
Revenue 69,064 54,805
Underlying profit(2) 13,259 12,761
Profit before tax 13,259 9,827
Basic EPS (cents) 7.4 6.3
Net Cash (end of period)(3) 21,393 27,804
Dividend per share (recommended) 1.25p 1.0p
Financial highlights
-- Full year revenue increased 26% to USD 69.1m (2018: USD
54.8m), of which USD 46.0m was delivered in H2 (H2 2018:
28.7m).
-- Underlying profit increased 4% to USD 13.3m (2018: USD 12.8m)
of which USD 10.7m was earned in H2 2019 (2018: USD 5.5m).
Exceptional costs relating to the Company's 2018 Admission to AIM
make up the prior year differential in underlying profit and profit
before tax.
-- Profit before tax of USD 13.3m (2018: USD 9.8m) increased by
35% and was in line with expectations.
-- Net cash at 31 December 2019 of USD 21.4m (2018: USD 27.8m).
The decrease was primarily due to increased trade receivables and
accrued revenue at year end resulting from an extremely active
November and December.
-- Proposed final full year dividend of 1.25p per share (2018: 1.0p per share).
Operational highlights
-- Awarded new contracts, uplifts and extensions to existing
contracts of USD 90.9m during 2019
(2018: USD 62.0m).
-- Order book of USD 141.0m (2018: USD 119.2m) at year end, up 18% from 2018 year end.
-- Further diversification of client base with revenue from
government and commercial customers making up 44% in 2019 (2018:
38%).
-- Strong increase in IFM services contracts to USD 28.6m (2018:
USD 23.1m) of which USD 10.4m was high value hospitality service
contracts (2018: USD 6.0m).
-- Significantly expanded operations in South Sudan and
Mozambique and entered Denmark and Libya executing projects in 11
countries during the year (2018: 9 countries).
-- Further streamlined the project delivery function through the
implementation of a group-wide Management System (RAMS) and by
adding the supply chain team to the Project Management Office.
Post year end highlights and outlook
-- Full COVID-19 assessment performed; with a strong balance
sheet, significant cash reserves and a sustainable business model
built on the expectation of operating through crisis situations
(civil war, terrorism, extreme weather, disease outbreak, etc...)
in often remote and challenging locations, the Company is in a
strong position to mitigate disruption caused by the pandemic.
-- Discussions with clients regarding continuing operations have
been positive and we have been commended for our ability to
continue to deliver critical services. Many of our service
contracts continue unabated or with scope reductions however some
construction contracts have been suspended and as a result a
significant value of revenue originally forecast to be generated in
2020 will shift to 2021. This is anticipated to have a material
effect on 2020 forecasted results.
-- Despite the current global economic situation, contract
awards continue. The Group has recently signed a USD 15.6 million
task order with IAP Worldwide Services for the provision of supply
chain services, an order from a Government client for the
procurement and delivery of PPE, orders for the provision of
sanitation services, and a contract to support efforts in
controlling locust swarms in East Africa.
-- Strong Q1 with USD 17.9m of revenue and an order book of USD
138.8m at the end of March 2020.
Soraya Narfeldt , Chief Executive Officer, commented:
"The Company delivered considerable year-on-year revenue growth,
resulting from undertaking the highest level of activity in the
Company's history during the second half. Profit margins were
affected by the delay in a contract award in the first half as well
as the mix of business; historically, executing short-term
contracts has led to long-term re-occurring revenue with the same
customers. With a strong reputation for delivering projects on time
and within budget, we are being invited to undertake projects in
geographies outside our historical areas of focus. We entered 2020
operating in more territories than ever before and with a healthy
order book of USD 141m, setting a strong base for continued
profitable growth."
"At present, it is not possible to quantify the financial impact
COVID-19 might have on the Company since the scheduling of some
projects is now unclear. This said, we believe that as a provider
of critical services, when COVID-19 is contained or possibly
sooner, we will return to work as normal, executing against our
order book and continuing to bid for new projects. Given our wealth
of experience in planning for and operating through crisis
situations we are uniquely placed to assist our clients in managing
the impact of the ongoing pandemic. We believe that continuing
economic activity is integral to ensuring that vulnerable
communities do not collapse in these unprecedented times and
therefore continue to advocate with our customers to allow us to
execute projects in planned timelines, taking all necessary and
recommended precautions."
Notes to summary table of financial results:
(1) The Company applied IFRS 16 Leases for the first time in
2019, using a fully retrospective approach. The nature and effect
of the changes as a result of the adoption of this new accounting
standard are described in note 5 of the Notes to the Consolidated
Financial Statements and have resulted in the restatement of the
statutory accounts for the fiscal year ended 31 December 2018.
(2) Underlying profit represents profit before tax and non-reoccurring exceptional items.
(3) Net cash represents cash less overdraft balances, term loans and notes outstanding.
Enquiries:
RA International Group PLC Via Hudson Sandler
Soraya Narfeldt, Chief Executive Officer
Lars Narfeldt, Chief Operating Officer
Andrew Bolter, Chief Financial Officer
Cenkos Securities PLC (Nominated Adviser
and Broker)
Derrick Lee +44 (0)131 220
Peter Lynch 6939
Hudson Sandler LLP (Financial PR & IR) +44 (0)207 796
Daniel de Belder 4133
Bertie Berger rainternational@hudsonsandler.com
Notes to editors:
RA International is a global provider of services in remote and
challenging locations. It specialises in three service channels:
construction, integrated facilities management, and supply chain.
The Company has a strong and loyal 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.
CHAIRMAN'S STATEMENT
I am pleased to report a year of significant progress in the
delivery of our strategic objectives. The Company continued to
broaden its customer base as well as its geographic presence,
whilst delivering larger and longer-term contracts. In terms of the
impact of the unprecedented challenges of COVID-19 on the Company,
further commentary is provided at the end of this statement but
suffice to say, as a company that is accustomed to operating and
planning in crisis I believe we have both the resilience and
reserves to withstand the significant global adverse
consequences.
Until recently, we have focused solely on the needs of clients
undertaking projects in African and Middle Eastern countries, but
our extensive experience working in remote and challenging
environments has equipped us to manage complex projects almost
anywhere.
Although RA International had a slower start to the year than
anticipated due to a delay in the commencement of one contract in
the first half of the year, the heightened level of activity in the
second half resulted in the Company reporting higher than expected
revenue for the full year of USD 69.1m. As a result, underlying
profit increased marginally to USD 13.3m.
During the year we won contracts with new clients and expanded
the range of services offered to existing clients. Our entry point
into new customers is often to provide lower value supply chain and
construction services, which can lead to a short-term impact on
underlying profitability. In time we look to cross-sell our other
services, moving towards a one-supplier model being, we believe,
the most efficient and cost-effective way for customers to deliver
on their own objectives.
We are encouraged by a significant order book of USD 141m as at
31 December 2019, compared to USD 119m at the end of 2018, and by
our success in converting short-term business won in 2019 into more
valuable recurring revenue and as a means of attracting new
customers.
Governance and corporate culture
As a service provider to UN agencies, western governments, and
global companies, we have in place a range of policies and
procedures to ensure the necessary high standards are maintained.
We are a signatory, participant and contributor to the United
Nations Global Compact. International and local compliance and
regulations play a vital role in our ability to bid for and execute
contracts.
Since RA International's formation in 2004, our founders Soraya
and Lars Narfeldt have instilled and ingrained a Company-wide
belief that running a sustainable business should benefit everyone,
including our customers, employees and the host communities in
locations where we operate. Accordingly, we cooperate respectfully
with people on the ground, building trust and goodwill not only
with our staff but also communities in and around our operations.
We continue to align our corporate social responsibility strategy
to the UN's Sustainable Development Goals (SDGs).
I am pleased to report that we have published our second
Sustainability Report, which can be found on our website at
rainternationalservices.com/sustainability/. Our sustainability
strategy focuses on three areas: People & Skills Development,
Labour Rights and Resource Management. These correlate strongly
with three of the UN's SDGs: SDG 4 Quality Education, SDG 7
Affordable & Clean Energy, and SDG 8 Decent Work & Economic
Growth. I would encourage our stakeholders to read our
Sustainability Report alongside this annual report in order to
understand the scope and range of work we carry out as part of our
contractual obligations. The Sustainability Report also helps to
explain how in supporting communities we are able to foster strong
relationships that are integral to working effectively and
efficiently to the benefit of our clients.
People
As a result of the increased level of activity in the business,
during the year the Company added to the number of people it
employs. Together both local and international staff total over
2,000. We are ultimately a people business and ensuring that our
staff have the right skills is a key priority, so that we can
provide services efficiently and effectively for our clients and
help build strong sustainable communities. In particular, during
the current ongoing COVID-19 crisis, our first priority is the
health, safety, and well-being of our people and to that end, we
have established robust procedures and processes particularly to
address the challenges of this crisis. On behalf of the Board, I
would like to thank the highly capable Executive Management Team
and all our staff for their commitment, tremendous hard work, and
unstinting dedication to the Company.
Dividend
The Board is recommending a final dividend of 1.25p per share to
be paid on 9 July 2020 to shareholders on the register as of 29 May
2020. The ex-dividend date is 28 May 2020. The Board's intention
continues to be, where possible, to maintain or 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.
Outlook and COVID-19 update
As an organisation that operates in challenging environments,
including areas with ongoing conflict and social unrest, the
Company has a wealth of experience in both planning and operating
during crises. The Board continues to monitor the COVID-19
situation closely and has taken several actions to mitigate the
potential risk to the Company's employees and customers by
implementing a comprehensive business continuity plan.
Our priority is the health and safety of our employees,
customers, suppliers, and other partners. In connection with
safeguarding their well-being during this unprecedented situation,
the Company has, among other initiatives:
1) Similar to those in past crisis situations, created a
COVID-19 Response Team and established a comprehensive COVID-19
Database capturing all information pertaining to the Company's
handling and preparedness of the pandemic;
2) Adopted WHO recommended guidelines to reduce exposure and
transmission of COVID-19, including social distancing,
disinfection, and temperature testing;
3) Administered WHO recommended training with respect to
sanitization and disinfection, quarantine procedures and medical
testing;
4) Distributed and delivered medical PPE and COVID-19 test kits;
5) Established quarantine centres where deemed required, along
with risk mitigation procedures for handling and administering
support services to these centres;
6) Increased food stock to over 90 days supply at operating
locations reliant on imported goods; and
7) Undertaken a full risk assessment and action plan within the
framework of the Group business continuity plan.
The Board recognises that COVID-19 will have a material effect
on the Company's 2020 financial results. Some contracts have been
suspended to ensure social distancing is maintained, and some
contracts have been modified whereby the Group will undertake a
reduced service offering. Additionally, some contracts forecast to
commence in H2 2020 are now likely to start in 2021.
Despite the impact COVID-19 is expected to have on the Company's
2020 trading, the Board is confident in the Company's ability to
trade as a going concern. With significant cash on hand,
high-quality receivables, no debt, and no capital commitments, the
Company is well placed to manage a period of reduced activity.
Further details are shown in note 2 to the Consolidated Notes to
the Financial Statements.
It is at present difficult to predict when the various lockdowns
and social distancing directives will cease, however in forming its
opinion on the future financial viability of the Company the Board
has assumed that most contracts affected by the current pandemic
will return to normal operating circumstances within a three to
six-month period. These expectations are primarily based on
feedback from our clients, many of whom have reiterated that RA
International is critical to their ability to execute their
objectives, which are often linked to globally significant
initiatives. In some cases, movement restrictions have a limited
impact on our contracts given the essential nature of our work for
our customers.
Additionally, the Board has reviewed, opined on, and challenged
information prepared by the executive team. This information
includes the following:
1) The Group business continuity plan;
2) An analysis of the issues affecting each country of
operations and the plans in place or being implemented to enhance
the well-being of employees, safeguard assets, and ensure full
operational capacity is maintained;
3) An analysis of each ongoing project which identifies
operational challenges and client communications relating to
COVID-19;
4) A financial impact analysis for each project being undertaken; and
5) Multiple financial scenarios detailing both the potential
effect of COVID-19 on 2020 financial performance and the Company's
ability to trade as a going concern.
The documents are updated regularly and reviewed weekly, and the
Board has access to the internal COVID-19 Database used to capture
the information and drive the decision-making process.
As more information becomes available the Board will provide
updates to its shareholders.
Sangita Shah
Non-Executive Chair
17 April 2020
OPERATING REVIEW
Highlights
-- USD 91m of new contracts, contract uplifts and extensions awarded during 2019.
-- USD 69.1m revenue for the full year, with a record USD 46.0m delivered in H2.
-- Expanded operations in South Sudan and Mozambique and entered Libya and Denmark.
-- Additional bids and pipeline growth with new and existing
clients outside of our current geographies.
Overview
We continued to make good progress against our strategic
objectives to broaden our client base, deliver contracts across all
three service channels and diversify our operations
geographically.
As expected, the second half of the year was far busier than the
first half with a number of large projects commencing during the
six-month period. We delivered revenue of USD 69.1m for the full
year (2018: USD 54.8m), which was ahead of expectations. Group
revenue in H2 2019 was 46.0m, which is 60% higher than our previous
most active six-month period (H2 2018: USD 28.7m); the significant
activity uplift affirmed the robustness of the back-office function
which received considerable investment around the time of the
Company's Admission to AIM in 2018.
We have continued to capture new contracts whilst executing
existing contracts and as a result, have grown our order book. In
total, we were awarded USD 91m of new contracts, contract uplifts
and extensions during 2019, with the average contract duration
remaining over 4 years when weighted by value. As at 31 December
2019 the Group reported an order book of USD 141m (2018: USD 119m)
which is scheduled to be delivered over 5 years. The increase in
the order book was driven by new customers and existing customers
requesting we participate in complex projects being undertaken in
and outside of our current geographies.
Contract order book
USDm
2018 Opening order book 112
Contract awards, uplifts
2018 and extensions 62
2018 Contracted revenue delivered (55)
2019 Opening order book 119
Contract awards, uplifts
2019 and extensions 91
2019 Contracted revenue delivered (69)
2020 Opening order book 141
The Group expanded its operations in South Sudan and Mozambique
as well as entered Libya and Denmark. As a result, we executed
projects in 11 countries in 2019 compared to 9 in 2018.
We have continued to diversify our client base, and while
supporting humanitarian projects remains the largest contributor to
revenue, we have grown the government and commercial contract base
so that together they represented 44% of total revenue in 2019
(2018: 38%).
Our entry point into many clients is to offer supply chain or
construction services, which are typically short-term contracts and
can result in profit margin fluctuations over reporting periods.
Over time we aim to convert these contracts into higher value or
recurring revenue business, moving up the value chain into IFM, and
eventually towards acting as a single supplier where we can
seamlessly build and service clients' infrastructure. During 2019
we were awarded several large supply chain or basic construction
contracts, leading to a short-term impact on gross profit margins,
but which have already led to new more profitable contracts in
2020.
Contracts
We continue to advocate the benefits of a 'one-supplier' model
as a way for clients to improve efficiencies. In 2019 we were able
to provide hybrid services, where we executed across two or more
service channels, to approximately half our clients, an increase on
the previous year. Notable contract wins in 2019 are included in
the below table.
Our delivery record remains excellent, reflecting our commitment
to delivering projects on time and to a high standard, helping to
attract new clients and strengthen the relationships with existing
ones.
The Danish project is an example of where we were able to
demonstrate our capabilities and build trust with a new customer.
This contributed to the Company being awarded new work in East
Africa less than two months later and this new contract was then
uplifted by USD 9.1m in December. The great job our team is doing
on the project is leading to additional opportunities in other
geographies.
Significant contracts won in 2019 Term Service
Channel
Master service agreement with IAP to supply 2019-2023 Supply
global supply chain services. The first chain
task order issued was for up to USD 8.5m.
Significant contract with Facilities Development 2019-2022 Construction
Corporation to provide construction services
in connection with the refurbishment and
upgrade of the U.S. Embassy in Denmark.
USD 9.8m contract to provide vehicle and 2019-2024 IFM
equipment fleet operation and first line
maintenance services in up to 10 locations
for a large humanitarian organisation in
East Africa.
USD 9.0m contract with a Western Government 2019-2022 Construction
to provide construction and facilities management / IFM
services in East Africa.
USD 10.7m construction contract with a large 2019-2020 Construction
humanitarian client to provide accommodation
facilities for peacekeeping troops in a
Central African country.
USD 7.8m contract with a large humanitarian 2019-2020 Supply
organisation to supply and install modified Chain /
shipping containers as accommodation and Construction
offices in an East African country.
USD 10.9m contract with Cherokee Nation 2019-2020 Construction
Mechanical, LLC, working on behalf of the
U.S. Department of State, to provide construction
services at a U.S. Embassy in East Africa.
IFM
We were very pleased with the growth in IFM services which grew
year-on-year from USD 23.1m to USD 28.6m. IFM service agreements
typically last from three to five years, giving the Company greater
future earnings visibility and allowing us to establish a solid
platform on which to grow the business. We have also increased the
breadth of customers and improved the quality of contracts.
Significantly we grew revenue from Hospitality Services, whereby we
lease our own facilities and offer life support services to
customers (similar to managing hotels), to USD 10.4m in 2019 (2018:
USD 6.0m).
Our investment in Mozambique continues this drive into
Hospitality Services. We acquired a 15-hectare parcel of land and
the first development phase, which will accommodate approximately
100 guests, is due to complete by June 2020. We will continue to
develop the area as demand requires however, as presently planned,
once completed the camp will have the capacity to accommodate over
500 guests and will offer recreation areas, office centres,
warehouses and workshops.
Construction
Construction revenue reduced year-on-year from USD 29.5m to USD
27.6m due to the delay in the start of a contract as previously
announced, and which commenced in the second half of 2019.
The announcement towards the end of 2019 of the Cherokee Nation
Mechanical contract, now valued at USD 11.2m, gave rise to a strong
order book for construction contracts at the start of 2020. Since
the year end we have seen an increase in demand and a corresponding
increase in the number of bids submitted for hybrid construction
and long-term service contracts, with the majority of construction
services initially scheduled to be delivered in 2020. As a result
of COVID-19, we expect many of these new projects will now commence
in 2021.
Supply chain
Revenue from supply chain activities increased significantly,
from USD 2.2m in 2018 to USD 12.8m in 2019. The increase was
predominantly the result of the Company supplying and installing
approximately 500 modified shipping containers for a large
humanitarian organisation and the work being undertaken for
IAP.
As stated previously, offering supply chain services is often an
entry point into many customers and can lead to larger and
longer-term contracts. This proved the case in 2019 where we were
awarded construction contracts by a government client for whom we
had previously supplied goods.
Central operations
The increased level of activity in the second half tested the
robustness of the investment made in our back-office function for
the first time, and I am pleased to report that we were more than
able to handle the workload. The Project Management Office ("PMO")
was focused on implementing contracts, while our enabling
departments ensured the resources needed to meet contractual
obligations were available while providing compliance
oversight.
The Company has undergone a significant recruitment and training
drive, as well as adding and redistributing resources to the PMO.
By the end of 2019, in total 122 new positions were added, and a
significant number of employees were promoted into more senior
roles. As at 31 December 2019, the number of staff we employed
totalled 2,011 (2018: 1,889).
Local labour participation as a percentage of total employees
reduced to 61% (2018: 69%). The reduction in local labour
participation resulted from the contract commencement delay in the
first half of the year. We expect local labour participation to
revert to former levels in the near future.
As At 31 2015 2016 2017 2018 2019
December
Total number
of employees 919 1,840 1,890 1,889 2,011
----- ------ ------ ------ ------
COVID-19
Our operational approach to managing the ongoing COVID-19
pandemic has been firstly to ensure the health and safety of our
staff, not just in terms of their physical wellbeing but also with
respect to morale, and secondly to ensure we are fully operational
so as to support our clients in these unprecedented times. We are
the contractor of choice for many of our customers because we can
be relied upon to deliver under the most challenging of
circumstances.
Overall, discussions with our clients have been extremely
positive since the start of the pandemic. We have been commended
for our ability to continue to operate at a full level of service
in these difficult times and some customers, having recognised our
significant efforts to mitigate the risk of COVID-19 transmission,
are facilitating worksite access where possible. Additionally, some
clients will reimburse all or a portion of additional costs
incurred as a result of the pandemic and accelerate the payment of
invoices during this period.
Although some business development activity has slowed as a
result of site visits being cancelled, we are retraining staff to
offer sanitisation services and other in-demand activities, and
pursuing new opportunities such as medical infrastructure
construction, the management of isolation facilities and the
disinfection of larger spaces including offices and public
facilities. We are also supplying much needed PPE to a government
customer and have had inquiries for the same service from other
potential clients. Additionally, while the adjudication process of
bids outstanding has slowed, we are still receiving contact awards;
in April we announced a new USD 15.6m task order from IAP, and we
hope to announce further awards in the coming months.
We believe we have a responsibility to all stakeholders during
this time of crisis and have confidence in the sustainability of
our business model. We work across three customer segments, operate
in over ten countries at any given time, and provide a broad range
of services, many of which are essential during times of crisis. We
have relentlessly and unforgivingly focused on investing in
diversification over the past few years, in terms of geography,
customer concentration, and service channel, and we believe this
strategy will continue to set us apart and allow us to mitigate the
impacts of adverse events taking place on a local or global
scale.
We are recognised as part of the essential supply chain for our
customers in the health, welfare and protection of their employees.
Understanding the vulnerability of many of the communities in which
the Company operates, we continue to advocate with these customers
to allow us to execute our projects in planned timelines, taking
all necessary and recommended precautions. We believe that
continuing economic activity is integral to ensuring that
vulnerable communities do not collapse in these unprecedented
times.
Outlook
The momentum of the second half of 2019 continued into the start
of 2020 with a heightened level of activity as we continued to
deliver on a greater number of larger, long-term contracts. Whilst
COVID-19 will have a material effect on our 2020 financial results,
we believe the impact will be limited to project delays rather than
cancellations. We see this as a temporary issue and when COVID-19
is contained, or possibly sooner, we will return to work as normal,
executing against our USD 139m order book and continuing to bid for
new and exciting projects.
Soraya Narfeldt
Chief Executive Officer
17 April 2020
FINANCIAL REVIEW
Overview
The Company's financial performance for the fiscal year ended
2019 was ahead of our expectations from a revenue perspective and
broadly in line in terms of profitability. Reported revenue was USD
69.1m (2018: USD 54.8m) representing an increase of 26% when
compared to the previous year. This translated into an underlying
profit of USD 13.3m (2018 restated: USD 12.8m) reflecting the mix
of business executed in 2019 and a delay experienced in commencing
a construction project in H1 2019. Statutory profit was USD 12.9m
(2018 restated(1): USD 9.8m).
2019 2018
USD'000 USD'000
Restated(1)
Revenue 69,064 54,805
Underlying operating profit(2) 14,734 14,168
Operating profit 13,640 13,581
Underlying profit(3) 13,259 12,761
Profit before tax 13,259 9,827
Basic EPS (cents) 7.4 6.3
Net Cash (end of period)(4) 21,393 27,804
Revenue
2019 revenue was weighted towards the second half as a result of
a delay in the commencement of one large contract in H1 2019, with
the Company generating the highest half-year revenue total in its
history in H2 2019. The USD 46.0m of turnover in H2 2019 was 60%
higher than in H2 2018.
The Company does not typically experience seasonality, rather
the weighting in the second half was the result of winning
contracts with an aggregate value of USD 66m in H1 2019, with the
majority of these contracts commencing in the third quarter of the
year. Additionally, the timing of revenue from short-term contracts
(STCs) executed during the year was significantly weighted to the
second half: USD 0.8m in H1 2019 and USD 10.8m in H2 2019. Overall,
STC revenue increased to USD 11.6m in 2019 compared with USD 8.3m
in 2018. This was USD 1.6m below expectations stated in our interim
report and resulted from client requested schedule changes to two
projects. As a result, USD 2.7m of revenue originally expected to
be recognised in H2 2019 will now be recognised in H1 2020.
Profit
Gross profit margin in 2019 decreased to 31.7% (2018 restated(1)
: 37.6%) due to a number of factors:
1. The H1 2019 delay in a significant contract award led to a
reported H1 2019 gross margin of 31.0%, down from 38.1% when the
operating location affected is excluded. H2 2019 gross margin from
this operating location was 36.0%;
2. H2 2019 gross margin was 32.1% as a result of an increase in
the proportion of revenue being generated from supply chain
business and short-term construction projects. 24% of second half
revenue was from supply chain activities whereas historically this
figure has averaged approximately 5%. While we anticipate supply
chain activities will continue to contribute significantly to Group
revenue, we do not anticipate it will continue to grow as a
percentage of total revenue. We also anticipate margin from supply
chain activities to increase as we undertake more complex supply
chain projects; and
3. We commenced a number of hybrid contracts in 2019, where we
were supplying and installing infrastructure and supplying,
constructing and servicing infrastructure. In all cases, the
lower-margin work was substantially complete at the end of 2019 and
as a result the margins from these projects are forecast to
increase in 2020. While we will continue to bid for and hopefully
be awarded hybrid contracts, as we grow the effect individual
contracts have on gross margin should diminish.
Underlying operating profit, which is used by the Company's
management to assess operating performance, increased by 4% to USD
14.7m (2018 restated(1) : USD 14.2m). Underlying profit also
increased by 4% to USD 13.3m (2018 restated(1): USD 12.8m) and
underlying margin was 19.2% (2018 restated(1) : 23.3%) again
reflecting the mix of business executed in 2019, timing of profits
earned from hybrid contracts, and the contract delay experienced in
the first half of the year. While net finance costs decreased by
USD 0.4m in 2019, these savings were offset by the Company
incurring a full year of holding company expenses resulting from
its Admission to AIM in mid-2018.
Comparability of Performance Measures
Many companies who provide IFM services use EBITDA as a primary
performance measure. We do not as we employ significantly more
capital than traditional IFM providers. Hospitality Services, which
is capital intensive, makes up a large percentage of our IFM
revenue and we perform construction services (where the primary
IFRS performance measure is often profit before tax).
We presently use Underlying profit and Underlying operating
profit as our primary performance measures, operating profit and
profit before tax being the related IFRS metrics. As the Group
matures and evolves, we will intermittently reassess these
performance measures to ensure they are the most relevant for
evaluating Group and management performance respectively. Please
refer to note 18 of the Notes to the Consolidated Financial
Statements for further information relating to Alternative
Performance Measures (APMs).
2019 2018
USDm USDm
Profit 12.9 9.8
Tax expense 0.4 -
Profit before tax 13.3 9.8
Exceptional items - 2.9
Underlying profit 13.3 12.8
Finance costs 0.7 0.8
Investment revenue (0.3) -
Operating profit 13.6 13.6
Depreciation 2.6 1.5
EBITDA 16.2 15.1
The Company incurred a tax charge of USD 0.4m in 2019 (2018:
nil) relating to income tax paid and accrued in connection with
contracts undertaken for commercial customers.
Earnings per share
Earnings per share for 2019, both basic and diluted, was 7.4
cents per share (2018 restated(1): 6.3 cents per share).
Cash flow
The Company targets a 100% cash conversion ratio but significant
increases in operational activity in the second half of 2019, as
they did in 2018, led to short-term divergences.
Cash flow generated from operations during the year was USD 8.9m
(2018 restated(1): USD 11.4m) which represents 66% cash
conversion(5) (2018 restated(1): 84%). The primary factor
contributing to the short-term differential was a USD 7.4m increase
in year end net working capital resulting primarily from an
increase in accrued revenue of USD 7.5m. Approximately half of the
USD 10.9m year end accrued revenue balance relates to a contract to
supply and install modified shipping containers. Due to the fact
that the Company generally requires in-country client sign off of
its invoices before invoices are sent to a second country for
submittal, the balance of accrued revenue normally approximates one
month of revenue. Total trade receivables and accrued revenue at
2019 year end represented 101% of the Company's revenue generated
in the last two months of the year (2018: 119%). The decrease in
this ratio is both a function of the Company improving its trade
receivable collection and a result of further diversification of
its customer base.
2019 2018
USDm USDm
Cash flows generated from operations
before changes in working capital 16.3 15.7
Change in working capital -7.4 -4.3
----------------------------------------- ------ ------
Cash flows generated from operations 8.9 11.4
Tax paid (0.1) -
End of service benefits and stock-based
compensation costs (0.1) -
Net cashflow from operating activities 8.7 11.4
========================================= ====== ======
During 2019 the Company continued to invest in revenue
generating property plant and equipment. Total capital expenditure
in 2019 was USD 12.4m (2018: USD 8.7m) of which USD 6.4m relates to
assets which are or will be utilised to provide Hospitality
Services. These assets are primarily Company constructed hotel or
commercial facilities and, in the majority of cases, the spend is
linked to recently awarded long-term contracts.
Additionally we invested in infrastructure, vehicles and
machinery to support our growing operations in South Sudan, where
the Company was awarded a USD 10.9m construction contract, and to
execute additional capital intensive contracts in East Africa where
there is a significant demand for contractors who can execute using
internationally accepted best practices and to specific western
country specifications.
The Company paid a post-Admission dividend in 2019 of 1.0p per
share (USD 1.3 cents), returning a total of USD 2.2m to
shareholders.
Balance Sheet
Net assets at 31 December 2019 were USD 69.5m (2018 restated(1):
USD 58.8m) with the majority of the total balance sheet comprising
cash and other current assets. Net working capital, inclusive of
cash, was USD 43.6m (2018: USD 43.0m) and the Company had no debt
(2018: nil) or committed capital expenditure for 2020 (2019:
nil).
As at the end of 2019 the Company had USD 21.4m in cash (2018:
USD 27.8m) and access to a short-term credit facility of USD 2.0m
(2018: USD 2.0m). Liquidity and net cash are often assessed by
potential customers during the contract adjudication process. We
are satisfied that both metrics are sufficient so that we can
continue to bid for larger projects and have the financial capacity
to mobilise multiple large projects simultaneously.
COVID-19
The spread of COVID-19 continues to heighten and is having a
significant impact on global economic activity. Until there is
clarity on the duration and severity of these events, it is not
possible to quantify the financial impact COVID-19 may have on the
Group; however, we have forecast our liquidity position and ability
to continue to trade as a going concern under multiple financial
scenarios and are confident that the going concern basis should be
adopted.
IFRS 16
The Company implemented IFRS 16 Leases for the first time in
2019, using a fully retrospective approach. The nature and effect
of the changes as a result of the adoption of this new accounting
standard are described in note 5 of the Notes to the Consolidated
Financial Statements and have resulted in the restatement of the
statutory accounts for the fiscal year ended 31 December 2018.
Dividend
The Directors have proposed a full year dividend of 1.25p per
share to be paid on 9 July 2020 to shareholders on the register as
at 29 May 2020.
Andrew Bolter
Chief Financial Officer
17 April 2020
Notes to Financial Review:
[1] The Company applied IFRS 16 Leases for the first time in
2019, using a fully retrospective approach. The nature and effect
of the changes as a
result of the adoption of this new accounting standard are
described in note 5 of the Notes to the Consolidated Financial
Statements and have
resulted in the restatement of the statutory accounts for the
fiscal year ended 31 December 2018.
2 Underlying operating profit represents operating profit less
holding company expenses and acquisition costs.
3 Underlying profit represents profit before tax and
non-reoccurring exceptional items.
4 Net cash represents cash less overdraft balances, term loans
and notes outstanding.
5 Cash conversion is calculated as cashflow generated from
operations divided by operating profit.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2019 2018
Notes USD'000 USD'000
Restated
Revenue 7 69,064 54,805
Direct costs 11 (47,174) (34,221)
---------------- ----------------
Gross profit 21,890 20,584
Administrative expenses 11 (7,156) (6,416)
---------------- ----------------
Underlying operating profit 14,734 14,168
Acquisition costs (46) (82)
Holding company expenses (1,048) (505)
---------------- ----------------
Operating profit 13,640 13,581
Investment revenue 294 34
Finance costs (675) (854)
---------------- ----------------
Underlying profit 13,259 12,761
Exceptional items 13 - (2,934)
---------------- ----------------
Profit before tax 13,259 9,827
Tax expense 14 (384) -
---------------- ----------------
Profit and total comprehensive income
for the period 12,875 9,827
Basic and diluted earnings per share
(cents) 15 7.4 6.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2019 2018 2017
Notes USD'000 USD'000 USD'000
Restated Restated
Assets
Non-current assets
Property, plant,
and equipment 19 28,516 18,624 11,262
Goodwill 10 138 - -
---------------- ---------------- ----------------
28,654 18,624 11,262
Current assets
Inventories 20 6,178 4,263 2,660
Trade and other
receivables 21 24,520 15,962 12,669
Cash and cash equivalents 22 21,393 27,804 7,469
---------------- ---------------- ----------------
52,091 48,029 22,798
---------------- ---------------- ----------------
Total assets 80,745 66,653 34,060
Equity and liabilities
Equity
Share capital 23 24,300 24,300 272
Additional contributed
capital - - 1,809
Share premium 18,254 18,254 -
Merger reserve (17,803) (17,803) -
Share based payment
reserve 47 16 -
Retained earnings 44,685 34,013 22,733
---------------- ---------------- ----------------
Total equity 69,483 58,780 24,814
---------------- ---------------- ----------------
Non-current liabilities
Term loans and notes - - 6
Lease liabilities 24 2,397 2,532 2,319
Employees' end of
service benefits 25 391 350 251
---------------- ---------------- ----------------
2,788 2,882 2,576
---------------- ---------------- ----------------
Current liabilities
Term loans and notes - - 1,861
Lease liabilities 24 437 111 60
Trade and other
payables 26 8,037 4,880 4,749
---------------- ---------------- ----------------
8,474 4,991 6,670
---------------- ---------------- ----------------
Total liabilities 11,262 7,873 9,246
---------------- ---------------- ----------------
Total equity and
liabilities 80,745 66,653 34,060
The financial statements were approved by the Board of Directors
on 17 April 2020 and signed on its behalf by:
_________________________________
_________________________________
Soraya Narfeldt Andrew Bolter
CEO CFO
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Additional Based
Share Contributed Share Merger Payment Retained
Capital Capital Premium Reserve(*) Reserve Earnings Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
As at 1
January
2018
previously
reported 272 1,809 - - - 23,020 25,101
Impact of
adoption
of IFRS
16 - - - - - (287) (287)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
As at 1
January
2018 restated 272 1,809 - - - 22,733 24,814
Total
comprehensive
income for
the period
** - - - - - 9,827 9,827
Share exchange
(note 8) 19,612 (1,809) - (17,803) - - -
Issue of
share capital
(note 8) 4,416 - 18,254 - - - 22,670
Non-cash
employee
compensation
(note 16) - - - - - 1,578 1,578
Share based
payments
(note 16) - - - - 16 - 16
Dividends
declared
and paid
(note 17) - - - - - (125) (125)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
As at 31
December
2018 24,300 - 18,254 (17,803) 16 34,013 58,780
Total
comprehensive
income for
the period - - - - - 12,875 12,875
Share based
payments
(note 16) - - - - 31 - 31
Dividends
declared
and paid
(note 17) - - - - - (2,203) (2,203)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
As at 31
December
2019 24,300 - 18,254 (17,803) 47 44,685 69,483
(*) Merger reserve represents the difference between the share
capital of RA International FZCO and the nominal value of the
shares issued by the Company to acquire RA International FZCO (note
8).
(**) Total comprehensive income recognised in 2018 has been
restated due to the adoption of IFRS 16 (note 5).
CONSOLIDATED STATEMENT OF CASH FLOWS
2019 2018
Notes USD'000 USD'000
Restated
Operating activities
Operating profit 13,640 13,581
Adjustments for non-cash and other items:
Depreciation on property, plant, and equipment 19 2,577 1,510
Loss on disposal of property, plant, and
equipment 19 46 120
Unrealised differences on translation of
foreign balances (165) 364
Provision for employees' end of service
benefits 25 174 116
Share based payments 16 31 16
---------------- ----------------
16,303 15,707
Working capital adjustments:
Inventories (1,607) (1,587)
Accounts receivable, deposits, and other
receivables (8,306) (2,627)
Accounts payable and accruals 2,559 (58)
---------------- ----------------
Cash flows generated from operations 8,949 11,435
Tax paid 14 (144) -
Employees' end of service benefits paid 25 (133) (17)
Stock-based compensation and related costs 16 - (24)
---------------- ----------------
Net cash flows from operating activities 8,672 11,394
---------------- ----------------
Investing activities
Investment revenue received 294 34
Release of cash margin against guarantees
issued - 2,000
Purchase of property, plant, and equipment 19 (12,358) (8,683)
Proceeds from disposal of property, plant,
and equipment 19 170 97
Acquisition of subsidiary (net of cash
acquired) 30 (106) (565)
---------------- ----------------
Net cash flows used in investing activities (12,000) (7,117)
---------------- ----------------
Financing activities
Repayment of term loans and notes - (1,867)
Payment of lease liabilities 24 (370) (73)
Finance costs paid (675) (853)
Dividends paid 17 (2,203) (125)
Share listing costs 8 - (1,332)
Issue of share capital (net of issue costs
paid) 8 - 22,672
---------------- ----------------
Net cash flows (used in) / from financing
activities (3,248) 18,422
---------------- ----------------
Net (decrease) / increase in cash and cash
equivalents (6,576) 22,699
Cash and cash equivalents as at start of
the period 22 27,804 5,469
Effect of foreign exchange on cash and
cash equivalents 165 (364)
---------------- ----------------
Cash and cash equivalents as at end of
the period 22 21,393 27,804
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. The
Company acquired, by way of a share for share exchange (the
"Exchange") the entire issued share capital of RA International
FZCO and its subsidiaries ("RA") on 12 April 2018. The Group
reorganisation is treated as a common control transaction, for
which there is no specific accounting guidance under IFRS.
Consequently, the integration of the Company has been accounted for
using merger accounting principles. The policy, which does not
conflict with International Financial Reporting Standards (IFRS),
reflects the economic substance of the transaction.
The adoption of merger accounting presents the Company as if it
had always been the parent of the Group. As the Company was not
incorporated until 13 March 2018, the financial statements of the
Group represent a continuation of the financial statements of RA
International FZCO, the former parent of the Group.
2 BASIS OF PREPARATION
The financial statements have been prepared in accordance with
IFRS as adopted by the European Union and the Companies Act 2006.
They have been prepared under the historical cost basis and have
been presented in United States Dollars (USD), being the functional
currency of the Group.
The financial information set out in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 31 December 2019 or 2018 but is derived from those
accounts. Statutory accounts for the year ended 31 December 2019
will be delivered to the Registrar of companies in due course. The
auditor has reported on the accounts; its report was unqualified,
did not contain an emphasis of matter reference and did not contain
statements under section 498 (2) or (3) of the Companies Act
2006.
Going concern
The Group has a sufficient level of cash and access to liquidity
to be able to operate for the foreseeable future and accordingly it
is appropriate to prepare the financial statements on a going
concern basis.
In assessing the basis of preparation of the financial
statements the Board has undertaken a rigorous assessment of going
concern, considering financial forecasts and utilising scenario
analysis to test the adequacy of the Group's liquidity. These
include multiple scenarios which specifically forecast the
potential impact of COVID-19 on the Group's trading.
The Group has performed a comprehensive analysis with respect to
the potential operational and financial risks associated with
COVID-19. The primary impact of COVID-19 on the Group is that, as
customers implement social distancing measures and repatriate their
staff from remote locations, some construction contracts have been
suspended and scope modifications have been made to a number of
service contracts. Based on discussions with customers, the Board
expects that most of these contracts will return to normal
operating circumstances within a three to six-month period.
The Board has approved financial forecasts that take into
account the potential impact of COVID-19 on the Group's operations,
as well as potential downside sensitivities which include the
cessation of all operations for a 3 month or 6 month period. Under
all of these scenarios the Group continues to be cash positive and
further mitigations have been identified to preserve cash if
required to provide additional headroom and remain cash positive if
there was a worsening of conditions beyond the downside scenarios
considered.
The Board has also assessed the Group's ability to overcome the
operating challenges associated with continuing to service clients
throughout the term of the pandemic and has concluded that the
Group will be able to continue to meet its contractual commitments.
The Group's primary activity is undertaking projects in locations
where a crisis situation is either ongoing or there is a reasonable
expectation that a crisis will occur during the term of the
project. As a result, the Group has existing plans in place to
address the operating challenges associated with restrictions on
both the movement of people and goods. It also has existing
infrastructure, procedures, and insurance in place to address the
safety and security of its staff and assets.
3 BASIS OF CONSOLIDATION
The financial statements comprise the financial statements of
the Company and its subsidiaries as at 31 December 2019. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the
Group has:
-- Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee),
-- Exposure, or rights, to variable returns from its involvement with the investee, and
-- The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee,
-- Rights arising from other contractual arrangements, and
-- The Group's voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Company loses control over the
subsidiary. Assets, liabilities, income, and expenses of a
subsidiary acquired or disposed of during the year are included in
the financial statements from the date the Group gains control
until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements
of a subsidiary to bring their accounting policies into line with
the Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
A change in the ownership interest of a subsidiary, without a
change of control, is accounted for as an equity transaction.
If the Company loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities,
non-controlling interest, and other components of equity while any
resultant gain or loss is recognised in the profit or loss. Any
investment retained is recognised at fair value.
Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at the fair value
on the acquisition date. The net identifiable assets acquired, and
liabilities assumed are recorded at their respective fair values on
the acquisition date. Acquisition-related costs are expensed as
incurred and included in acquisition costs.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition
date.
4 SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Revenue from contracts with customers is recognised when control
of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services. The Group
has concluded that it is acting as a principal in all its revenue
arrangements.
Sale of goods
Revenue from the sale of goods is recognised when control of
ownership of the goods have passed to the buyer, usually on
delivery of the goods.
C onstruction
Typically, revenue from construction contracts is recognised at
a point in time when performance obligations have been met.
Generally, this is the same time at which client acceptance has
been received. Dependant on the nature of the contracts, in some
cases revenue is recognised over time using the percentage of
completion method.
Services
Revenue from providing services is recognised over time,
applying the time elapsed method for accommodation and similar
services to measure progress towards complete satisfaction of the
service, as the customers simultaneously receive and consume the
benefits provided by the Group.
Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
Direct costs
Direct costs represent costs directly incurred or related to the
core business of the Group.
Contract balances
Trade receivables
A receivable represents the Group's right to an amount of
consideration that is unconditional, meaning only the passage of
time is required before payment of the consideration is due.
Accrued revenue
Accrued revenue represents the right to consideration in
exchange for goods or services transferred to a customer in
connection with fulfilling contractual performance obligations. If
the Group performs by transferring goods or services to a customer
before invoicing, accrued revenue is recognised in an amount equal
to the earned consideration that is conditional on invoicing. Once
an invoice has been accepted by the customer accrued revenue is
reclassified as a trade receivable.
Customer advances
If a customer pays consideration before the Group transfers
goods or services to the customer, a customer advance is recognised
when the payment is received by the Group. Customer advances are
recognised as revenue when the Group meets its obligations to the
customer.
Tax
Current tax expense is based on taxable profit for the year and
is recognised in profit or loss. Taxable profit may differ from net
profit reported in the statement of comprehensive income because it
excludes items of income and expense that are taxable or deductible
in other years, and it excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the statement of financial position date.
Property, plant, and equipment
Property, plant, and equipment are stated at cost less
accumulated depreciation and any impairment in value. Capital
work-in-progress is not depreciated until the asset is ready for
use. Depreciation is calculated on a straight-line basis over the
estimated useful lives as follows:
Buildings Lesser of 20 years and term of land lease
Leasehold improvements 10 years or term of lease
Furniture and fixtures 5 years
Shipping containers 20 years
IT equipment 5 years
Tools and equipment 5 to 10 years
Motor vehicles 10 years
The carrying values of property, plant, and equipment are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down, with the
write down recorded in profit or loss to their recoverable amount,
being the greater of their fair value less costs to sell and their
value in use.
Expenditure incurred to replace a component of an item of
property, plant, and equipment that is accounted for separately is
capitalised and the carrying amount of the component that is
replaced is written off. Other subsequent expenditure is
capitalised only when it increases future economic benefits of the
related item of property, plant, and equipment. All other
expenditure is recognised in profit or loss as the expense is
incurred.
An item of property, plant, and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use. Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal proceeds and
carrying amount of the asset) is included in the profit or loss in
the year the asset is derecognised.
Assets' residual values, useful lives, and methods of
depreciation are reviewed at each financial year end, and adjusted
prospectively, if appropriate.
Goodwill
Goodwill is stated as cost less accumulated impairment losses.
Cost is calculated as the total consideration transferred less net
assets acquired.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs include those expenses incurred in bringing each
product to its present location and condition. Cost is calculated
uses the weighted average method. Net realisable value is based on
estimated selling price less any further costs expected to be
incurred in disposal.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and balances
with banks, which are readily convertible to known amounts of cash
and have a maturity of three months or less from the date of
acquisition. This definition is also used for the consolidated cash
flow statement.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the
Group estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs to sell and its value in use. An
asset's recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where
the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining
fair value less costs to sell, an appropriate valuation model is
used maximising the use of observable inputs. These calculations
are corroborated by valuation multiples, quoted share prices for
publicly traded entities or other available fair value
indicators.
The Group bases its impairment calculation on detailed budgets
and forecasts which are prepared separately for each of the Group's
cash-generating units to which the individual assets are allocated.
These budgets and forecasts generally cover a period of five years.
For longer periods, a long-term growth rate is calculated and
applied to project future cash flows after the fifth year.
Impairment losses relating to continuing operations are
recognised in those expense categories consistent with the function
of the impaired asset.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the Group estimates the asset's or CGU's recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the profit or loss.
Financial instruments
i) Financial assets
Initial recognition and measurement
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial
asset or part of a group of similar financial assets) is
derecognised when the rights to receive cash flows from the asset
has expired.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a
simplified approach in calculating ECLs. Therefore, the Group does
not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
A financial asset is deemed to be in default when internal or
external information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. A financial
asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are initially recognised at fair value and
subsequently classified at fair value through profit or loss, loans
and borrowings, or payables. Loans and borrowings and payables are
recognised net of directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables.
Subsequent measurement
The measurement of financial liabilities depends on their
classification as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as held at fair
value through profit or loss.
Financial liabilities designated upon initial recognition at
fair value through profit or loss are designated at the initial
date of recognition, and only if the criteria in IFRS 9 are
satisfied. The Group has not designated any financial liability
as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered
into by the Group that are not designated as hedging instruments in
hedge relationships as defined by IFRS 9. Separated embedded
derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Loans and payables
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expires.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
profit or loss.
Employees' end of service benefits
The Group provides end of service benefits to its employees in
accordance with local labour laws. The entitlement to these
benefits is based upon the employees' final salary and length of
service, subject to the completion of a minimum service period. The
expected costs of these benefits are accrued over the period of
employment.
Share based payments
Employees (including senior executives) of the Group receive
remuneration in the form of share based payments, whereby employees
render services as consideration for equity instruments
(equity-settled transactions).
The cost of equity-settled transactions is determined by the
fair value at the date when the grant is made using an appropriate
valuation model, further details of which are provided in note
16.
That cost is recognised in employee benefits expense, together
with a corresponding increase in equity (share based payment
reserve), over the period in which the service and, where
applicable, the performance conditions are fulfilled (the vesting
period). The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will
ultimately vest. The expense or credit in the statement of profit
or loss for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into
account when determining the grant date fair value of awards, but
the likelihood of the conditions being met is assessed as part of
the Group's best estimate of the number of equity instruments that
will ultimately vest. Market performance conditions are reflected
within the grant date fair value. Any other conditions attached to
an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate
expensing of an award unless there are also service and/or
performance conditions.
No expense is recognised for awards that do not ultimately vest
because non-market performance and/or service conditions have not
been met. Where awards include a market or non-vesting condition,
the transactions are treated as vested irrespective of whether the
market or non-vesting condition is satisfied, provided that all
other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted earnings
per share.
Contingencies
Contingent liabilities are not recognised in the financial
statements, they are disclosed unless the possibility of an outflow
of resources embodying economic benefits is remote. A contingent
asset is not recognised in the financial statements but disclosed
when an inflow of economic benefits is probable.
Foreign currencies
The Group's financial statements are presented in USD, which is
the functional currency of all Group companies. Items included in
the financial statements of each entity are measured using that
functional currency.
Transactions in foreign currencies are initially recorded at the
functional currency rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of exchange
prevailing at the reporting date. All differences are taken to
profit or loss.
Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rates as at the
dates of the initial transactions. Non-monetary items measured at
fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Foreign currency share capital (including any related share
premium or additional paid-in capital) is translated using the
exchange rates as at the dates of the initial transaction. The
value is not remeasured.
5 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
New and amended standards and interpretations
The Group applied IFRS 16 Leases for the first time in 2019,
using a fully retrospective approach. The nature and effect of the
changes as a result of the adoption of this new accounting standard
are described below.
The Group has not early adopted any standards, interpretations
or amendments that have been issued but are not yet effective.
IFRS 16 Leases
IFRS 16 was issued in January 2016 and replaces IAS 17 Leases,
IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15
Operating Leases-Incentives and SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease. IFRS 16 sets out
the principles for the recognition, measurement, presentation, and
disclosure of leases and requires lessees to account for all leases
under a single on-balance sheet model similar to accounting for
finance leases under IAS 17. The standard includes two recognition
exemptions for lessees - leases of 'low-value' assets and
short-term leases. At the commencement date of a lease, lessees
recognise a liability relating to future lease payments (i.e., the
lease liability) and an asset representing the right to use the
underlying leased asset during the lease term (i.e., the
right-of-use asset). Lessees are required to separately recognise
the interest expense on the lease liability and the depreciation
expense on the right-of-use asset.
Lessees are also required to remeasure the lease liability upon
the occurrence of certain events such as a change in lease term or
in future lease payments resulting from a change in an index or
reference rate used to determine those payments. The lessee will
generally recognise the amount of the remeasurement of the lease
liability as an adjustment
to the right-of-use asset.
Transition to IFRS 16
Before the adoption of IFRS 16, lease costs were recognised as
expenses in the period of asset use. The Group has chosen to adopt
the fully retrospective approach and as such has restated prior
period results as if IFRS 16 had always been in place.
As a result, 2018 opening retained earnings decreased by USD
287,000 to reflect the impact of IFRS 16 in periods previous to 1
January 2018. A right-of-use asset of USD 2,092,000 was also
recognised together with associated aggregate lease liabilities of
USD 2,379,000 as at 1 January 2018.
2018 reported direct costs have decreased by USD 311,000,
administrative expenses increased by USD 9,000 and finance costs
increasing by USD 447,000. Earnings per share and diluted earnings
per share decreased by 0.1 cents.
Property, plant and equipment has increased by USD 2,229,000 as
at 31 December 2018, with lease liabilities increasing by USD
2,643,000. Retained earnings have decreased by USD 432,000.
On the Statement of Cashflows, net cash flows from operating
activities increased by USD 520,000 for the year ended 31 December
2018, with net cash flows from financing activities decreasing by
USD 520,000.
The Group has chosen to take advantage of the exemptions for
leases of 'low-value' assets and short-term leases. Rental expense
relating to these leases will continue to be fully recognised in
direct costs and administrative expenses.
Presentation of Statement of Cash Flows
The Company has modified the presentation of the Consolidated
Statement of Cash Flows to start with operating profit rather than
profit before tax, so as to increase the similarity of presentation
to sector comparators. The Company believes this provides a more
meaningful basis for users of the financial statements. Prior
period results have been restated accordingly.
6 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that may affect the
reported amount of assets and liabilities, revenue, expenses,
disclosure of contingent liabilities, and the resultant provisions
and fair values. Such estimates are necessarily based on
assumptions about several factors and actual results may differ
from reported amounts.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
a) Judgments
Use of Alternative Performance Measures
IAS1 requires material items to be disclosed separately in a way
that enables users to assess the quality of a company's
profitability. In practice, these are commonly referred to as
'exceptional' items, but this is not a concept defined by IFRS and
therefore there is a level of judgement involved in arriving at an
Alternative Performance Measure (APM) which excludes such
exceptional items. The Group considers items which are material and
outside its normal operating practice to be suitable for separate
presentation. Further details can be found in note 18.
b) Estimates and assumptions
Percentage of completion
The Group uses the output percentage-of-completion method when
accounting for contract revenue on its long-term construction
contracts. Use of the percentage-of-completion method requires the
Group to estimate the progress of contracts based on surveys of
work performed. The Group has determined this basis of revenue
recognition is the best available measure on such contracts and
where possible seeks customer verification of
percentage-of-completion calculations as at financial reporting
dates.
The accuracy of percentage-of-completion estimates has a
material impact on the amount of revenue and related profit
recognised. As at 31 December 2019, USD 2,806,000 of accrued
revenue had been calculated using the percentage-of-completion
method (2018: USD 1,676,000), of which USD 884,000 is supported by
customer verifications (2018: USD 1,035,000).
Revisions to profit or loss arising from changes in estimates
are accounted for in the period when the changes occur.
7 SEGMENTAL 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:
2019 2018
USD'000 USD'000
Integrated facilities management 28,600 23,145
Construction 27,634 29,479
Supply chain services 12,830 2,181
---------------- ----------------
69,064 54,805
The Group allocates a contract to a specific service channel
based on the nature of the primary deliverable to the customer.
Revenue by recognition timing:
2019 2018
USD'000 USD'000
Revenue recognised over time 38,450 23,145
Revenue recognised at a point
in time 30,614 31,660
---------------- ----------------
69,064 54,805
Geographic segment
The Group primarily operates in Africa and as such the CODM
considers Africa and Other locations 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:
2019 2018
USD'000 USD'000
Africa 68,735 48,003
Other 329 6,802
---------------- ----------------
69,064 54,805
Non-current assets by geographic area:
2019 2018
USD'000 USD'000
Restated
Africa 27,527 16,607
Other 1,127 2,017
---------------- ----------------
28,654 18,624
Revenue split by customer
2019 2018
% %
Customer A 30 30
Customer B 13 26
Customer C 11 2
Customer D 6 13
Other 40 29
---------------- ----------------
100 100
8 GROUP REORGANISATION
Share for Share Exchange
On 12 April 2018, RAI acquired 100% ownership of RA through a
share for share exchange transaction (the "Exchange"). The cost of
RA was established and accounted for with reference to IAS 27 which
states that when a parent reorganises the structure of its group by
establishing a new entity as its parent, and meets specific
criteria, the new parent measures cost at the carrying amount of
its share of the equity items shown in the separate financial
statements of the original parent at the date of the
reorganisation. In the case of the Exchange, RA was the former
parent of the Group and all relevant criteria were met, as a result
the cost of RA was determined to be USD 29,781,000, being the
carrying amount of the equity of RA at the date of the
Exchange.
USD'000
Equity balances of RA at date
of Exchange
Share capital 272
Additional contributed capital 1,809
Retained earnings 27,700
----------------
Total equity balances of RA at
date of Exchange 29,781
The consideration paid to the shareholders of RA was 139,999,998
ordinary shares of GBP 0.10 each.
The difference between the total equity balances of RA and the
nominal value of shares issued by RAI at the date of the Exchange
is recorded as a merger reserve. Upon consolidation, all
intra-group transactions, balances, income and expense are
eliminated, and the merger reserve is equal to the difference
between the nominal value of the shares issued by RAI and the total
share capital and additional contributed capital of RA at the date
of the Exchange.
Initial Public Offering
On 29 June 2018, RAI undertook an initial public offering (IPO)
and was admitted to trade on the Alternative Investment Market
(AIM), a sub-market of the London Stock Exchange. New ordinary
shares of 33,575,741 were issued on the date of the IPO bringing
the total number of shares outstanding to 173,575,741. These shares
have a par value of GBP 0.10 and were sold by RAI at GBP 0.56 per
share.
During the IPO process, the Group incurred USD 2,059,000 of
expenses which were incremental and directly attributed to the
equity raise. As per IAS 32, these costs are to be accounted for as
a deduction from equity raised and as a result the net proceeds of
the IPO were USD 22,672,000.
USD'000
Reconciliation of IPO proceeds
Proceeds from issue of share capital 24,731
Costs incurred and attributable
to issue of share capital (2,059)
----------------
Net proceeds from issue of share
capital 22,672
9 GROUP INFORMATION
The Company operates through its subsidiaries, listed below,
which are legally or beneficially, directly or indirectly owned and
controlled by the Company.
The extent of the Company's beneficial ownership and the
principal activities of the subsidiaries are as follows:
Name of the entity Country of incorporation Beneficial ownership Registered address
RA Africa Holdings Limited British Virgin Islands 100% 3rd floor, J&C Building, PO
Box 362, Road Town, Torola
Virgin Islands (British) VG110
RA Asia Holdings Limited British Virgin Islands 100% 3th floor, J&C Building, PO
Box 362, Road Town, Torola
Virgin Islands (British) VG110
RASB Holdings Limited British Virgin Islands 100% 3th floor, J&C Building, PO
Box 362, Road Town, Torola
Virgin Islands (British) VG110
RA International Limited Cameroon 100% 537 Rue Njo-Njo, Bonaprisi, PO
Box 1245, Douala, Cameroon
RA International RCA Central African Republic 100% Avenue des Martyrs, Bangui,
Central African Republic
RA International Chad Chad 100% N'djamena, Chad
RA International DRC SARL Democratic Republic of Congo 100% Kinshasa, Sis No106,
Boulvevard Du 30 Juin, Dans La
Commune De La Gombe EN RD,
Congo
RA Property ApS Denmark 100% Tuborg Boulevard 12, 4 DK-2900
Helerup, Denmark
Raints Ghana Limited Ghana 100% PO Box 2843 Accra, Ghana
Windward Insurance PCC Limited Guernsey 100% Level 5, Mill Court, la
- Berkshire Cell Charroterie, St Peter Port,
Guernsey, GY1 1EJ
RA International Guyana Inc. Guyana 100% 210 New Market Street,
Geoegetown, Guyana
Raints Kenya Limited Kenya 100% 770 Faith Ave, Runda Estate,
Nairobi City (North), Nairobi,
Kenya
RA International Limited Malawi 100% Hanover House, Hanover Avenue,
Independence Drive, Blantyre,
Malawi
Raints Mali Mali 100% Bamako-Niarela Immeuble Sodies
Appartement C/7, Mali
RA International Limitada Mozambique 100% Distrito Urbano 1, Bairro
Sommarchield, Av, Kenneth
Kaunda no 783 R/C, Maputo,
Mozambique
Royal Food Solutions S.A Mozambique 100% Distrito Urbano 1, Bairro
Central, Rua do Sol, 23
Maputo, Mozambique
RA International Niger Niger 100% Niamey, Quartier Cite
Piudriere, Avenue du Damergou,
CI-48, Niger
RA Contracting and Facility Qatar 100% 63 Aniza, Doustor St. 905,
Management LLC Salam International, Qatar
RA International(*) Somalia 100% Mogadishu, Somalia
RA International FZCO South Sudan 100% Plot no. 705, Block 3-K South,
, Airport Road, Hai Matar
South Sudan
Reconstruction and Assistance Sudan 100% 115 First Quarter Graif
Company Ltd west-Khartoum, Kharthoum,
Republic of Sudan
RA International Limited Tanzania 100% 369 Toure Drive, Oysterbay, PO
Box 62, Dar Es Salaam,
Tanzania
RA International FZCO UAE 100% Office Number S101221O39,
Jebel Ali Free Zone, Dubai,
United Arab Emirates
RA International General UAE 100% Bay Square Building 12, Office
Trading LLC 704, Al Abraj Street, Business
Bay, PO Box 115774, Dubai,
United
Arab Emirates
RA SB Ltd. UAE 100% RAK International Corporate
Centre, Ras Al Khaimah, United
Arab Emirates
RA International Limited Uganda 100% 4th Floor, Acacia Mall, Plot
14-18, Cooper Road, Kololo,
Kampala, Uganda
REMSCO Uganda (SMC) Limited Uganda 100% 4th Floor, Acacia Mall, Plot
14-18, Cooper Road, Kololo,
Kampala, Uganda
(*) RA International in Somalia is not an incorporated legal
entity.
10 GOODWILL
2019 2018
USD'000 USD'000
As at 1 January - -
Acquisitions 138 -
Impairment - -
---------------- ----------------
As at 31 December 138 -
11 PROFIT FOR THE PERIOD
Profit for the period is stated after charging:
2019 2018
USD'000 USD'000
Restated
Staff costs 21,775 20,518
Materials 20,671 10,688
Depreciation 2,577 1,510
Staff costs relate to wages and salaries plus directly
attributable expenses.
Amounts paid or payable by the Group in respect of audit and
non-audit services to the Auditor are shown below.
2019 2018
USD'000 USD'000
Fees for the audit of the interim
accounts 25 25
Fees for the audit of the Company
annual accounts 115 116
Fees for the audit of the subsidiary
annual accounts 60 60
---------------- ----------------
Total audit fees 200 201
Audit related assurance services - -
Non-audit related services 54 75
Fees in relation to the IPO - 457
---------------- ----------------
Total non-audit fees 54 532
The non-audit fees incurred in the prior year represent services
undertaken by a separate EY team as part of the Group's IPO process
and as part of a corporate acquisition that was completed in 2018.
No members of the audit team were involved in undertaking these
non-audit procedures and strict independence processes were in
place. All non-audit services, post IPO, have been assessed and
approved by the Audit Committee.
12 EMPLOYEE EXPENSES
The average number of employees (including directors) employed
during the period was:
2019 2018
Directors 7 4
Executive management 6 5
Staff 1,763 2,016
---------------- ----------------
1,776 2,025
The aggregate remuneration of the above employees was:
2019 2018
USD'000 USD'000
Wages and salaries 17,466 15,836
Social security costs 77 34
---------------- ----------------
17,543 15,870
The remuneration of the Directors and other key management
personnel of the Group are detailed in note 29.
13 EXCEPTIONAL ITEMS
2019 2018
USD'000 USD'000
Share listing costs(*) - 1,332
Stock-based compensation and related
costs (note 16) - 1,602
---------------- ----------------
- 2,934
(*) Share listing costs represent advisory, legal, and other
costs incurred in connection with the IPO which have not been
accounted for as a deduction from equity raised.
14 TAX
The tax charge on the profit for the year is as follows:
2019 2018
USD'000 USD'000
Current tax:
UK corporation tax on profit for - -
the year
Non-UK corporation tax 240 -
Adjustment for prior years 144 -
---------------- ----------------
Tax charge for the year 384 -
Factors affecting the tax charge
The tax assessed for the year varies from the standard rate of
corporation tax in the UK. The difference is explained below:
2019 2018
USD'000 USD'000
Restated
Profit before tax 13,259 9,827
---------------- ----------------
Expected tax charge based on the
standard average rate of corporation
tax in the UK of 19% (2018: 19%) 2,519 1,867
Effects of:
Expenses not deductible(*) - 257
Deferred tax asset not recognised 86 39
Exemptions and foreign tax rate
difference (2,365) (2,163)
Adjustment for prior years 144 -
---------------- ----------------
Tax charge for the year 384 -
(*) Expenses not deductible represent the costs incurred
relating to the share for share exchange and IPO.
The Group benefits from tax exemptions granted to its customers
who are predominantly governments and large supranational
organisations, as well as zero corporate tax rates in certain
countries of operation. The CODM is not aware of any factors that
indicate the tax rates in these countries will materially change in
future periods or that tax exemptions granted will no longer be
available to the Group.
15 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.
Since a new parent entity was established in 2018 by means of a
share for share exchange and the Group's financial statements have
been presented as a continuation of the existing group, the number
of shares taken as being in issue for the preceding period is the
number of shares issued by the new parent entity. As a result, the
opening balance of shares used in calculating the historical
weighted average number of shares presented in the comparative EPS
calculation is 139,999,998, being the number of ordinary shares
exchanged for the entire share capital of RA.
2019 2018
Restated
Profit for the period (USD'000) 12,875 9,827
Basic weighted average number
of ordinary shares 173,575,741 157,109,829
Effect of warrants - -
Effect of employee share options - -
---------------- ----------------
Diluted weighted average number
of shares 173,575,741 157,109,829
Basic earnings per share (cents) 7.4 6.3
Diluted earnings per share (cents) 7.4 6.3
16 SHARE BASED PAYMENT EXPENSE
The Group recognised the following expenses related to
equity-settled payment transactions:
2019 2018
USD'000 USD'000
Performance Share Plan 31 16
Other share based payments - 1,602
---------------- ----------------
31 1,618
Performance Share Plan
During the prior year, the Company introduced a Performance
Share Plan (PSP) whereby options may be granted to eligible
employees. Awards vest after a performance period of 3 years
subject to continuous employment and the achievement of a hurdle
total shareholder return (TSR) as at the end of the performance
period.
Weighted Weighted
average average
Number exercise Number exercise
of of
options price options price
2019 2019 2018 2018
GBP GBP
Outstanding at 1 January 2,826,085 0.10 - -
Granted during the year - - 2,826,085 0.10
---------------- ---------------- ---------------- ----------------
Outstanding at 31 December 2,826,085 0.10 2,826,085 0.10
Options issued under the PSP plan were valued using the Monte
Carlo Simulation model which is considered to be the most
appropriate for valuing options granted under schemes where there
are changes in performance conditions by which the options are
measured, such as for TSR based awards.
The fair value of the options at the grant date was USD 96,000
and a charge of USD 31,000 (2018: USD 16,000) was recognised in
administrative expenses for the fiscal year ended 2019.
The Monte Carlo and Black-Scholes models used the following
inputs:
Weighted average share 56p (USD
price 0.74)
Expected volatility 10.10%
Risk free rate 1.24%
Other share based payments
On Admission, in exchange for brokerage services provided to the
Company during its IPO, the Company issued a warrant instrument
granting its primary broker the right to subscribe for 671,514
ordinary shares of the Company. The warrants are exercisable for
five years from the date of Admission at a subscription price of
GBP 0.728 (USD 0.923) per ordinary share. They are
non-transferrable and are subject to typical anti-dilution rights
to adjust on a proportional basis for share consolidations, share
splits and stock dividends. The Company used the Black-Scholes
model to value the warrants at the grant date. The fair value of
the warrants is nil.
On Admission, the majority shareholder of RAI gifted 2,142,855
personally owned shares of the Company to certain employees of RA
International FZCO as a reward for past employment service. The
fair value of the shares on the grant date was GBP 0.56 (USD 0.74)
per share. A charge of USD 1,602,000 was recognised in exceptional
items in the prior year.
17 DIVIDS
During the period, a dividend of 1 pence (USD 0.01) per share
(173,575,741 shares) totalling GBP 1,736,000 (USD 2,203,000) was
declared and paid (2018: USD 12,500 per share (10 shares) totalling
USD 125,000).
18 ALTERNATIVE PERFORMANCE MEASURES
APMs used by the Group are defined below along with a
reconciliation from each APM to its IFRS equivalent, and an
explanation of the purpose and usefulness of each APM. APMs are
non-IFRS measures.
In general, APMs are presented externally to meet investors'
requirements for further clarity and transparency of the Group's
financial performance. APMs are also used internally by management
to evaluate business performance and for budgeting and forecasting
purposes.
Underlying Operating Profit (UOP)
The Group uses UOP as an alternative measure to Operating Profit
to better compare the profitability of its operations across
financial periods. UOP is calculated as Operating Profit less
holding company expenses and acquisition costs.
On 29 June 2018, RAI listed on AIM and began to incur costs
associated with being a listed company. No holding company expenses
were incurred in 2017 and a full year of these expenses were
incurred in 2019. Both holding company expenses and acquisition
costs do not relate to the day-to-day operating business of the
Group.
Underlying Operating Margin is calculated as UOP divided by
revenue.
Underlying Profit (UP)
The Group uses UP as an alternative measure to Profit Before Tax
so as to better compare the profitability of the Group across
financial periods. To calculate UP exceptional items are excluded
from Profit Before Tax.
Exceptional items are excluded as they are by definition
incurred outside of the normal operating practice of the Group.
Underlying Profit Margin is calculated as UP divided by
revenue.
Net Cash
Net cash represents cash less overdraft balances, term loans and
notes outstanding. This is a commonly used metric, helpful to
stakeholders when analysing the business.
19 PROPERTY, PLANT, AND EQUIPMENT
Right-of-use Machinery,
Assets motor
- vehicles,
Land and Land and furniture Leasehold
and
Buildings Buildings equipment improvements Total
USD'000 USD'000 USD'000 USD'000 USD'000
Cost:
At 1 January 2019
restated* 2,814 9,605 10,515 451 23,385
Additions 561 7,288 5,090 20 12,959
Disposals - (288) (713) - (1,001)
---------------- ---------------- ---------------- ---------------- ----------------
At 31 December 2019 3,375 16,605 14,892 471 35,343
---------------- ---------------- ---------------- ---------------- ----------------
Depreciation:
At 1 January 2019
restated* 585 888 3,233 55 4,761
Charge for the year 355 606 1,549 67 2,577
Relating to disposals - (19) (492) - (511)
---------------- ---------------- ---------------- ---------------- ----------------
At 31 December 2019 940 1,475 4,290 122 6,827
---------------- ---------------- ---------------- ---------------- ----------------
Net carrying amount:
At 31 December 2019 2,435 15,130 10,602 349 28,516
Right-of-use Machinery,
Assets motor
- vehicles,
Land and Land and furniture Leasehold
and
Buildings Buildings equipment improvements Total
USD'000 USD'000 USD'000 USD'000 USD'000
Cost:
At 1 January 2018
restated* 2,477 6,011 6,010 126 14,624
Additions restated* 337 3,690 4,668 325 9,020
Acquired on business
combination - 17 52 - 69
Disposals - (113) (215) - (328)
---------------- ---------------- ---------------- ---------------- ----------------
At 31 December 2018
restated* 2,814 9,605 10,515 451 23,385
---------------- ---------------- ---------------- ---------------- ----------------
Depreciation:
At 1 January 2018
restated* 385 560 2,391 26 3,362
Charge for the year
restated* 200 330 951 29 1,510
Relating to disposals - (2) (109) - (111)
---------------- ---------------- ---------------- ---------------- ----------------
At 31 December 2018
restated* 585 888 3,233 55 4,761
---------------- ---------------- ---------------- ---------------- ----------------
Net carrying amount:
At 31 December 2018
restated* 2,229 8,717 7,282 396 18,624
*Balances have been restated to reflect impact of IFRS 16. See
note 5 for further details.
Information related to lease liabilities is available in note
24.
The table below indicates the rents resulting from lease
contracts which are not capitalised.
2019 2018
USD'000 USD'000
Short-term leases 1,599 650
Short-term leases include amounts paid for vehicles and heavy
equipment rental, as well as short-term property leases.
20 INVENTORIES
2019 2018
USD'000 USD'000
Materials and consumables 4,839 3,241
Goods-in-transit 1,339 1,022
---------------- ----------------
6,178 4,263
There was no write down to NRV made in relation to inventory as
at 31 December 2019 (2018: nil)
21 TRADE AND OTHER RECEIVABLES
2019 2018
USD'000 USD'000
Trade receivables 10,820 9,992
Accrued revenue 10,916 3,393
Deposits 221 213
Prepayments 1,381 584
Other receivables 1,182 1,780
---------------- ----------------
24,520 15,962
Invoices are generally raised on a monthly basis, upon
completion, or part completion of performance obligations as agreed
with the customer on a contract by contract basis.
During the year 100% of accrued revenue was subsequently billed
and transferred to trade receivables from the opening unbilled
balance in the period (2018: 100%).
As at 31 December the transaction price allocated to remaining
performance obligations was USD 141,000,000 (2018: USD
119,200,000). This represents revenue expected to be recognised in
subsequent periods arising on existing contractual arrangements.
The Group has not taken the practical expedient in IFRS 15.121 not
to disclose information about performance obligations that have
original expected durations of one year or less and therefore no
consideration from contracts with customers is excluded from these
amounts. All revenue is expected to be recognised within the next 5
years.
As at 31 December the ageing of trade receivables was as
follows:
2019 2018
USD'000 USD'000
Not past due 7,396 5,912
Overdue by less than 30 days 1,058 3,249
Overdue by between 30 and 60 days 1,383 285
Overdue by more than 60 days 983 546
---------------- ----------------
10,820 9,992
Trade receivables are non-interest bearing and generally have
payment terms of 30 days. No ECL was recorded as at 31 December
2019 (2018: nil) and all receivables are expected, on the basis of
past experience, to be fully recoverable.
22 CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the consolidated statement of
financial position comprised of cash at bank of USD 21,393,000
(2018: USD 27,804,000).
23 SHARE CAPITAL
2019 2018
USD'000 USD'000
Authorised, issued and fully paid
173,575,741 shares (2018: 173,575,741 shares)
of GBP 0.10 (2018: GBP 0.10) each 24,300 24,300
24 LEASE LIABILITIES
Movements in the provision recognised in the consolidated
statement of financial position are as follows:
2019 2018
USD'000 USD'000
As at 1 January 2,643 2,379
Additions 561 337
Interest 493 447
Payments (863) (520)
---------------- ----------------
As at 31 December 2,834 2,643
Current 437 111
Non-current 2,397 2,532
Interest of USD 493,000 (2018: USD 447,000) relating to the
above lease liabilities has been included in Finance Costs for the
year.
As at 31 December the maturity profile of lease liabilities was
as follows:
2019 2018
USD'000 USD'000
3 months or less 332 26
3 to 12 months 105 85
1 to 5 years 795 700
Over 5 years 1,602 1,832
---------------- ----------------
2,834 2,643
The Group had total cash outflows relating to leases of USD
2,462,000 in 2019 (2018: USD 1,170,000). This is the total of
short-term lease payments from note 19 and payments from note
24.
25 EMPLOYEES' OF SERVICE BENEFITS
Movements in the provision recognised in the consolidated
statement of financial position are as follows:
2019 2018
USD'000 USD'000
As at 1 January 350 251
Provided during the year 174 116
End of service benefits paid (133) (17)
---------------- ----------------
As at 31 December 391 350
26 TRADE AND OTHER PAYABLES
2019 2018
USD'000 USD'000
Accounts payable 5,342 3,440
Accrued expenses 1,855 1,412
Customer advances 840 28
---------------- ----------------
8,037 4,880
All customer advances recorded at 31 December 2018 were
subsequently recognised as revenue in 2019 and all customer
advances held at 31 December 2019 are expected to be recognised as
revenue in the next 12 months.
27 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group was not exposed to any
significant interest rate risk on its interest-bearing
liabilities.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group's exposure to the risk
of changes in foreign exchange rates relates primarily to the
Group's operating activities when revenue or expenses are
denominated in a different currency from the Group's functional
currency, as well as cash and cash equivalents held in foreign
currency accounts.
At 31 December 2019, the Group held foreign cash and cash
equivalents of GBP 2,040,000 (USD 2,689,000). UK pound sterling is
primarily held by the Group to settle payment obligations
denominated in GBP. As at 31 December 2018, the Group held GBP
4,432,000 (USD 5,624,000).
The Group's exposure to foreign currency variances for all other
currencies is not material.
Credit risk
Credit risk is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the other party to
incur a financial loss. The Group is exposed to credit risk on its
bank balances and receivables.
The Group seeks to limit its credit risk with respect to banks
by only dealing with reputable banks as determined by the CODM and
with respect to customers by only dealing with creditworthy
customers and continuously monitoring outstanding receivables. The
Company's 5 largest customers account for 73% of outstanding
accounts receivable at 31 December 2019 (2018: 78%).
Receivables split by customer
2019 2018
% %
Customer A 31 31
Customer B 29 5
Customer C 12 -
Other 28 64
---------------- ----------------
100 100
No material credit risk is deemed to exist due to the nature of
the Group's customers, who are predominantly governments and large
supranational organisations.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group limits
its liquidity risk by ensuring bank facilities are available.
The Group's terms of sale generally require amounts to be paid
within 30 days of the date of sale. Trade payables are settled
depending on the supplier credit terms, which are generally 30 days
from the date of delivery of goods or services.
As at 31 December the maturity profile of trade payables was as
follows:
2019 2018
USD'000 USD'000
3 months or less 5,333 3,428
3 to 6 months 9 12
---------------- ----------------
5,342 3,440
Liabilities falling due within 12 months are recognised as
current on the consolidated statement of financial position.
Liabilities falling due after 12 months are recognised as
non-current.
The unutilised bank overdraft facilities at 31 December 2019
amounted to USD 2,000,000 (2018: USD 2,000,000) and carry interest
of 1M LIBOR +3.50% per annum (2018: 1.50%). In the prior period the
facilities required a cash margin guarantee to be paid upfront;
100% margin for USD drawdowns and 120% margin for GBP
drawdowns.
The Group manages its liquidity risk by maintaining significant
cash reserves.
The Group's cash and cash equivalents balance is substantially
all held in institutions holding a Moody's long-term deposit rating
of A1 or above.
Capital management
The primary objective of the Group's capital management is to
ensure that it maintains a healthy capital ratio in order to
support its business and maximise shareholder value. The Group
manages its capital structure and makes adjustments to it in light
of changes in business conditions.
No changes were made in the objectives, policies or processes
during the year ended 31 December 2019.
Capital comprises share capital, share premium, merger reserve,
share based payment reserve and retained earnings and is measured
at USD 69,483,000 as at 31 December 2019 (2018: USD
58,780,000).
28 RELATED PARTY DISCLOSURES
Related parties represent shareholders, directors and key
management personnel of the Group, and entities controlled, jointly
controlled, or significantly influenced by such parties. Pricing
policies and terms of these transactions are approved by the
Group's management.
On 1 January 2018, the Group acquired 100% ownership of RA SB
Ltd. from one of its shareholders, who is also a member of key
management.
There were no outstanding balances with related parties included
in the consolidated statement of financial position at 31 December
2019 (2018: nil).
29 COMPENSATION
Compensation of key management personnel
The remuneration of key management during the year was as
follows:
2019 2018
USD'000 USD'000
Short-term benefits 1,628 1,367
Stock based compensation 31 1,672
---------------- ----------------
1,659 3,039
The key management personnel comprise of 6 (2018: 5)
individuals. Included in key management personnel are 3 (2018: 3)
directors.
Compensation of directors
The remuneration of directors during the year was as
follows:
2019 2018
USD'000 USD'000
Short-term benefits 1,291 1,071
Stock based compensation 14 569
---------------- ----------------
1,305 1,640
Highest paid director
The remuneration of the highest paid director during the year
was as follows:
2019 2018
USD'000 USD'000
Short-term benefits 423 276
Stock based compensation - 569
---------------- ----------------
423 845
The amount disclosed in the tables is the amount recognised as
an expense during the reporting year related to key management
personnel and directors of the Group.
30 ACQUISITION OF SUBSIDIARY
RA SB Ltd.
On 1 January 2018, the Group acquired 100% ownership of RA SB
Ltd. and its subsidiary (together "RASB"), from one of its
shareholders, who is also a member of key management. The purchase
consideration of USD 594,000 represents the net book value of RASB
as at 1 January 2018. RA SB Ltd. is registered in Ras Al Khaimah,
UAE and operates in the Republic of Sudan through its subsidiary
which provides remote site services to the mining industry. The
acquisition is consistent with the Group's strategy of operating
across Africa.
The fair values of the identifiable assets and liabilities of
RASB as at the date of acquisition were:
USD'000
Assets
Property, plant, and equipment 69
Inventories 16
Accounts receivable, deposits,
and other receivables 688
Bank balances and cash 29
Liabilities
Accounts payable and accruals (208)
----------------
Net assets 594
Net cash outflow on acquisition
USD'000
Consideration paid 594
Less:
Bank balances and cash acquired (29)
----------------
565
Acquisition costs of USD 6,000 relating to the acquisition of
RASB are included in acquisition costs within the prior accounting
period.
For the year ended 31 December 2018, RASB contributed USD
1,754,000 revenue and USD 350,000 profit before finance costs to
the Group results.
31 STANDARDS ISSUED BUT NOT YET EFFECTIVE
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Group's financial statements are disclosed below. The Group intends
to adopt these new and amended standards and interpretations, if
applicable, when they become effective.
No other standards and interpretations that are issued, but not
yet effective, up to the date of issuance of the Group's financial
statements are expected to have a material impact on the Group.
32 SUBSEQUENT EVENTS
While the magnitude of the financial impact COVID-19 will have
on the business cannot currently be accurately quantified, the
Group will benefit from its strong balance sheet and the essential
nature of many of its contracts with customers. As a result, no
impairment to the assets and liabilities on the balance sheet are
expected. See note 2 for further details relating to the going
concern analysis undertaken by the Board.
COMPANY STATEMENT OF FINANCIAL POSITION
2019 2018
Notes USD'000 USD'000
Assets
Non-current assets
Investments 4 50,047 50,047
---------------- ----------------
Current assets
Trade and other receivables 5 12,675 361
Cash and cash equivalents 645 669
---------------- ----------------
13,320 1,030
---------------- ----------------
Total assets 63,367 51,077
Equity and liabilities
Equity
Share capital 8 24,300 24,300
Share premium 18,254 18,254
Merger reserve 9,897 9,897
Share based payment reserve 47 16
Retained earnings 10,788 (1,561)
---------------- ----------------
Total equity 63,286 50,906
---------------- ----------------
Current liabilities
Trade and other payables 6 81 171
---------------- ----------------
Total equity and liabilities 63,367 51,077
The Company has taken the exemption conferred by section 408 of
the Companies Act 2006 not to publish the profit and loss of the
parent company within these accounts. The result for the Company
for the year was a profit of USD 14,552,000 (2018: loss of USD
1,561,000).
The financial statements of the Company (registration number
11252957) were approved by the Board of Directors on 17 April 2020
and signed on its behalf by:
_________________________________
_________________________________
Soraya Narfeldt Andrew Bolter
CEO CFO
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
Based
Share Share Merger Payment Retained
Capital Premium Reserve Reserve Earnings Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
As at 1 January
2018 - - - - - -
Preference
shares issued
on
incorporation 70 - - - - 70
Issue of share
capital on
reorganisation 19,884 - - - - 19,884
Share exchange - - 9,897 - - 9,897
Issue of share
capital on
Admission 4,416 18,254 - - - 22,670
Share based
payments - - - 16 - 16
Redemption
of preference
shares (70) - - - - (70)
Total
comprehensive
income for
the period - - - - (1,561) (1,561)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
As at 31
December
2018 24,300 18,254 9,897 16 (1,561) 50,906
Total
comprehensive
income for
the period - - - - 14,552 14,552
Share based
payments - - - 31 - 31
Dividends
declared
and paid - - - - (2,203) (2,203)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
As at 31
December
2019 24,300 18,254 9,897 47 10,788 63,286
The attached notes 1 to 9 form part of the Financial
Statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
The financial statements have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and the Companies Act 2006), including
Financial Reporting Standard 101 'Reduced Disclosure Framework'
(FRS101) under the historical cost basis and have been presented in
USD, being the functional currency of the Company.
The Company has applied a number of exemptions available under
FRS 101. Specifically, the requirement(s) of:
(a) paragraphs 91-99 of IFRS 13 Fair Value Measurement;
(b) paragraph 38 of IAS 1 'Presentation of Financial Statements'
to present comparative information in respect of paragraph
79(a)(iv) of IAS 1;
(c) paragraphs 10(d), 10(f), and 134-136 of IAS 1 Presentation
of Financial Statements;
(d) IAS 7 Statement of Cash Flows;
(e) 30 and 31 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors;
(f) 17 of IAS 24 Related Party Disclosures and IAS 24 Related
Party Disclosures to disclose related party transactions entered
into between two or more members of a group, provided that any
subsidiary which is a party to the transaction is wholly owned by
such a member: and
(g) paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36
Impairment of Assets.
2 SIGNIFICANT ACCOUNTING POLICIES
Except noted below, all accounting policies applied to the
Company are consistent with that of the Group.
Investments
Investments held by the company are stated at cost less
provision for diminution in value.
3 EMPLOYEE EXPENSES
The average number of employees employed during the period
was:
2019 2018
Directors 7 4
The aggregate remuneration of the above employees was:
2019 2018
USD'000 USD'000
Wages and salaries 400 203
Social security costs 45 23
---------------- ----------------
445 226
4 INVESTMENTS
2019 2018
USD'000 USD'000
Cost and net book value
As at 1 January 50,047 -
Acquisition of RA International
FZCO - 29,781
Additional capital in RA International
FZCO - 20,266
---------------- ----------------
As at 31 December 50,047 50,047
The Company owns 100% of the issued share capital of RA
International FZCO, registered and incorporated in the UAE. The
Company's principal activity is that of a holding company .
5 TRADE AND OTHER RECEIVABLES
2019 2018
USD'000 USD'000
Prepayments 27 16
Due from subsidiary 12,636 297
VAT recoverable 12 48
---------------- ----------------
12,675 361
Amounts due from subsidiary represent amounts due from RA
International FZCO, an immediate subsidiary, and are non-interest
bearing and payable on demand.
6 TRADE AND OTHER PAYABLES
2019 2018
USD'000 USD'000
Trade payables 19 87
Accruals 62 84
---------------- ----------------
81 171
7 RELATED PARTY TRANSACTIONS
The Directors have taken advantage of the exemption under
paragraph 8(j) and 8(k) of FRS101 and have not disclosed
transactions with other wholly owned group undertakings. There are
no other related party transactions.
8 SHARE CAPITAL
2019 2019 2018 2018
Number USD'000 Number USD'000
Authorised, issued, and fully
paid:
Ordinary shares of GBP 0.10
each 173,575,741 24,300 173,575,741 24,300
9 SUBSEQUENT EVENTS
While the magnitude of the financial impact COVID-19 will have
on the business cannot currently be accurately quantified, the
Company will benefit from its strong balance sheet and the
continued trading of its subsidiary, RA International FZCO. As a
result, no impairment to the assets and liabilities on the balance
sheet, including both its investment in and receivable balance from
RA International FZCO, is expected to arise as a result of the
ongoing pandemic.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UNARRRSUSAUR
(END) Dow Jones Newswires
April 17, 2020 02:00 ET (06:00 GMT)
Ra (LSE:RAI)
Historical Stock Chart
From May 2024 to Jun 2024
Ra (LSE:RAI)
Historical Stock Chart
From Jun 2023 to Jun 2024
