RA International Group PLC Annual Report 2018

Plain-text annual report

We deliver. Regardless. ANNUAL REPORT 2018 CONTENTS OVERVIEW HIGHLIGHTS LETTER FROM THE FOUNDER STRATEGIC REPORT RA INTERNATIONAL AT A GLANCE INTRODUCTION FROM THE CHAIR OUR BUSINESS OUR BUSINESS MODEL OUR STRATEGY OUR MARKET EXECUTIVE MANAGEMENT TEAM OPERATING REVIEW FINANCIAL REVIEW MANAGING RISK 1 2 4 6 7 8 10 12 14 16 18 21 CORPORATE GOVERNANCE REPORT CHAIR’S CORPORATE GOVERNANCE STATEMENT QCA CODE PRINCIPLES BOARD OF DIRECTORS CORPORATE GOVERNANCE FRAMEWORK BOARD COMMITTEES & STRUCTURE AUDIT COMMITTEE REPORT DIRECTORS’ REMUNERATION REPORT DIRECTORS’ REPORT DIRECTORS’ RESPONSIBILITY STATEMENT FINANCIAL REPORT AUDITOR’S REPORT 30 32 36 39 40 43 44 48 50 52 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 59 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CORPORATE SOCIAL RESPONSIBILITY 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION COMPANY STATEMENT OF CHANGES IN EQUITY NOTES TO THE COMPANY FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 4 60 61 62 63 88 89 90 92 HIGHLIGHTS +7% +6% +6% USD 54.8m USD 13.3m USD 119m REVENUE UNDERLYING PROFIT REVENUE BACKLOG 54.8 51.2 13.3 12.5 119 112 108 100 37.0 21.2 5.0 1.0 2018 2017 2016 2015 2018 2017 2016 2015 DEC 18 DEC 17 DEC 16 DEC 15 +10% +3% 4.4 years 69% USD 24.7m AVERAGE CONTRACT LENGTH LOCAL LABOUR PARTICIPATION RAISED ON ADMISSION TO AIM 4.4 4.0 69 67 63 3.0 2.6 USD 27.8m 57 NET CASH DEC 18 DEC 17 DEC 16 DEC 15 2018 2017 2016 2015 1.0p DIVIDEND PER SHARE 1 252757 RA_Int_pp01-pp50.indd 1 252757 RA_Int_pp01-pp50.indd 1 09/05/2019 18:45 09/05/2019 18:45 LETTER FROM THE FOUNDER SORAYA NARFELDT Chief Executive Offi cer I am delighted to introduce our are local staff members who we have In addition, we continued to work ﬁ rst annual report following our recruited and trained over the years. towards diversifying our geographic Admission to AIM last year. 2018 was transformative for the RA International Group as we secured the additional funding required to take our business to the next stage of growth. One of RA International’s key strengths is the importance we have always placed on sustainability. We are acutely aware that, by maximising the positive impact we have on When Lars and I founded RA communities, we foster strong local International in 2004, we recognised relationships that enable us to work that large organisations were unable more effi ciently and eff ectively to presence and customer base, as well as broadening the mix of services we off er to each client. I am pleased to report that we are already starting to see the results of these eff orts; both with regards to contracts won and those for which we have been invited to tender since the Admission. to manage or implement projects the beneﬁ t of our clients. We are an I look forward to reporting on our eff ectively when operating in remote active participant and contributor progress in the years to come and locations. This often resulted in to the United Nations Global showcasing some of the very valuable ineffi ciencies that hindered the Compact and align our corporate work we do for our clients and the progress of important peacekeeping, humanitarian and commercial projects. social responsibility strategy to the UN’s Sustainable Development communities we work with. From early projects in Afghanistan we Goals (SDGs). SORAYA NARFELDT, expanded into Africa supporting the Before our Admission to AIM we CHIEF EXECUTIVE OFFICER United Nations across the continent were regularly approached to work and growing substantially in the on projects that we had to decline process. Over the years we have due to capital constraints. The built a reputation for honesty and fundraising we undertook at the time the effi cient and reliable delivery of of our Admission, combined with projects, evidenced by our high client our own resources, addressed this retention. We now have over 2,000 and we immediately began to bid 10 April 2019 staff , from 34 countries, most of whom on larger and longer-term contracts. 2 252757 RA_Int_pp01-pp50.indd 2 252757 RA_Int_pp01-pp50.indd 2 09/05/2019 18:45 09/05/2019 18:45 STRATEGIC REPORT 252757 RA_Int_pp01-pp50.indd 3 252757 RA_Int_pp01-pp50.indd 3 09/05/2019 18:45 09/05/2019 18:45 3 RA INTERNATIONAL AT A GLANCE RA International is a leading provider of services to remote locations in Africa and the Middle East We provide comprehensive, ﬂ exible, mission critical support to our clients enabling them to focus on the delivery of their respective businesses and services. Our focus on integrity alongside on-going investment in people, locations and operations has, over time, created a reliable and trusted brand within our sector. KEY FACTS: FOUNDED IN 2004 DELIVERED MORE THAN USD 450M OF CONTRACTS SINCE INCEPTION CURRENT OR PAST PRESENCE IN 20+ COUNTRIES ACROSS AFRICA AND THE MIDDLE EAST MORE THAN 2,000 EMPLOYEES 69% OF EMPLOYEES ARE LOCAL STAFF PARTICIPANT AND CONTRIBUTOR TO THE UNITED NATIONS GLOBAL COMPACT CSR STRATEGY ALIGNED TO THE UN’S SUSTAINABLE DEVELOPMENT GOALS SERVICE CHANNELS KEY DIFFERENTIATORS • Robust back offi ce support Our services are delivered through The growth of RA International has to enable and deliver multiple three channels: construction, been achieved through securing projects simultaneously integrated facilities management and contracts with new customers and • Focus on developing local supply chain logistics. by generating repeat business from content through capacity building CUSTOMERS We have a strong customer base, largely comprising UN agencies and clients across our three service programmes channels. We believe that this is • Proactive in seeking government due to the following features which approvals and permissions diff erentiate us from our competitors: humanitarian organisations, western • Compliance with international and INVESTOR WEBSITE governments and global corporations. local regulations • Risk management focus The investors section of our website at www.raints.com contains a wide range of information of interest to • • • • Intelligence-led approach Innovative solutions to remote site institutional and private investors, service delivery including: latest news, press releases Global supply chain capability and our Annual Reports and Strong track record of project Sustainability Reports. delivery • On-ground personnel and Executive Management Team (EMT) actively involved in project level matters 4 252757 RA_Int_pp01-pp50.indd 4 252757 RA_Int_pp01-pp50.indd 4 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S Locations past and current PAST & CURRENT Afghanistan, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Ghana, Kenya, Malawi, Mali, Mozambique, Niger, Oman, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Syria, Tanzania, UAE, Uganda RA OFFICES Group HQ in London HQ in Dubai PMO in Nairobi Country support offi ces 252757 RA_Int_pp01-pp50.indd 5 252757 RA_Int_pp01-pp50.indd 5 09/05/2019 18:45 09/05/2019 18:45 5 INTRODUCTION FROM THE CHAIR OVERVIEW In my ﬁ rst statement since the Company’s Admission to AIM, in mid-2018, I am pleased to report that RA International has made strong progress and has delivered a solid performance in its ﬁ rst year on the market. RESULTS GOVERNANCE For the year ended 31 December 2018, underlying proﬁ t increased by 6.3% to USD 13.3m on revenues of USD 54.8m (2017: USD 51.2m). The contracted revenue backlog as at 31 December 2018 was USD 119m compared to USD 112m the previous year. PLACING AND BALANCE SHEET In June 2018, the Company completed a placing to raise USD 21.4m (after expenses) alongside the Company’s Admission to trading on AIM. With a strengthened balance sheet the Company is well placed to commence bidding on larger and longer-term contracts in line with our strategy. Since Admission to AIM the Board has been encouraged by the positive feedback, from existing and potential customers, on the Company’s PLC- status and the opportunities this has provided. As a result of the above activity, net cash at 31 December 2018 was USD 27.8m and net assets were USD 59.2m. Given the nature of RA’s business, the Board is committed to the maintenance and continuous review of the highest of compliance and governance standards. As a service provider to the UN and western governments, RA International is required to have a strict level of policies and procedures in place in order to secure contracts. Since Admission, RA International has adhered to the QCA Corporate Governance Code which the Directors feel is appropriate to the Company’s size and structure and published its ﬁ rst Sustainability Report. More information can be found in the Corporate Governance section on our website. PEOPLE RA International employs over 2,000 people across Africa and the Middle East. Whenever possible, our goal is to recruit and develop the skills of the local communities. Over the years we have seen local employee participation increase to 69% across our operations, contributing signiﬁ cantly to successful service delivery. This is a trend we want to continue, as it is both good for our business and the wider 6 SANGITA SHAH Non-Executive Chair communities in which we work. Our international staff are often deployed as a means to recruit and develop local people towards an eventual handover. Undoubtedly the key asset of RA lies in its people: I would like to thank all our people for their unstinting dedication and support in helping us to build strong communities. DIVIDEND As stated in the Admission Document, the Directors intend to adopt a progressive dividend policy whilst retaining suffi cient capital to meet both the working capital needs of the business and to fund continued growth. The Directors remain conﬁ dent in the Company’s ability to deliver its strategy and, as such, propose a maiden full year dividend of 1.0p per share to be paid on July 3, 2019 to the Shareholders on the register as of May 24, 2019. The ex- dividend date is May 23, 2019. SANGITA SHAH Non-Executive Chair 10 April 2019 252757 RA_Int_pp01-pp50.indd 6 252757 RA_Int_pp01-pp50.indd 6 09/05/2019 18:45 09/05/2019 18:45 OUR BUSINESS T R O P E R I C G E T A R T S INTRODUCTION stakeholders. In 2018, this led us to look creating opportunities for people to RA International is a leading provider carefully at RA International’s purpose develop their skills. of services to remote locations in Africa and the Middle East. The Company off ers its services through three channels: construction, integrated facilities management (IFM) and supply chain. We service three main client groups: humanitarian and aid agencies, governments and commercial customers, predominantly in the oil and gas and mining sectors. and ensure that, as we grow, we remain focused on our mission — to deliver immediate results and lasting change. In 2018, we formalised our approach to sustainability in order to increase the positive impacts and diminish the negative impacts of our operations, COMPLIANCE AND REGULATION and to ensure we continue to align our International and local compliance aims with the United Nations SDGs. and regulation plays a vital role in our Our CSR strategy focuses on three ability to bid for and execute contracts areas where we feel we can make in the territories where we operate. The UN is a signiﬁ cant customer for the most positive impact: Labour Rights, People & Skills Development The Company provides us and we are a signatory, participant and Resource Management. We are comprehensive, ﬂ exible, mission and contributor to the United Nations currently setting measurable targets critical support to its clients enabling Global Compact. We operate to and will from next year be monitoring them to focus on the delivery of their international best practices and ensure progress and tracking improvements. respective businesses and services. we are compliant with local practices. A more detailed introduction to our Our focus on integrity and values alongside on-going investment in people, locations and operations has over time created a reliable and trusted brand within our sector. During our transition to a public CORPORATE SOCIAL RESPONSIBILITY Since our inception in 2004, a key part of our business model has been to act responsibly and make a company, and as we start to take on meaningful contribution, whether that larger contracts and mature as an organisation, we recognise that we face new expectations from all our means providing stable employment, improving workplace conditions, promoting equality and diversity or CSR approach and activities can be found within this report and within our ﬁ rst comprehensive Sustainability Report which is available on our website. 7 252757 RA_Int_pp01-pp50.indd 7 252757 RA_Int_pp01-pp50.indd 7 09/05/2019 18:45 09/05/2019 18:45 OUR BUSINESS MODEL OUR BUSINESS IS TO ENABLE CLIENT DELIVERY OUR CLIENTS We have successfully delivered over USD 450m of projects to a broad range of clients, often in remote locations and diffi cult conditions. Our clients are largely UN agencies, western governments and global corporations who are executing complex projects in demanding environments. HUMANITARIAN AGENCIES GOVERNMENTS COMMERCIAL We work closely with humanitarian We count a number of agencies, including many UN agencies and NGOs. governments as clients including the USA, UK, Canada, France, Our diverse commercial client base operates across a number of sectors including oil and gas, and Italy as well as the EU and mining, telecoms, automotive, African Union. logistics and facilities management. OUR SERVICES We have a strong position within our market and consistently deliver across three, often integrated, service channels in countries across Africa and the Middle East to international standards. CONSTRUCTION IFM SUPPLY CHAIN Build, design and build, or design, build and operate projects Facilities management and maintenance Civil construction, such as horizontal and vertical construction, roads, runways, helipads and aprons Permanent, semi-permanent and temporary facilities including accommodation camps, workshops, warehouses and offi ces Permanent, semi-permanent and temporary infrastructure including: power generation, water treatment plant, solid/liquid waste management plant and landﬁ lls and workshops Plant and equipment operation and maintenance Catering, hospitality, and accommodation Cleaning and laundry Waste management Vehicle ﬂ eet operation and maintenance Pest and vector control Local, regional and global procurement of mission critical equipment, material and consumables Consolidation and repacking services Land, sea and air logistics management Last mile logistics Warehousing and yard management Inventory control Freight forwarding and clearance of goods 8 252757 RA_Int_pp01-pp50.indd 8 252757 RA_Int_pp01-pp50.indd 8 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S DELIVERING VALUE HOW WE DO IT We are frequently asked how we are able to do what we do given the complexity of our work and the demanding environments we operate in. Since RA International’s foundation in 2004 we have built a reputation for integrity and the effi cient and reliable delivery of projects. LOCAL INTELLIGENCE SPECIALISED EXPERIENCE BEST PRACTICE Subject matter experts who take an intelligence-led approach Strong track record of project delivery and long-term partnerships Risk management focused and clear reporting structures Local on the ground knowledge that enables us to work quickly and effi ciently Reputation for last mile delivery to remote and challenging locations Compliance with international and local regulations OUR STAKEHOLDERS We recognise that investing in communities through local employment and community projects has a profound eff ect on our ability to win and execute client projects and deliver value to all our stakeholders. CLIENTS COMMUNITIES EMPLOYEES SHAREHOLDERS We have a long track record for providing comprehensive, ﬂ exible and mission critical support which enables our clients to focus on the delivery of their business and services. Over the years we have formed close partnerships with our clients and have built a reliable and trusted brand within our market. RA International works on many fronts to ensure that our business beneﬁ ts people living in the areas where we operate and does not harm their environment. We have integrated our sustainability strategy with the Company’s core business activities and aligned ourselves with the UN’s Sustainable Development Goals. The success of our Company is dependent on our employees. Our goal is to recruit and develop local people whenever practical and economically viable. In this way, we are able to meet most of our labour needs and build the foundation for a long- term relationship with the local community. Through eff ective management, a clear strategy and a strong focus on risk management and compliance with international and local regulations, we aim to deliver shareholder value through capital growth and a progressive dividend policy. USD 119m 3 69% 1.0p PER SHARE REVENUE BACKLOG AS AT 31 DECEMBER 2018 (2017: USD 112M) CORE SUSTAINABILITY GOALS LOCAL LABOUR PARTICIPATION (2017: 67%) MAIDEN FULL YEAR DIVIDEND 9 252757 RA_Int_pp01-pp50.indd 9 252757 RA_Int_pp01-pp50.indd 9 09/05/2019 18:45 09/05/2019 18:45 OUR STRATEGY Our strategy is closely aligned to environments, so that they can Through expansion into new the Company’s purpose. We have focus on the delivery of their core territories and increasing our footprint never lost sight of why the Company objectives. Our aim is to do this in existing territories we can increase was founded: to off er a transparent wherever there is a need for our the value we deliver to all our and responsible project delivery services, but we primarily target stakeholders. Following our Admission service from start to ﬁ nish. Taking the humanitarian, government, and to AIM we are in a strong position to on full ownership of a project allows oil and gas and mining sectors due execute our growth strategy through us to deliver more effi ciently and to these being the organisations four, interdependent objectives: provide better value to organisations predominantly executing complex working in remote and challenging projects in demanding environments. OBJECTIVE DESCRIPTION VALUE TO STAKEHOLDERS BROADEN Clients in the humanitarian sector such as multiple United Nations agencies OUR and the World Bank represent over half of our revenue. We have been working CUSTOMER with many of these clients for over 10 years and maintain strong relationships BASE throughout the humanitarian sector. While we continue to target business growth from our long-term clients, we recognise the inherent risks associated with over-reliance on the humanitarian sector and aim to continue to expand the number of customers we service in the western government and commercial sectors. By working with a variety of organisations we have the opportunity to make more effi cient use of our resources and hasten our geographic diversiﬁ cation. When simultaneously executing several projects in one geographic location we can pass effi ciencies on to our clients and better inﬂ uence project delivery to the beneﬁ t of local communities. DIVERSIFY We maintain and constantly update a list of geographies to target for expansion. OUR This said, our growth is often ‘customer-led’ in that we ﬁ nd that delivering a GEOGRAPHIC project for a new customer in one country, often leads to requests to perform in REACH another. In entering new geographies, we often become enablers to new clients delivering their own projects in these locations and are then asked to follow these new clients to new geographies. Our newly created Project Management Offi ce (PMO) in Nairobi can deliver projects worldwide, be it rapidly mobilising for a new contract or value engineering an existing project. Reducing geographical concentration decreases the wider ﬁ nancial and operational impact that temporary project stoppages can have on the Company, and which can arise in challenging locations. Most often these situations are beyond our control, such as in instances of political instability or conﬂ ict. 10 252757 RA_Int_pp01-pp50.indd 10 252757 RA_Int_pp01-pp50.indd 10 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S OBJECTIVE DESCRIPTION VALUE TO STAKEHOLDERS TARGET Tendering and delivering larger and longer-term contracts is a key driver for LONGER-TERM ﬁ nancial growth. It also provides the Company with greater forward earnings CONTRACTS visibility which allows us to plan for the future. These contracts, lasting up to ﬁ ve years or greater, better enable us to off er our project staff sustained long-term employment and support greater investment from RA International in the local community and countries where we operate. CROSS- Providing a greater mix of services to each client allows us to make more SELL OUR effi cient use of our resources, drives revenue growth and strengthens our SERVICES TO relationships with clients. NEW AND EXISTING CUSTOMERS Construction projects are often drivers of IFM and supply chain revenue. We aim to maintain the mix of service off erings equally between Construction and our other service channels. In most cases we believe we can provide services more eff ectively and at a lower cost than our competitors or our clients. From a ﬁ nancial and administrative standpoint, clients can beneﬁ t from working with one supplier, allowing them to focus on the delivery of their own projects without having to manage multiple service providers. Financial strength Business growth Risk mitigation Effi ciency Social impact 252757 RA_Int_pp01-pp50.indd 11 252757 RA_Int_pp01-pp50.indd 11 09/05/2019 18:45 09/05/2019 18:45 11 OUR MARKET The size of our market is diffi cult In the majority of cases, RA Looking ahead, we anticipate the to deﬁ ne given our broad service International projects involve planned cuts to the USAID budget off ering and the signiﬁ cant number supporting countries that are coping will widen this gap. In an eff ort to of potential customers who utilise with or emerging from long-term compensate, the EU presented its the services we provide. We primarily conﬂ ict. Of the 21 humanitarian highest ever humanitarian aid budget work for humanitarian agencies and response plans presented in 2018, all of EUR 1.6b in 2018, and is now looking western governments but we are more but two were conﬂ ict-related, and to increase contributions for 2019 and frequently bidding on projects with many involved long-term instabilities. 2020. It has also proposed to increase commercial customers working in the 16 countries have been in crisis for foreign spending by some 30% from mining and oil and gas industries. ﬁ ve years or more; three have been 2021-2027. Limiting the market to these industries and geography to Sub-Saharan Africa, making annual aid appeals for a period of approximately 18 years.1 US defence spending looks set to increase in the coming years, we estimate a market size of at least In 2017, UN agencies and USAID spent which will undoubtedly have a USD 30b in annual expenditure. approximately USD 4.6b1 and USD 4b2 knock-on eff ect on NATO countries, Historically, we have estimated that respectively in Chad, Niger, Central Russia and China. This will boost 1%-2% of this budget directly relates African Republic, the Democratic RA International’s business in the to services we provide, however Republic of Congo, Eritrea, Ethiopia, government sector since we are since our Admission to AIM we have Libya, Mali, Somalia, South Sudan and well-equipped to compete for military been invited to bid for additional Sudan. These are all countries in which contracts, including the building and contracts not previously included in RA International is presently working servicing of training camps and bases our estimate. We now estimate the or can provide services at short notice. across Africa. addressable portion of this budget to be 2-4%. The US remains the largest single foreign aid donor. While in many cases COMMERCIAL SPEND IN SUB- we are excluded from competing SAHARAN AFRICA HUMANITARIAN & GOVERNMENT directly for US Government contracts, The mining and oil & gas sectors, SPEND we can partner with US contractors which represent the mainstay of RA A key part of our business is to help to carry out or support their projects International’s commercial business deliver Overseas Development Aid on the ground. Our service off ering, and new commercial sector business (ODA) on behalf of governments and geographical reach, and experience targets, are experiencing renewed international aid agencies. Their goals in successfully completing US conﬁ dence in the future. They are to provide stability in conﬂ icted Government projects puts us in an anticipate growth in 2019, partly regions, promote democracy, ideal position to do this. contribute to counter terrorism and law enforcement eff orts, and to help alleviate short-term humanitarian crises. Our experience operating in remote locations across Africa is seen as being especially valuable in this context. Spending on international aid to Africa remained stable in 2018. However, needs rose faster than contributions leading to a shortfall of around 48%. The UN alone reported a USD 2b shortfall in its peacekeeping budget. driven by healthy growth rates in the economies in which we operate. 3.6% growth is forecast across sub Saharan Africa in 2019.3 1United Nations Offi ce for the Coordination of Humanitarian Aff airs, www.unocha.org/ 2USAID, explorer.usaid.gov/ 3IMF, www.imf.org/en/Publications/WEO/Issues/2019/01/11/weo-update-january-2019 12 252757 RA_Int_pp01-pp50.indd 12 252757 RA_Int_pp01-pp50.indd 12 09/05/2019 18:45 09/05/2019 18:45 T T R R O O P P E E R R I I C C G G E E T T A A R R T T S S 252757 RA_Int_pp01-pp50.indd 13 252757 RA_Int_pp01-pp50.indd 13 09/05/2019 18:45 09/05/2019 18:45 13 EXECUTIVE MANAGEMENT TEAM RA International’s Executive Management Team is actively involved in operations, often down to the level of ﬁ eld implementation. Each member has experience working in remote locations and has a deep understanding of the profound impact seemingly small problems can have on project delivery. SORAYA NARFELDT Chief Executive Offi cer LARS NARFELDT Chief Operating Offi cer ANDREW BOLTER Chief Financial Offi cer Soraya Narfeldt founded RA International in 2004 and has led the Company to becoming a leading remote site service provider. Since founding RA International, Soraya has turned the Company into a multifaceted organisation with operations in the Middle East and across Africa, employing over 2,000 staff . In 2018, Soraya identiﬁ ed the need for the Company to take the leap to become a public company and led RA International through the process of listing on AIM. Soraya is a strong advocate and supporter of responsible business practices and community-based enterprises. She is a regular contributor and speaker on the subject to high proﬁ le journals and international forums. Lars Narfeldt has served for over two decades in pivotal leadership and development roles in some of the world’s most challenging environments. As COO at RA International, he is responsible for day-to-day operations across the Company. His role also encompasses setting CSR strategy, HR, communications and marketing and compliance. He has been instrumental in developing RA International’s strong brand equity amongst the Company’s clients, geographies and markets. Lars spent the ﬁ rst 15 years of his post university career working with the Swedish government and the UN. He worked with SIDA in Palestine and with the UN in the Democratic Republic of Congo, Uzbekistan, Sierra Leone and Afghanistan. While in Sierra Leone Lars managed a team of over 2,000 individuals and ran the UN Volunteer Programme. As CFO of RA International Andrew is responsible for overseeing ﬁ nancing activities, M&A, business planning and forecasting, ﬁ nancial reporting, taxation, audit and process improvement. Upon joining, he managed the implementation of RA International’s enterprise resource planning system, and together with the CEO, developed a long-term strategic plan which has contributed to a more diverse customer base and signiﬁ cant business growth. Andrew joined RA in 2011 from Ernst & Young’s Transaction Advisory Services Group where he was primarily responsible for assisting multi-national corporations establish operations in the Middle East and Africa. He is a Canadian Chartered Accountant, Chartered Professional Accountant and a Chartered Business Valuator. 14 252757 RA_Int_pp01-pp50.indd 14 252757 RA_Int_pp01-pp50.indd 14 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S TREVOR STRATFORD Business Development Director JOHN MITCHELL Director of Project Management WILLIAM WARNOCK Director of US Business Development Trevor Stratford joined RA International in 2011. He has over 20 years’ expertise in business development and brings a deep understanding of remote site service delivery, project management, contract management, technical knowledge and a mindset for client satisfaction. His mandate is to extend the Company’s geographical reach and most importantly, develop new and existing customer relationships. Trevor has worked across geographies that encompass South Africa, Zimbabwe, Malawi, Senegal, Dubai, Iraq and Brazil. He has commissioned projects in a variety of industries including electrical contracting, security, water treatment, packaging, and mining. Trevor has drawn on his diverse experience and knowledge to enhance the implementation and service delivery of the Company’s projects. John Mitchell heads up our in-house PMO which manages implementation of construction and IFM projects with a team of subject experts. His team works closely with Deputy Country Managers in the execution of projects in our operational areas. John originally joined RA International in 2010. During his time with the Company he has worked across all departments and specialisations, developed a meritocratic workplace through a target-centric culture. He has focused on developing ambitious yet achievable goals to motivate staff and ensure professional development. John’s background in the Royal Navy working in post-conﬂ ict areas makes him especially well placed to work alongside people from diverse cultures, religions and world views. William joined RA International’s EMT in January 2019 having worked previously as a consultant. He is responsible for growing RA International’s US Government project portfolio and has played a vital role in the Company’s transition to embracing many USG business practices. William reports to the CEO on project development and provides recommendations for strategic investments. Before RA International, William served for 30 years with the US Navy including acting as Defence Attaché assigned to the US Mission in Somalia. He has held a variety of diplomatic and military roles, and has served as Commander of all Naval forces deployed to Kuwait and Qatar where he was responsible for the employment of over 1,200 US Navy personnel. He has also served as the Naval Liaison to the White House under Presidents Bush and Clinton. In addition to the EMT we have a committed team of management and senior staff spread across the Group, at Head Offi ce, Regional, Country and Project level. Country Managers are particularly important in ensuring that the right resources are in place and available to bring in projects on time, on budget and to the right quality standards. This team of talented individuals all contribute to the growth of the business and are all committed to bringing about positive change to the local communities where we work. 15 252757 RA_Int_pp01-pp50.indd 15 252757 RA_Int_pp01-pp50.indd 15 09/05/2019 18:45 09/05/2019 18:45 OPERATING REVIEW We made strong progress across our strategic objectives during the year. These are to: • Broaden our customer base • Diversify our geographic reach • Target longer-term contracts • Cross-sell our services to new and existing customers SORAYA NARFELDT Chief Executive Offi cer CONTRACTS Our strengthened balance sheet, following our Admission to AIM in June 2018, enabled us to bid for larger and longer-term contracts. The average contract value at 31 December 2018 was USD 7.2m with an average duration of 4.4 years when weighted by contract value. We have increased our geographical presence; the Company executed projects in 9 countries in 2018 compared to 6 in 2017; entering Mali, Oman, and Sudan. In addition, we increased revenue from government and commercial customers. Together, revenue from these clients made up almost 40% of our total revenue in 2018 compared to less than 30% a year ago. Having advocated the beneﬁ ts of a ‘one-supplier’ model for years, we have now started to see signiﬁ cant demand for ‘hybrid’ projects where we may perform services from two or more of our service channels. Examples include recent projects executed for UNICEF and the UK MOD. There are signiﬁ cant effi ciencies which can be passed on to the client when remote site operators are able to seamlessly transition from construction to providing IFM services. We continue to advocate this delivery model and have structured our organisation in a way which best allows us to build infrastructure and take care of the occupying tenants. continent. Our strategy has started to produce results, with two large and strategically important contracts awarded with new clients in the second half of 2018. Despite seeing an increase in the size and complexity of our contracts, our delivery record remains excellent, reﬂ ecting our commitment to delivering our projects on time and to a high standard. Our growth model continues to be ‘customer led’ and, in addition to targeting new customers, our focus remains on ensuring we meet the needs of existing clients. We secured signiﬁ cant new contracts and contract renewals from the UN. Most notable amongst these was a 5-year contract with UNICEF which has recently been uplifted to USD 22.8m, and a USD 30m power infrastructure project with the United Nations Support Offi ce in Somalia. As at 31 December 2018 the Company reported a revenue backlog of USD 119m compared to USD 112m the previous year. At our half year we outlined our strategy for US Government contracts, whereby we partner with US companies in order to support them winning work across the African The ﬁ rst was a USD 9.1m contract awarded by URS Group, Inc., a subsidiary of AECOM, to provide construction services in Somalia repairing an asphalt runway for the US Naval Facilities Engineering Command. In December, we announced a second contract with a large US company, to provide support services in connection to strengthening the capacity of local security sector institutions in a Central African country, on behalf of the US Government. NEW BUSINESS OPPORTUNITIES The credibility gained and strengthened balance sheet resulting from the Admission to AIM has led to invitations to bid for opportunities which were previously unavailable to us, both from existing and new customers. The biggest uplift is in the commercial sector, particularly from mining and oil & gas companies where we are bidding for a number of large construction and service projects. 16 252757 RA_Int_pp01-pp50.indd 16 252757 RA_Int_pp01-pp50.indd 16 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S Becoming a UK quoted company has also strengthened RA International’s position when bidding for UK Government contracts, as evidenced by our increasing work from the MOD and FCO. While our revenue backlog and bid pipeline is larger than ever before, many of the tenders now have longer preparation and adjudication periods, and many involve several counterparties (such as where we are a subcontractor to a US company). Contract awards are, therefore, taking longer than originally anticipated but we remain conﬁ dent that our strategy will deliver great value to our stakeholders. OPERATIONS During the year we initiated operations in Sudan, Mali and Oman and increased our presence in the Central African Republic. Additionally, we recently announced that we have signiﬁ cantly expanded operations in Mozambique, having acquired a 49% stake in a well- established local integrated facilities management company and a large parcel of land in the North of the country. Our plan is to construct a large, fully integrated and serviced camp in order to support upcoming gas projects in the region, and we are in the process of securing potential anchor tenants. The project is an example of one approach we are taking to further target new opportunities. Our goal is to recruit and develop local people whenever it is practical to do so. Local labour participation is one of our key performance indicators and has grown consistently over the years. In 2018 local hires accounted for 69% of total employees compared to 67% in 2017, and 63% in 2016. As we enter new territories, we often need to bring in staff from outside if the necessary skills are not available on the ground. This may cause variations in the percentage of local labour we employ until the required training and handover is complete. In late 2017 we identiﬁ ed that we needed to scale-up and build a robust back-offi ce function. This was driven by our ambition to deliver more large projects simultaneously, coupled with the signiﬁ cant reporting requirements of our customers and internal compliance requirements. As a result, in 2018 the Company’s processes were structured so as to have an enabling function and a delivery function. To establish the delivery function, a project management offi ce (PMO) was established in Nairobi that is responsible for implementing contracts. Deputy Country Managers report into the PMO and are responsible for project delivery in our operational areas. The enabling offi ce is managed from Dubai and includes ﬁ nance, HR, procurement, business development, communications, strategy, compliance and other senior level roles. To support these functions and strengthen the management team we made a number of key senior level appointments in 2018. On 1 January 2019 William Warnock joined the Executive Management Team as Director of US Business Development, having worked previously with RA International as a consultant. CAPT Warnock has been instrumental in enabling the Company’s transition to USG business practices and is responsible for expanding RA International’s client base to USG organisations and contractors operating in Africa. He communicates directly with the CEO on project development and provides recommendations for strategic investments. In addition, he continues to leverage his expertise as the former defence attaché assigned to the US Mission Somalia. OUTLOOK We remain focused on our strategic objectives as we work to deliver on our rising backlog of contracts (presently USD 130m). During the year, we streamlined our operations to three service channels, construction, integrated facilities management and supply chain. We aim to execute our strategy through four independent pillars: • Broaden our customer base • Diversify our geographic reach • Target longer-term contracts • Cross-sell our services to new and existing customers We continue to see strong business opportunities in the government sector and expect US and UK Government work to continue to increase as a portion of our overall revenue. We also anticipate strong growth from our Supply Chain service channel as we continue to bid on larger projects. We continue to target work from commercial clients and have a number of large bids outstanding relating to the mining sector. Additionally, we have recently expanded into Mozambique to further target work from the oil & gas industry. Given the longer sales cycle involved when compared with humanitarian or government projects, we are not anticipating signiﬁ cant revenue generation from these projects in 2019 but are still expecting growth in revenue from commercial customers. The Company is in a stronger position now than it was a year ago, and there are currently many large bids outstanding on which we are awaiting notiﬁ cation and where we are very well positioned to capitalise on our reputation for reliability and can-do approach. Many of the bids outstanding are transformational in nature and signiﬁ cance and while we await notice of awards we continue to bid on similar opportunities. 17 252757 RA_Int_pp01-pp50.indd 17 252757 RA_Int_pp01-pp50.indd 17 09/05/2019 18:45 09/05/2019 18:45 FINANCIAL REVIEW OVERVIEW Financial performance for the year ended 2018 was broadly in line with our expectations. The Group reported revenue and underlying proﬁ t of USD 54.8m and USD 13.3m, representing an increase of 7.0% and 6.3% respectively when compared with the prior year. The Group repaid all debt balances during the year and had a cash balance of USD 27.8m at 31 December 2018. Revenue Underlying operating proﬁ t2 Underlying proﬁ t2 Proﬁ t (after exceptional items) Normalised EPS (cents)2 Basic EPS (cents) Net Cash (end of period)2 2018 USD’000 54,805 14,212 13,252 9,954 8.4 6.3 27,804 2017 USD’000 Restated1 51,215 13,585 12,471 12,471 8.9 8.9 5,602 REVENUE 7.0m in 2017. As the Group continues Despite the Company experiencing to secure higher value, longer-term delays in the commencement of contracts, it is expected that the eff ect several projects in late 2018, the USD of STCs will diminish. 28.7m revenue reported in the second half of 2018 represents the highest half-year revenue total reported by the Group since its formation in 2004. PROFIT Gross proﬁ t margin in 2018 decreased slightly to 37.7% (2017: 38.9%) As indicated in the interim ﬁ nancial resulting from a decrease in cost review, the Group does not experience reimbursements received relating seasonality, but it does frequently to prior periods. In connection with execute short-term contracts (STCs) implementing IFRS 15 in 2018, the which often have a signiﬁ cant eff ect Group has reclassiﬁ ed non-contracted on revenue and proﬁ tability in a given cost reimbursements to direct costs quarter or half-year period. The Group whereas in the past these payments reported revenue from STCs of USD were recorded as other income. It 8.3m in 2018 compared with USD is not expected that the value of 18 ANDREW BOLTER Chief Financial Offi cer non-contracted cost reimbursements will be signiﬁ cant in future periods. Excluding cost reimbursements, gross margin was consistent at 37.0% for both periods. Underlying proﬁ t increased by 6.3% to USD 13.3m in 2018 (2017: USD 12.5m) and underlying margin was broadly consistent across the current and prior period at 24.2% and 24.4% respectively despite the impact of non-contracted cost reimbursements. Underlying operating proﬁ t, which is used by the Group’s management to assess operating performance, grew by 4.6% to USD 14.2m (2017: USD 13.6m). EXCEPTIONAL ITEMS Exceptional items of USD 2.9m were recorded as costs for the year. These items represent expenses incurred in relation to the Company’s Admission to AIM, which in accordance with international accounting standards, are presented as expenses in the income statement. Within the accounts, exceptional items are split into two categories: advisory fees and other costs associated with the Admission 252757 RA_Int_pp01-pp50.indd 18 252757 RA_Int_pp01-pp50.indd 18 09/05/2019 18:45 09/05/2019 18:45 T T R R O O P P E E R R I I C C G G E E T T A A R R T T S S KEY PERFORMANCE INDICATORS THE DIRECTORS USE THE FOLLOWING KPIS AS A MEASURE OF THE GROUP’S PERFORMANCE: 54.8 51.2 14.2 13.6 37.0 21.2 5.8 2018 2017 2016 2015 DEC 18 2018 DEC 17 2017 DEC 16 2016 DEC 15 2015 1. REVENUE (USDm) 2. UNDERLYING OPERATING 1.5 13.3 12.5 119 112 108 100 PROFIT (USDm) 69 67 63 57 5.0 DEC 18 2018 DEC 17 2017 DEC 16 2016 1.0 DEC 15 2015 DEC 18 DEC 18 DEC 17 DEC 17 DEC 16 DEC 16 DEC 15 DEC 15 2018 2018 2017 2017 2016 2016 2015 2015 3. UNDERLYING PROFIT (USDm) 4. REVENUE BACKLOG AT YEAR 5. LOCAL LABOUR PARTICIPATION END (USDm) (% OF LABOUR WHO ARE LOCAL WORKERS) 19 252757 RA_Int_pp01-pp50.indd 19 252757 RA_Int_pp01-pp50.indd 19 09/05/2019 18:45 09/05/2019 18:45 FINANCIAL REVIEW CONTINUED totalled USD 1.3m and stock-based 2) Increased inventory due to Other investment initiatives include: compensation totalled USD 1.6m. The project mobilisation: inventory stock-based compensation charge balances increased USD 1.6m relates to the transfer of shares by the from 31 December 2017 resulting majority shareholder of the Company from higher levels of inventory to certain employees at the AIM on site and in-transit relating Admission date. While the Company to construction works being • The purchase and mobilisation of a ﬂ eet of heavy-duty trucks in CAR to greater improve our operating capability and effi ciency in the country. was not a party to this transfer, IFRS undertaken in the Central • Water puriﬁ cation equipment mandates that the transaction be African Republic (CAR) for which once installed will distribute accounted for as a cost on the date of MINUSCA and the execution of the share grant. The transfer of shares projects in Somalia; speciﬁ cally, was conditional on the Company’s the construction of power drinking water throughout our facilities in Mogadishu, removing the need for single-use water successful Admission to AIM. infrastructure for UNSOS and bottles. EARNINGS PER SHARE On June 29, 2018 the Company listed on AIM and issued 33,575,741 new a conference centre being built for the use of UNICEF and other customers. • Upgrading certain construction equipment to be used in connection with the URS construction contract and other shares representing a 24.0% increase BALANCE SHEET upcoming projects. in total shares outstanding. Net of share issuance and AIM Normalised earnings per share for 2018, both basic and diluted, was 8.4 cents per share (2017: 8.9 cents per share). Basic earnings per share, both basic and diluted, was 6.3 cents per share (2017: 8.9 cents per share). CASHFLOW The Company targets a 100% cash conversion ratio but signiﬁ cant increases in operational activity, such as mobilising for material contracts, may lead to short-term divergences. Admission costs, the Group raised USD 21.4m in proceeds. Net cash increased to USD 27.8m at 31 December 2018 (2017: USD 5.6m) and the Group repaid all debt balances in 2018. Liquidity and net cash are often assessed by potential customers during the contract adjudication process. The completion of the Admission to AIM and related fundraising was a milestone for the Group in that it now qualiﬁ es to bid for larger projects and has the ﬁ nancial Net cash ﬂ ow from operations in the capacity to mobilise for multiple large year was USD 10.9m (2017: USD 12.5m) projects simultaneously. Net assets at which represents 80.1% cash conversion (2017: 92.0%)3. The primary factors contributing to the diff erential were: 31 December 2018 were USD 59.2m with the majority of the total balance sheet comprising cash and other 1) A build-up of trade receivables, current assets. primarily from UN agencies: trade The Group continues to invest in receivables were USD 10.0m at 31 December 2018, USD 3.8m revenue generating ﬁ xed assets, investing over USD 4m to upgrade higher than at December 31, 2017. and expand its camp facilities to The Group received payments accommodate UNICEF and other totalling USD 3.5m within the ﬁ rst customers contracting with the Group half of January 2019 including payment of 55.3% of receivables overdue at 31 December 2018. for accommodation services. 20 • Purchasing a 400-man tented camp which was leased to a client in 2018 and is being repurposed in connection with another project commencing in 2019. DIVIDEND The Directors have proposed a maiden full year dividend of 1.0p per share to be paid on 3 July 2019 to Shareholders on the register as of May 24, 2019. The ex-dividend date is May 23, 2019. 1Comparative ﬁ nancial information has been restated following adoption of IFRS 15. Further details can be found within Note 5 of the consolidated ﬁ nancial statements and accompanying notes (p. 68-70). 2Full deﬁ nitions and explanations of the purpose and usefulness of each non-IFRS Alternative Performance Measure used by the Group can be found within Note 18 of the consolidated ﬁ nancial statements and accompanying notes (p. 79-80). 3Cash conversion is calculated as cash ﬂ ow generated from operations divided by operating proﬁ t. 252757 RA_Int_pp01-pp50.indd 20 252757 RA_Int_pp01-pp50.indd 20 09/05/2019 18:45 09/05/2019 18:45 MANAGING RISK T R O P E R I C G E T A R T S The Board has ultimate responsibility Day-to-day risk management is the The principal risks that the Board for ensuring the Group’s risks are responsibility of the EMT and the believe are most likely to aff ect the properly understood, quantiﬁ ed and Country Managers and any potential business operations, impact strategy appropriately managed. The Board changes to risk are reviewed regularly and ﬁ nancial performance, and continually assesses the Group’s during Executive and Management inﬂ uence reputation are set out below. exposure to risk and seeks to ensure meetings. Working in remote and that risks are mitigated wherever challenging locations requires the possible. Group to have robust controls and company policies that are integrated into all levels of the business. STRATEGIC RISKS PROFITABLE GROWTH Failure to retain and win proﬁ table business will impact our ﬁ nancial performance and growth. The business is inﬂ uenced by ODA budgets, political stability, attitudes towards outsourcing services, and our reputation in the market. Key risk drivers: • Mispricing bids Controls and mitigation: • An intelligence-led approach to bidding for contracts. Local • Not meeting customer requirements intelligence with respect to labour and material prices and • Being unable to resource suffi cient labour, regional variances feeds into tender processes, protecting equipment, and materials operating margins. • Not understanding or meeting our customers or • Self-performance of project works so as to retain control of stakeholder expectations project timelines and quality. • • Investment in people, and infrastructure. Investment in local labour and capacity building where possible and practical to enhance local intelligence. • Source new suppliers and uplift current material providers. REPUTATION MANAGEMENT Failure to manage our reputation will mean that we will be less likely to win or renew business from existing customers or attract new clients. It will also aff ect our ability to operate in our geographies and attract the necessary skills and talent. Key risk drivers: Controls and mitigation: • Bribery and corruption issues either by our • Customer and stakeholder relationship management employees or counterparties programmes in place. • Failure to respond and manage incidents • A zero-tolerance stance on bribery and corruption along with • Not delivering projects on time or to required ongoing training programs on anti-bribery and corruption standards (ABC) risk management and an independent whistle blower channel. • Gifts and hospitality policies in place. • Ensure availability of company policies to all employees and stakeholders through country offi ces and online resources. • Increasing regular training sessions across the whole company on ethical and compliance related subjects. • Introducing clear incident management and crisis management strategies and procedures. 21 252757 RA_Int_pp01-pp50.indd 21 252757 RA_Int_pp01-pp50.indd 21 09/05/2019 18:45 09/05/2019 18:45 MANAGING RISK CONTINUED FINANCIAL, LEGAL AND COMPLIANCE RISKS FINANCIAL CONTROLS Failure to impose strong ﬁ nancial controls may result in: inaccurate and delayed reporting of ﬁ nancial results, the inability to meet ﬁ nancial contractual reporting obligations, a heightened risk of error and fraud, poor quality data leading to poor business decisions, inaccurate forecasting, the failure to create a suitable capital structure, and an inability to make critical ﬁ nancial transactions. In turn this could lead to ﬁ nancial instability, potential business loss and a negative impact on our reputation. Key risk drivers: Controls and mitigation: • Inadequate internal ﬁ nancial controls • Group ﬁ nancial policies and procedures in place which are reviewed surrounding receipts, payments, and cash and updated regularly. management • Regular meetings to discuss status of all debts and identify any • Failure to adequately manage cash ﬂ ow concerns regarding receipt of payments. • Misappropriation of assets, theft or fraud • • Weekly review of cash ﬂ ow forecasts at an operational and Group level. Authorised signatories in place for all payments with the CFO authorising all signiﬁ cant payments. • Limit cash payments to the greatest extent possible and limit those staff who have access to cash. Operations funded on a weekly basis. • Increasing training sessions across whole company on ethical and compliance related subjects, and whistleblowing procedures. COMPLIANCE AND REGULATION Failure to deliver contractual requirements or failure to meet and report against agreed service performance levels may lead to signiﬁ cant ﬁ nancial penalties, legal notices, onerous contract provisions, or early termination of contracts. Lack of oversight and procedures to control and monitor bribery and corruption may lead to litigation, inquiries or investigations that could divert management time and resources, and result in jail terms, heavy corporate ﬁ nes, sanctions against bidding for contracts and damage to reputation. Key risk drivers: Controls and mitigation: • Failure to deliver projects against agreed • Standard Operating Procedures consistent across the Group. service performance • Misunderstanding local regulations or legal requirements • • • Engage local professional advisors in all operating jurisdictions. ABC training is regularly provided. Risk assessments on all third parties acting on behalf of RA • Bribery and corruption by employees and International. third parties in dealings with foreign public • Introducing training for third parties and have third parties agree offi cials, resulting in possible heavy punitive to abide by RA International’s code of conduct as part of their measures via international legislations contractual obligations. 22 252757 RA_Int_pp01-pp50.indd 22 252757 RA_Int_pp01-pp50.indd 22 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S FINANCIAL, LEGAL AND COMPLIANCE RISKS CONTINUED RESPONSIBLE AND ETHICAL BEHAVIOUR Irresponsible or unethical behaviour could lead to a breach of human rights, labour rights or inadequate health and safety measures. This behaviour can arise from the actions of individual employees or as a result of poor company culture. The result might be the loss of clients, inability to win new business and loss of reputation. Key risk drivers: • Failure to communicate the Company’s purpose and values Controls and mitigation: • All staff handling equipment and materials receive health and safety training. • Health and safety practices not adhered to • Constant challenging of behavioural norms and training to improve or ignored attitudes towards health and safety. • Direct or indirect contribution to abuses • Consistently support the Labour Rights initiatives of governments in countries of operation. • Encourage more employees to become advocates for responsible behaviour through engagement in the Company’s sustainability strategy. See our CSR overview on p. 24-28. OPERATIONAL RISKS RESOURCE MANAGEMENT Failure to attract, acquire or develop adequate resources could impact ﬁ nancial and operational performance, and reputation. Key risk drivers: Controls and mitigation: • Delivery delays caused by poor quality equipment and materials procured • • Standard procurement procedures. Supplier penalty clauses included in purchase orders for delays and • Manpower shortfall resulting from incorrect delivery of poor quality goods. estimation of required labour • HR works with the talent acquisition team to choose the right talent • Inability to recruit the right skills and labour and manpower for each project. • Retention schemes and succession planning programmes are constantly being improved. • Expanding performance-linked award programmes. CATASTROPHIC EVENTS Failure to eff ectively respond to events that result from our own actions or events that are beyond our control such as weather, political upheaval, violence or war. Such events can result in multiple fatalities, severe property and asset damage or loss or very serious long-term environmental damage. Key risk drivers: Controls and mitigation: • Lack of adequate policies and procedures • Clear understanding of long-term weather security, and other to manage incidents restrictions that might be encountered during projects. • Inadequate or delayed response to • Insurances covering business interruption, political violence and catastrophic events political risk. • Poor health and safety procedures and • Medical and evacuation procedures updated regularly and accessible policies to all employees. • • Provide training programmes on health and safety. Crisis management, disaster recovery and business continuity plans being expanded and tested. 23 252757 RA_Int_pp01-pp50.indd 23 252757 RA_Int_pp01-pp50.indd 23 09/05/2019 18:45 09/05/2019 18:45 CORPORATE SOCIAL RESPONSIBILITY From responsive to responsible to sustainable 2018 was a landmark year for sustainability at RA International. We re- assessed our whole approach with a view to integrating sustainability with the Company’s core business activities, deﬁ ned our priorities and aligned them with the UN’s Sustainable Development Goals. To create a ﬁ rm foundation for the future, we conducted our ﬁ rst ever materiality assessment, and hired a consultant to calculate our carbon footprint. Our eff orts culminated in the publication of our ﬁ rst ever Sustainability Report which is available for download at www.raints.com. RA’S FOCUS AREAS THREE FOCUS AREAS, ALIGNED APPROACH AND TARGET SETTING WITH THE SDGs 2019 will be our baseline, target- With the support of sustainability setting year. Three working groups advisory group One Stone, we (1 for each priority SDG) consisting narrowed down RA International’s of 4-6 global RA employees have sustainability priorities to three areas: been tasked with evaluating the People & Skills Development, Labour environmental impacts and effi ciency Rights and Resource Management. of all our ongoing operations. Based These are the areas in which we on their ﬁ ndings, they will set targets have an opportunity to become to reduce negative and amplify sustainability leaders and they positive impacts from 2020 and correlate closely with three SDGs — SDG 4 Quality Education, SDG 7 Aff ordable & Clean Energy, and SDG 8 Decent Work & Economic Growth (see diagram). In addition, there are ﬁ ve further goals and corresponding targets where we can create a positive direct or indirect impact, and two others where we have a responsibility to mitigate our negative impacts. (For a full breakdown see our Sustainability Report.) beyond. OUR PURPOSE “ To deliver immediate results and lasting change.” Part of the strategy review carried out in 2018 was to deﬁ ne our Company’s purpose. Following a process of internal consultation, we decided on: “To deliver immediate results and lasting change.” This statement resonates with our idea that the work we do should not only deliver business results for our clients, but also have an enduring positive eff ect on local communities. RESOURCE MANAGEMENT PEOPLE & SKILLS DEVELOPMENT LABOUR RIGHTS SDG’S 24 252757 RA_Int_pp01-pp50.indd 24 252757 RA_Int_pp01-pp50.indd 24 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S PERSEVERANCE PAYS OFF IN MPOKO In 2015, the UN initiated a youth employment project in Mpoko, a suburb of Bangui, Central African Republic. Its goal was to help the young, including former combatants, back into employment. However, in December 2017 after a series of setbacks, the programme was stopped. We decided to help alleviate the situation by taking on some of the young people from the programme to work on RA International’s own projects in Mpoko. We focused on teaching transferable skills in the building trades as well as raising awareness of health & safety, personal responsibility, accountability and teamwork. Despite numerous disruptions, the initiative was ultimately successful. In March 2018 all our projects were completed, and 250 local youths had gained valuable work experience. People & Skills Development Our policy has always been to recruit STAFF TRAINING SUPPLIER DEVELOPMENT and develop local people whenever During 2018, we continued our eff orts Local sourcing has a positive impact this is practical and economically to instil safe working practices across on both our business and that of our viable, only bringing in staff from our operations. Over 1,500 health suppliers. It means we are able to outside the country when the and safety brieﬁ ngs (Toolbox talks) secure the supply of quality goods necessary skills are not available on were held during the year. We also at an advantageous price while our the ground. This approach is not identiﬁ ed opportunities to improve supplier is able to grow his or her just good for our business but also key operational processes and set business based on the security of reduces costs for our clients and has about devising training programmes a long-term relationship with us. In a positive impact on the communities to raise the skills and knowledge of 2018 we continued to buy from local we work in (see case story above). our laundry and kitchen staff . suppliers, as well as supporting their development through micro-loans, business advice and basic training as needed. 25 252757 RA_Int_pp01-pp50.indd 25 252757 RA_Int_pp01-pp50.indd 25 09/05/2019 18:45 09/05/2019 18:45 CORPORATE SOCIAL RESPONSIBILITY CONTINUED Labour Rights We ﬁ rmly believe that all RA INTERNATIONAL STANDARDS by law. And in an eff ort to contribute employees have the right to We off er employment within a to the long-term wellbeing of our decent work in a safe and secure framework of legal, health and host communities, we consistently environment. This includes the chance safety provisions that aligns with support the Labour Rights initiatives to beneﬁ t economically irrespective of international best practice, even in of regional and national governments. gender, sexual orientation, religion or countries where this is not required (See case story below.) nationality. Our beliefs are enshrined in the RA Code of Conduct, RA Employee Handbook and Company Policies, 16 of which relate speciﬁ cally to employee conduct. The content of these documents is explained to new recruits during induction training SUCCESS IN SOMALIA FOUNDED ON RESPECT When RA ﬁ rst started working in Somalia in 2009, the country faced severe challenges. There was a transitional government, virtually no infrastructure and the local population had lived much of their lives in a conﬂ ict-ridden state. and explored in detail at monthly HR Over the last decade, we have invested in training Somali workers, who training sessions held across our sites. now account for 50% of our in-country workforce. Our eff orts were offi cially recognised in 2017, when the Somali Ministry of Labour and Social Aff airs awarded us a Certiﬁ cate of Appreciation for upholding the labour rights of employees. Responsible Business TACKLING BRIBERY AND COMBATTING HUMAN TRAFFICKING COMMUNITY ENGAGEMENT CORRUPTION AND SEXUAL EXPLOITATION Our founder, Soraya Narfeldt, has Our zero-tolerance position on bribery In 2018, we decided to draw special always believed that business has a and corruption is clearly stated in attention to our Anti-Slavery Human leading role to play in the development the RA Code of Conduct and two Traffi cking Policy and our Sexual of emerging economies and driving speciﬁ c policies: our RA Anti-Bribery Exploitation Policy. The Nairobi-based positive change on the ground. Over & Corruption Policy and our Gifts counter-traffi cking organization the years, we have been involved in & Hospitality Policy. Employees are made aware of our position both through policy training and through Awareness Against Human Traffi cking — HAART Kenya (see www.haartkenya. org) helped us devise and later run more than 30 community engagement projects and we continue to keep an eye open for opportunities. To hard-hitting anti-corruption posters awareness-raising workshops with RA cite a few examples from 2018, we displayed at our sites. Anyone who employees in Nairobi and Bangui. answered a call for emergency food witnesses or suspects a violation is encouraged to report it to their manager or to submit a report via our independent whistleblower channel. The successful workshops highlighted the beneﬁ ts of communicating our HR policies proactively, which has now become standard practice across the Company with regular company-wide policy training sessions. aid to starving people in the Lower Shabelle region of Somalia, continued to support the sporting career of RA employee and Olympic athlete Elisabeth Mandaba, and, following on from the workshops conducted with HAART Kenya, we became an offi cial partner of Free As A Human. (see www. anyangompinga.com/free-as-a-human). 26 252757 RA_Int_pp01-pp50.indd 26 252757 RA_Int_pp01-pp50.indd 26 09/05/2019 18:45 09/05/2019 18:45 T R O P E R I C G E T A R T S OPTIMISING WATER USE AND REDUCING PLASTIC WASTE In Mogadishu, we installed two large reverse osmosis (RO) units to provide drinking water for our entire camp. Water is pumped from a 50-metre deep borehole and led to the RO units (pictured), which treat it to drinkable quality. The upgrades eliminate the need for an estimated 15,000 plastic bottles per month. 27 252757 RA_Int_pp01-pp50.indd 27 252757 RA_Int_pp01-pp50.indd 27 09/05/2019 18:45 09/05/2019 18:45 Resource Management Resource Management is the focus area where we feel a concerted, company-wide eff ort can have most positive impact. We see numerous opportunities to improve, building on the initiatives launched in 2018. For example, the introduction of environmentally-friendly technologies in three of our smaller laundries, the installation of reverse osmosis (RO) units to provide drinking water in Mogadishu, and the decision to produce wraps (rolled, ﬂ at bread) locally rather than importing them. (See case story below.) UTILITY SAVINGS FROM NEW LAUNDRY DESIGN In 2018, we piloted a new laundry design at two camps in CAR and one in Somalia. The equipment ﬁ lters and recycles water at various stages of the wash process so it can be reused for the washing cycle of the next load. It also recovers heat for re-use, further reducing electricity consumption. Projected savings are 25-30% less energy and 50% less water. The total utilities savings over a twenty-year period (the equipment’s lifetime) in these three laundries alone will be 24 million litres of water and over a third of a million kWh of electricity. Following the success of these pilot projects, we have decided to implement the new design as standard. Water (l) Power (kWh) Daily consumption conventional design Daily consumption advanced design Annual saving/camp Lifetime saving/camp Lifetime savings across three camps 5,320 2,660 799,000 15,960,000 47,880,000 102 71 9,180 183,000 550,800 MORE SUSTAINABLE SNACKS After analysing the impacts of importing and storing large volumes of wraps at our Mogadishu site, we decided to upgrade our own kitchen equipment and make the wraps in-house instead. In this way, we were able to lower transport impacts and reduce the energy required for cold storage. On-site production also has the added advantage of employing local manpower and ingredients. 28 LOOKING AHEAD Within energy generation and use, we are now assessing the possibility of installing solar panels on the roof of a new building in Somalia, which will reduce the need for diesel generators. And we are investigating how modern, effi cient AC systems can help reduce our energy consumption. To make our food supplies more sustainable, we are looking at a variety of options from increasing local sourcing to further reducing food waste in our kitchens. Within construction, we are in the process of developing a new, holistic design philosophy that will ensure RA International’s future camps align with our sustainability goals. 252757 RA_Int_pp01-pp50.indd 28 252757 RA_Int_pp01-pp50.indd 28 09/05/2019 18:45 09/05/2019 18:45 CORPORATE GOVERNANCE REPORT E T A R O P R O C E C N A N R E V O G 252757 RA_Int_pp01-pp50.indd 29 252757 RA_Int_pp01-pp50.indd 29 09/05/2019 18:45 09/05/2019 18:45 29 CHAIR’S CORPORATE GOVERNANCE STATEMENT SANGITA SHAH Non-Executive Chair I am pleased to introduce the Since our admission to trading on analysts following the announcement corporate governance section of our AIM on 29 June 2018, the Board has of interim and ﬁ nal results. I also report. As Chair, I am responsible recognised the revisions to the AIM intend to make myself available to for instilling high standards of Rules for Companies eff ective 28 Shareholders to discuss strategy and corporate governance processes September 2018 pursuant to which governance. I look forward to meeting within the Company. Such processes all AIM companies are required to Shareholders in the year to come. Finally, I would like to thank our Executive Management Team for their hard work and dedication to the Company. SANGITA SHAH Non-Executive Chair 10 April 2019 unquestionably underpin the comply with a recognised corporate Company’s success and they are governance code. The Board complies reﬂ ective of the long-established with the Quoted Companies Alliance culture that exists towards adherence Corporate Governance Code (QCA to international and local compliance Code) which is believed to be and regulatory standards. The Board the most appropriate recognised is fully supportive of embracing the highest levels of corporate governance possible. The culture of the Company is based on strong ethical values and behaviours that are instilled throughout the organisation and embedded within governance code for the size and structure of the Company. The QCA Code makes clear that it is the prime responsibility of the Chair to ensure the Company applies the principles to the best advantage of all stakeholders. the fundamentals of the business and One of my main objectives is to its objectives. The Board is ultimately maintain strong relationships with responsible for the risks of the Group Shareholders and to have a proactive and principle risks of the business are investor relations programme to considered and understood by each maintain good communication with all director. Details of the Company’s key stakeholders. This includes making the risks can be found on pages 21-23 of Executive Directors available to meet the 2018 Annual Report. with institutional Shareholders and 30 252757 RA_Int_pp01-pp50.indd 30 252757 RA_Int_pp01-pp50.indd 30 09/05/2019 18:45 09/05/2019 18:45 E T A R O P R O C E C N A N R E V O G 252757 RA_Int_pp01-pp50.indd 31 252757 RA_Int_pp01-pp50.indd 31 09/05/2019 18:45 09/05/2019 18:45 31 QCA CODE PRINCIPLES The QCA has ten principles which the Company is required to adhere to and to make certain disclosures both within its report and accounts and on its website. The Company’s website disclosures can be found at www.raints.com/wp-content/uploads/2018/11/RA-QCA-Disclosures-updated.pdf. QCA REQUIRED DISCLOSURE REFERENCE CODE Explain the Company’s business model and strategy, including key challenges in their execution (and how those will be addressed). Seek to understand and meet Shareholders’ needs and expectations. Explain the ways in which the Company seeks to engage with Shareholders. Take into account wider stakeholder and social responsibilities and their implications for long-term success. Explain how the business model identiﬁ es the key resources and relationships on which the business relies. Explain how the Company obtains feedback from stakeholders. 2018 Annual Report: p. 7-12. Being newly admitted to trading on the AIM market of the London Stock Exchange, we are committed to listening and communicating openly with our Shareholders to seek to ensure that our strategy, business model and performance are clearly understood. Understanding the expectations of our investors and wider stakeholders and in turn helping these audiences understand our business is and will be a key part of driving our business forward. The Company’s website contains all announcements, press releases, major corporate presentations and interim and year end results. Whilst being mindful of the requirements of the AIM Rules and Market Abuse Regulations, the Board may engage with Shareholders directly from time to time in relation to questions that they may have and other matters. The Company’s ﬁ rst annual general meeting (‘AGM’) will be held on 24 June 2019, this will provide an opportunity for Shareholders to meet with the Company. There shall also be an opportunity for Shareholders to ask questions during the formal business of the meeting and informally following the meeting. The growth of our business has been achieved through securing contracts with new customers and by generating repeat business from existing clients both in regard to new contracts and contract extensions and uplifts. Our investment in local communities enables us to identify and manage risks inherent in operating in remote locations. Local intelligence in respect of labour, material and regional variances and regulatory requirements gathered by the Group feeds into its business model. The Group’s intelligence-led approach also enables it to identify where new opportunities may arise which means we can mobilise quickly in new locations and capitalise on opportunities to deliver additional services to meet our client’s needs. We have many key relationships with stakeholders, both externally with our suppliers, customers, regulators and others, and internally with our employees. We strongly believe that engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver on our commitments. We engage with our key stakeholders through various channels depending upon who they are, and we value the feedback we receive from them. We take every opportunity to ensure that where possible the views of stakeholders are considered and acted on. Employees across the business work closely together, and the Board seeks to encourage an environment of openness and inclusion. 1 2 3 32 252757 RA_Int_pp01-pp50.indd 32 252757 RA_Int_pp01-pp50.indd 32 09/05/2019 18:45 09/05/2019 18:45 E T A R O P R O C E C N A N R E V O G QCA REQUIRED DISCLOSURE REFERENCE CODE 4 5 Describe how the Board has embedded eff ective risk management in order to execute and deliver strategy. This should include a description of what the Board does to identify, assess and manage risk and how it gets assurance that the risk management and related control systems in place are eff ective. Identify those Directors who are considered to be independent; where there are grounds to question the independence of a Director, through length of service or otherwise, this must be explained. 2018 Annual Report: p. 21-23. Sangita Shah, Non-Executive Chair, was appointed to the Board in May 2018. Alec Carstairs, Non-Executive Director, was appointed to the Board in May 2018. Philip Haydn-Slater, Non-Executive Director, was appointed to the Board in May 2018. Ian Henderson, Non-Executive Director, was appointed to the Board in May 2018. There are no grounds to question the Non-Executive Directors’ independence. Please refer to 2018 Annual Report: p. 36-38 for further details of the Non-Executive Directors. Describe the time commitment required from Directors (including Non-Executive Directors as well as part-time Executive Directors). The Executive Directors are expected to devote substantially the whole of their time to their duties with the Company. The Non-Executives have a lesser time commitment but are expected to devote as much time as is necessary to conduct their duties and responsibilities on behalf of the Company. Time commitment increases if any Non-Executive Director is provided with additional responsibility, such as being appointed to or as chair of further committees. Include the number of meetings of the Board (and any committees) during the year, together with the attendance record of each Director. 2018 Annual Report: p. 41. 252757 RA_Int_pp01-pp50.indd 33 252757 RA_Int_pp01-pp50.indd 33 09/05/2019 18:45 09/05/2019 18:45 33 QCA CODE PRINCIPLES CONTINUED QCA REQUIRED DISCLOSURE REFERENCE CODE 6 Identify each Director. 2018 Annual Report: p. 36-38. Describe the relevant experience, skills and personal qualities and capabilities that each Director brings to the Board (a simple list of current and past roles is insuffi cient); the statement should demonstrate how the Board as a whole contains (or will contain) the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the strategy of the Company for the beneﬁ t of the Shareholders over the medium to long- term. Explain how each Director keeps his/her skillset up-to-date. Where the Board or any committee has sought external advice on a signiﬁ cant matter, this must be described and explained. 2018 Annual Report: p. 36-38. The Board as a whole is kept abreast with developments of governance and AIM regulations. The Company’s NOMAD provides initial training of AIM regulations as part of a Directors’ onboarding and this is refreshed annually, and on an ad hoc basis where necessary to the Board as a whole. The Board is mindful of ensuring an understanding by the Directors of their ﬁ duciary duties and responsibilities of good governance. The skill set of the Board is monitored and considered by the Directors. A Board evaluation process will be undertaken during 2019. No such advice has been sought to date. Where external advisers to the Board or any of its committees have been engaged, explain their role. The Directors have access to the Company’s NOMAD, Company Secretary, lawyers and auditors and are able to obtain advice from other external bodies as and when required. Describe any internal advisory responsibilities, such as the roles performed by the Company Secretary and the senior independent Director, in advising and supporting the Board. The Company Secretary helps keep the Board up to date on areas of new governance and liaises with the Company’s lawyers and NOMAD on areas of AIM requirements. The Company Secretary has frequent communication with the Chair and is available to other members of the Board as and when required. 34 252757 RA_Int_pp01-pp50.indd 34 252757 RA_Int_pp01-pp50.indd 34 09/05/2019 18:45 09/05/2019 18:45 E T A R O P R O C E C N A N R E V O G QCA REQUIRED DISCLOSURE REFERENCE CODE 7 8 9 Include a high-level explanation of the Board performance eff ectiveness process. 2018 Annual Report: p. 42. Where a Board performance evaluation has taken place in the year, provide a brief overview of it, how it was conducted and its results and recommendations. Progress against previous recommendations should also be addressed. Include in the Chair’s corporate governance statement how the culture is consistent with the Company’s objectives, strategy and business model in the strategic report and with the description of principal risks and uncertainties. The statement should explain what the Board does to monitor and promote a healthy corporate culture and how the Board assesses the state of the culture at present. Maintain governance structures and processes that are ﬁ t for purpose and support good decision- making by the Board. Roles and responsibilities of the Chair, CEO and other Directors with commitments. Describe the roles of the Committees. 2018 Annual Report: p. 42. 2018 Annual Report: p. 30 and 39. 2018 Annual Report: p. 39-40. 10 Describe the work of any Board committees undertaken during the year. 2018 Annual Report: p. 40. Include an audit committee report (or equivalent report if such committee is not in place). 2018 Annual Report: p. 43. Include a remuneration committee report (or equivalent report if such committee is not in place). 2018 Annual Report: p. 40 and 44-46. If the Company has not published one or more of the disclosures set out under Principles 1-9, the omitted disclosures must be identiﬁ ed and the reason for their omission explained. N/A 252757 RA_Int_pp01-pp50.indd 35 252757 RA_Int_pp01-pp50.indd 35 09/05/2019 18:45 09/05/2019 18:45 35 BOARD OF DIRECTORS The Board retains full and eff ective control over the Company. The Sangita Shah, Non-Executive Chair, was appointed to the Board in May Company holds regular scheduled 2018. Sangita is a qualiﬁ ed accountant Soraya Narfeldt, Chief Executive Offi cer, was appointed to the Board in March 2018. The Company Board meetings, as well as ad hoc and has extensive experience in was founded by Soraya and Lars ones as and when the demands of the corporate ﬁ nance, journalism and Narfeldt after they witnessed large business requires. senior consultancy. Individual Directors may engage Sangita brings with her a wealth outside advisors at the expense of AIM listed and public market of the Company in appropriate experience and is also the Non- circumstances. The Non-Executive Directors are independent in character and judgement and have the range of experience and calibre to bring independence on issues of strategy, performance, resources and standards of conduct which is vital to the success of the Group. Executive Chair of AIM traded Bilby plc, a Board Director of NASDAQ listed Forward Industries Inc. and a Director to Global Reach Technology EMEA Limited. She has held a number of senior roles within blue chip organisations, including Unilever, Mars, Ernst & Young and KPMG and is a past President of the Chartered Institute of Journalists. Sangita is also a regular consultant to a number of companies and to HM Cabinet Offi ce. Sangita is a frequent key note speaker in forums for the Windsor Leadership Trust, European Parliament and European School of Management. organisations unable to provide a comprehensive range of services or manage or complete projects eff ectively when operating in remote locations, resulting in ineffi ciencies hindering the progress of peacekeeping, humanitarian and commercial projects. After initially undertaking successful projects in Afghanistan, the Group expanded into Africa, supporting the United Nations across the continent and growing its client base substantially. Soraya is a strong advocate and supporter of responsible business practice and has contributed articles on the subject to a number of recognised journals such as Forced Migration Review. 36 252757 RA_Int_pp01-pp50.indd 36 252757 RA_Int_pp01-pp50.indd 36 09/05/2019 18:45 09/05/2019 18:45 E T A R O P R O C E C N A N R E V O G Lars Narfeldt, Chief Operating Offi cer, was appointed to the Board in March 2018. Lars is a Swedish citizen Andrew Bolter, Chief Financial Offi cer, joined RA International in 2011 and was appointed to the Board Alec Carstairs, Non-Executive Director, was appointed to the Board in May 2018. Alec is a qualiﬁ ed who spent the ﬁ rst ﬁ fteen years of his in May 2018. Andrew is a Canadian chartered accountant with over post university career working with Chartered Accountant, Chartered 35 years experience of advising the Swedish government and the UN. Professional Accountant, and a companies ranging from new start- Lars worked with SIDA in Palestine Chartered Business Valuator. ups to multi-national corporations, and with the UN in the Democratic Republic of Congo, Uzbekistan, Sierra Leone and Afghanistan. While in Sierra Leone Lars managed a team of over 2,000 individuals and ran the UN Volunteer Programme. RA International was founded by Soraya and Lars Narfeldt in 2004. principally in the oil & gas sector. During his time at EY he acted as Head of UK Oil and Gas Mergers and Acquisitions and became Managing Partner of its Aberdeen offi ce and was an elected member of the UK Governance Council. Alec has previously served as an independent Non-Executive Director of Ithaca Energy Inc., and is currently a Director of Cela Consulting Limited. Alec also has a number of charitable interests and is currently a Director of Vine Trust and Techfest and was formerly President of the Aberdeen & Grampian Chamber of Commerce. Having lived and worked across four continents, Andrew has gained a breadth of experience working in a variety of industries including ﬁ nancial services, support services, and telecommunications. He has advised on and executed equity and debt ﬁ nancing transactions, diligence, valuations, business planning services, merger mediations, hedge structuring and testing and other general corporate ﬁ nance transactions. He has also performed and managed projects relating to assurance services, tax structuring, risk management, internal control audits and system implementations. Prior to joining RA International, Andrew held a number of roles with Ernst & Young and growth stage businesses in Canada and the UK. 252757 RA_Int_pp01-pp50.indd 37 252757 RA_Int_pp01-pp50.indd 37 09/05/2019 18:45 09/05/2019 18:45 37 BOARD OF DIRECTORS CONTINUED Philip Haydn-Slater, Non-Executive Director, was appointed to the Board in May 2018. Philip has over 35 years Ian Henderson, Non-Executive Director, was appointed to the Board in May 2018. Ian is a qualiﬁ ed of City experience, principally within chartered accountant (ACA and FCA) institutional sales with a number of and holds an LLB in Scots Law and well-known ﬁ rms. Philip was co-founder of HD Capital Partners Ltd, where he was a Director for over ﬁ ve years. Prior to this he spent eight years as Head of Corporate Broking at WH Ireland Ltd in London, where he was responsible for originating and managing the sales process for a range of transactions, including ﬂ otations and secondary placings for corporate clients on AIM and other international exchanges, largely in the resources sector. Philip has worked in both London and Sydney for ﬁ nancial organisations that include ABN Amro, Bankers Trust, James Capel & Co and Bain Securities (Deutsche Bank) Sydney. an MA in Philosophy and Politics from Edinburgh University. Ian has had a distinguished career as an investment manager in London for over 35 years during which time he managed, inter alia, JP Morgan’s Natural Resources funds for over 20 years, which reached assets of over USD10b, and JP Morgan’s Global Financials fund. Following his retirement as manager, Ian became an investment adviser for the JP Morgan Natural Resources funds before serving as a Non-Executive Director of Endeavour Mining Corporation, the TSX-V listed gold mining company operating in West Africa. He is currently a Non- Executive Director of BMO Capital Markets Limited, a London-based subsidiary of Bank of Montreal and Bluejay Mining Plc an AIM listed mining, exploration and development company. 38 252757 RA_Int_pp01-pp50.indd 38 252757 RA_Int_pp01-pp50.indd 38 09/05/2019 18:46 09/05/2019 18:46 CORPORATE GOVERNANCE FRAMEWORK The Company is committed to a Company takes all reasonable steps to preventing bribery and corruption. corporate culture that is based on ensure compliance by the Directors, Each employee is required to sign an sound ethical values and behaviours employees and agents with the agreement to conﬁ rm that they will and it seeks to instil these values provisions of the AIM rules relating to comply with the policies. across the organisation as a whole. dealings in securities. The Board is fully committed to taking this responsibility very seriously. The Directors take the issue of refresher courses to ensure that the bribery and corruption seriously. issues of bribery and corruption Annually staff are provided with The Board retains ultimate The Directors acknowledge the remain front of mind. The Company accountability for good governance importance of ensuring that the has a Compliance Manager working and is responsible for monitoring Group, its employees and those on these matters and a training the activities of the executive team. third parties to which the business program has been designed and The Company has appointed a Chief engages with are operating within is being rolled out throughout Executive Offi cer who is responsible the requirements of the Bribery the Company. for the overall strategy of the Group, Act. The Company has adopted and a Chief Operating Offi cer, responsible implemented comprehensive anti- for the Group’s daily operations and bribery and corruption policies and a Chief Financial Offi cer, responsible procedures (the ‘ABC Policies’) and for the Group’s ﬁ nancial controls the Directors impose a zero-tolerance and reporting to the Board. It has approach to non-compliance. It is the also appointed four independent, Executive Directors’ responsibility Non-Executive Directors (including to ensure that all of the Group’s All Company policies are also available to the staff through the employee self-service portal on the Company’s HR Management System and in hard copy across HR and Country Manager offi ces. the Chair) to bring an independent employees, in the various locations, BOARD DIVERSITY view to the Board, and has the are complying with the ABC policies responsibility of ensuring that the and that the Group has in place Board discharges its responsibilities adequate procedures to ensure and is also responsible for facilitating that its partners, contractors and full and constructive contributions suppliers do not engage in bribery or from each member of the Board in corrupt activity. determination of the Group’s strategy and overall commercial objectives. The ABC Policies, along with all other main compliance policies, are The Company has adopted a code on provided to staff upon joining the dealings in securities which the Board business and training is provided at regards as appropriate for an AIM the induction course to ensure that listed company and is compliant with all employees within the business the Market Abuse Regulations. The are aware of the importance of The Board recognises the beneﬁ ts of diverse skill sets, capabilities, backgrounds and experience to the eff ective functioning of the Board and delivery of strategy. Both the CEO and the Chair are females representing 28.6% of the Board. E T A R O P R O C E C N A N R E V O G 252757 RA_Int_pp01-pp50.indd 39 252757 RA_Int_pp01-pp50.indd 39 09/05/2019 18:46 09/05/2019 18:46 39 BOARD COMMITTEES & STRUCTURE The Board has a Remuneration The ﬁ rst Remuneration Committee REMUNERATION PLANS: Committee and Audit Committee. meeting was held on 13 December • Review and agree a remuneration All Board Committees report back to the Board following a Committee meeting. 2018 and all members were present. structure The Remuneration Committee shall meet at least twice a year and may meet at other times during the year as required, or as agreed between • Review and launch a share or share option scheme off ering to employees below Board level 2018 ACTIVITIES: the members of the Committee or as • Scorecard 2019 • Reviewed and approved the requested by the Committee Chair. Company’s 2018 Interim Report • Executive Director remuneration • Reviewed and approved the 2018 ACTIVITIES: 2018 audit plan presented by the • Reviewed current remuneration Company’s auditors structure THE AUDIT COMMITTEE The Audit Committee has the primary responsibility of monitoring • Reviewed the independence and • Agreed to review share and share the quality of internal controls competence of the Company’s option schemes for below Board and ensuring that the ﬁ nancial auditors, Ernst & Young level employees THE REMUNERATION COMMITTEE The Remuneration Committee is responsible for reviewing the performance of the Executive Directors and to make recommendations to the Board on matters relating to their remuneration and terms of service. The Remuneration Committee also makes recommendations to the Board on proposals for the granting of share • Discussed a remuneration structure for executive bonuses relating to 2019 performance of the Company is properly measured and reported on. It will receive and review reports from the EMT and external auditors relating to the interim and annual accounts • Agreed to engage external and the accounting and internal consultants to assist with salaries control systems in use throughout the against comparator peer groups Group. • Reviewed salaries and whether The Audit Committee comprises of: increases would be made Alec Carstairs as Chair, Sangita Shah • Considered CEO bonus/share and Philip Haydn-Slater. awards and 2019 salary The ﬁ rst Audit Committee meeting options and other equity incentives • Agreed to review the pursuant to any employee share remuneration policy option scheme or equity incentive plans in operation from time to time. The Remuneration Committee comprises of Philip Haydn-Slater as Chair, Sangita Shah and Ian Henderson. was held on 13 September 2018. All members were present. The Audit Committee has committed to meet no less than twice in each ﬁ nancial year and has unrestricted access to the Company’s external auditors. 40 252757 RA_Int_pp01-pp50.indd 40 252757 RA_Int_pp01-pp50.indd 40 09/05/2019 18:46 09/05/2019 18:46 BOARD/COMMITTEE ATTENDANCE AT MEETINGS DURING 2018 Sangita Shah Soraya Narfeldt Lars Narfeldt Andrew Bolter Alec Carstairs Ian Henderson Philip Haydn-Slater Board meetings (2 scheduled) Audit Committee meetings (1) Remuneration Committee meetings (1) 2 2 2 2 2 2 2 1 N/A N/A N/A 1 N/A 1 1 N/A N/A N/A N/A 1 1 E T A R O P R O C E C N A N R E V O G BOARD OBJECTIVES/ACTIVITIES MATTERS RESERVED FOR THE The Board is responsible for BOARD • Financial Reporting and Controls Approval of: ﬁ nance reports interim formulating, reviewing and approving The directors adopted a schedule of management statements and any the Company’s strategy, budgets those matters that should be reserved other preliminary announcement and corporate actions. The Directors for the Board. intend to hold meetings of the Board not less than four times a year following admission with additional The following matters require the approval of the Board. meetings as and when business demands require. The eff ectiveness • Strategy and Management Approval of: long-term objectives; of the Board, Director and senior commercial strategic aims; annual management appointments and the operating and capital expenditure Company’s succession planning, will budgets; extending the Group’s be evaluated on a regular basis. activities into new business; any of the ﬁ nal results; annual reports and accounts; dividend policy and declaration of any dividend and signiﬁ cant changes in accounting policies/practice; • Internal Controls Ensuring maintenance of a sound system of internal control and risk management; decision to cease to operate all or • any material part of the Group’s Finance Raising new capital and The Board believes that running a sustainable business should beneﬁ t everyone, including its customers, business; employees and the host communities in locations in which the Group • Structure and Capital Major changes to the Group’s operates. Having a multi-cultural and corporate or capital structure; multi-lingual workforce of people who changes to the management and are experienced in the way in which control structure; change to the conﬁ rmation of major ﬁ nancing facilities; recommendation of dividends; operating and capital expenditure budgets; granting of security over any material Group asset; operations work in Africa and beyond Company’s listing; alteration of the • is key to delivering this. Accordingly, Company’s articles of association; the Group cooperates respectfully change in the Company’s Contracts All contracts above USD 7m; major capital contracts over with local communities, building trust accounting reference date, USD 2.5m; contracts which are and goodwill. The Group provides registered name or business name; material or strategic; contracts stable employment and training to local unskilled or semi-skilled labourers. In this end, the Group has a direct impact on the wellbeing of its employees’ families, and on the local economy in general. outside of the approved budget and not in the ordinary course of business; major investments or any acquisitions/disposals and transactions with Directors or other related parties which are not in the ordinary course of business; 41 252757 RA_Int_pp01-pp50.indd 41 252757 RA_Int_pp01-pp50.indd 41 09/05/2019 18:46 09/05/2019 18:46 BOARD COMMITTEES & STRUCTURE CONTINUED • Communications Approval or resolutions and The Board has formed two sub- The Company’s NOMAD provides committees: namely the Audit annual board room training and documentation put forward Committee and Remuneration provided initial training as part of a to Shareholders; approval of Committee, with delegated Director’s onboarding. The Company circulars, prospectuses and listing responsibility to monitor their Secretary helps keep the Board particulars and approval of press respective areas and to report back up to date with developments in releases concerning matters to the full Board. Board committees corporate governance and liaises decided by the Board; operate under clearly deﬁ ned terms of with the NOMAD on areas of AIM • • Board Membership and Other Appointments Delegation of Authority Division of responsibilities between the Chair, the Chief Executive and Executive Directors; delegated levels of authority, including the Chief Executive’s authority limits; establishment of Board committees and approval of terms of reference of Board committees; • Corporate Governance Matters Review of the Group’s overall corporate governance arrangements; • Other Policies including the share reference which are kept under review requirements. The Company Secretary to ensure proper functioning of the has frequent communication with Committees and eff ective application both the Chair and CEO and is of best practice. BOARD EVALUATION/REVIEW OF BOARD’S EFFECTIVENESS The Directors consider seriously the eff ectiveness of the Board, its Committees and individual performance. The Board meets formally four times a year with ad hoc Board meetings as the business demands. There is a strong ﬂ ow of communication between the Directors, and in particular between the CEO and Chair. Board meeting agendas are set in consultation with both the CEO and available to other members of the Board as required. The Directors also have access to the Company’s auditors and lawyers as and when required and the Directors are able, at the Company’s expense to obtain advice from other external advisors if required. As a recently formed Board it is considered to be too soon to carry out a formal process of Board evaluation. The eff ectiveness of the Board, individual Directors and senior management will be considered on an on-going informal basis as the Board forms a united forum for building the business. dealing code; appointment or Chair, with consideration being given change of the Group’s principal to both standing agenda items and On behalf of the Board professional advisers and auditors; the strategic and operational needs of overall levels of insurance for the business. Comprehensive Board the Company; material litigation; papers are circulated well in advance any decision likely to have a of meetings, giving Directors ample material impact on the Company time to review the documentation or Group from any perspective and enabling an eff ective meeting. including, but not limited to, Resulting actions are tracked for ﬁ nancial, operational, strategic appropriate delivery and follow up. SANGITA SHAH Non-Executive Chair 10 April 2019 or reputational; matters reserved for Board decisions and which the Board considers suitable for delegation are contained in the terms of reference of its committees; and the grant of options, warrants or any other form of security convertible into shares. The Directors have a broad knowledge of the business and understand their responsibilities as Directors of a UK company quoted on AIM. The Directors are developing appropriate corporate governance procedures and looking forward to building further on the governance structure already in place. 42 252757 RA_Int_pp01-pp50.indd 42 252757 RA_Int_pp01-pp50.indd 42 09/05/2019 18:46 09/05/2019 18:46 AUDIT COMMITTEE REPORT The Audit Committee is responsible the members attendance record at • compliance with accounting for reviewing and monitoring the Audit Committee meetings during standards and legal and regulatory eff ectiveness of the Group’s ﬁ nancial the ﬁ nancial year is set out in the requirements reporting, internal control policies, Directors’ Report on page 41. In a full and procedures for the identiﬁ cation, year the Audit Committee plans to assessment and reporting of risk. meet at least twice. The latter two areas are integral to the Group’s core management processes and the Committee devotes signiﬁ cant time to their review. The Audit Committee is also responsible for overseeing the relationship with the external auditor. The Audit Committee has considered the Group’s internal control and risk management policies and systems, their eff ectiveness and the • disclosures in the interim and annual report and ﬁ nancial statements • reviewing the eff ectiveness of the Group’s ﬁ nancial and internal controls requirements for an internal audit • any signiﬁ cant concerns of function in the context of the Group’s the external auditor about overall risk management system. The the conduct, results or overall E T A R O P R O C E C N A N R E V O G An essential part of the integrity of Audit Committee is satisﬁ ed that the outcome of the annual audit of the the ﬁ nancial statements lies around Group does not currently require an Group the key assumptions and estimates internal audit function; however, it will or judgments to be made. The Audit continue to periodically review the Committee reviews key judgments situation. prior to publication of the ﬁ nancial statements at both the end of the ﬁ nancial year and at the end of the six-month interim period, as well as considering signiﬁ cant issues throughout the year. In particular, this includes reviewing any subjective material assumptions within the Group’s activities to enable an appropriate determination of asset valuation, provisioning and the The Audit Committee has responsibility for reviewing the adequacy and security of the Company’s arrangements for its employees and contractors to raise concerns about possible wrongdoing in ﬁ nancial reporting, fraud, and bribery and ensure that appropriate 10 April 2019 follow up action is taken. No issues have been highlighted. • any matters that may signiﬁ cantly aff ect the independence of the external auditor ALEC CARSTAIRS Chairman of the Audit Committee accounting treatment thereof. The The external auditors, EY, were Audit Committee reviewed and was appointed during the ﬁ nancial year. satisﬁ ed that the judgments exercised The Audit Committee shall undertake by management on material items a comprehensive review of the quality, contained within the Report and eff ectiveness, value and independence Financial Statements are reasonable. of the audit provided by EY each year, Although not a member of the Audit Committee, the Chief Financial Offi cer is invited to attend meetings. The Audit Committee has engaged seeking the views of the wider Board, together with relevant members of the Committee. Ernst & Young LLP (EY) to act as RESPONSIBILITIES external auditors and they are also invited to attend Audit Committee meetings, unless they have a conﬂ ict of interest. The Audit Committee also meets with the auditors without management in attendance. Since the Audit Committee was formed in June 2018, it has met twice and The Committee reviews and makes recommendations to the Board on: • any change in accounting policies • decisions requiring a major element of judgement and risk 252757 RA_Int_pp01-pp50.indd 43 252757 RA_Int_pp01-pp50.indd 43 09/05/2019 18:46 09/05/2019 18:46 43 DIRECTORS’ REMUNERATION REPORT THE REMUNERATION COMMITTEE Group’s remuneration policy attracts long-term and all employees and The Remuneration Committee is a and retains employees with the Executive Directors are appropriately standing committee of the Board of right skills and expertise needed remunerated. the Company and is comprised of at to enable the Group to achieve its least three Non-Executive Directors. goals and strategies and that fair The purpose of the Remuneration Committee is to assist the Board in discharging its oversight and competitive compensation, with appropriate performance incentives, are awarded. The Remuneration Committee comprises three Non-Executive Directors whose names and proﬁ les are set out on pages 40 and 36-38 in this Annual Report respectively. responsibilities relating to the The Remuneration Committee The Remuneration Committee held attraction, compensation, evaluation aims to ensure that the Company’s one meeting during 2018. Members’ and retention of Executive Directors remuneration policy is aligned with attendance records are on page 41 in and key senior management and promotes the implementation this Annual Report. employees. The Remuneration of the Company’s strategy and Committee aims to ensure that the eff ective risk management for the EXECUTIVE DIRECTORS’ SERVICE CONTRACTS Details of Directors’ service contracts are indicated below: Director Soraya Narfeldt Lars Narfeldt Andrew Bolter NON-EXECUTIVE DIRECTOR APPOINTMENT Director Sangita Shah Alec Carstairs Ian Henderson Philip Haydn-Slater Eff ective term 29 June 2018 29 June 2018 29 June 2018 Eff ective term 29 June 2018 29 June 2018 29 June 2018 29 June 2018 Notice period 6 months 6 months 6 months Appointment Term 3 years 3 years 3 years 3 years 44 252757 RA_Int_pp01-pp50.indd 44 252757 RA_Int_pp01-pp50.indd 44 09/05/2019 18:46 09/05/2019 18:46 DIRECTORS’ REMUNERATION Fees/basic salary1 GBP’000 Beneﬁ ts in kind GBP’000 Other remuneration2 GBP’000 Total 2018 GBP’000 Total 2017 GBP’000 Executive Soraya Narfeldt Lars Narfeldt Andrew Bolter Non-Executive Sangita Shah Alec Carstairs Philip Haydn- Slater Ian Henderson 273 149 174 40 25 25 25 16 11 9 12 9 415 301 169 598 40 25 25 25 297 82 374 - - - - E T A R O P R O C E C N A N R E V O G DIRECTORS’ SHARE OPTIONS time, acting through the Board and Scheme is a UK non-tax advantaged, The Directors recognise the need subject to the rules of the Scheme. discretionary share option plan which to attract, incentivise and retain employees and the importance of ensuring that all employees are well motivated and able to identify closely with the proﬁ tability of the Group. To The Scheme was adopted by the Board on Admission. The principal terms of the Scheme are summarised below. that end, the Company introduced the Option awards under the Scheme Share Option Scheme 2018 (‘Scheme’) provide the right to acquire a certain under which options may be granted number of ordinary shares in the to eligible employees from time to Company in the future, subject to the satisfaction of any speciﬁ ed performance conditions. The provides for the grant of options to employees of the Group. The Board believes that the Scheme is an eff ective mechanism to incentivise key employees of the Group. Performance options under the Scheme were granted to Andrew Bolter (Executive Director) as set out on the following page and have performance vesting conditions. Option Holder Date of Grant Share Options Option Exercise Period (with performance conditions) Exercise Price GBP Andrew Bolter 29 June 2018 1,304,347 From the third anniversary of Admission to the 0.10 sixth anniversary of admission The performance options granted under the Scheme are conditional on the performance of the Company and requires that the compound annual TSR in respect of a share must match or exceed speciﬁ c targets which are measured over a period of time and against objective criteria set by the Board. If at the end of the performance period, the performance condition is not satisﬁ ed, the option will immediately lapse and cease to be exercisable. The Company’s stock price was 0.44 pence as at the close of 31 December 2018. 1The Executive Directors each have two employment contracts with the Group. One with the Company in connection with their role as a Director, and another with a subsidiary reﬂ ecting their role as a member of the EMT. The above ﬁ gure denotes the total base salary for both employment contracts. EMT contracts are denominated in United Arab Emirate dirhams and have been converted to UK Pounds at a rate of 1 UAE Dirham : GBP 0.2026, being the average exchange rate during 2018. 2Other remuneration includes end of service beneﬁ ts which are deﬁ ned in note 4 of the annual ﬁ nancial statements and share based payments which are detailed in note 16. 45 252757 RA_Int_pp01-pp50.indd 45 252757 RA_Int_pp01-pp50.indd 45 09/05/2019 18:46 09/05/2019 18:46 DIRECTORS’ REMUNERATION REPORT CONTINUED NON-EXECUTIVE DIRECTORS The below represents the annual fees to be paid to the Non-Executive Directors Non-Executive Directors Sangita Shah Alec Carstairs Philip Haydn-Slater Ian Henderson Fees GBP 80,000 50,000 50,000 50,000 CONSIDERATION BY THE • Ensuring Executive remuneration The Company is committed to DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION The Committee is responsible for making recommendations to the Board regarding the framework for the remuneration of the Executive Directors and other members of Executive Management. The packages are competitive. maintaining an open and transparent • Determining whether annual bonus payments should be made and approving levels for individual Executive Directors • Determining each year whether any awards/grants should be dialogue with Shareholders on all aspects of Remuneration within the Group. PHILIP HAYDN–SLATER Remuneration Committee Chairman Committee works within its terms of made under the incentive schemes reference, and its role includes: and the value of such awards • Determining and agreeing with the • Considering any new long-term Board, the Remuneration Policy incentive scheme awards and 10 April 2019 for all Executive Directors and performance criteria under guidance of the Executive Directors, other members of the Executive Management Team. • Agreeing Directors’ service contracts and notice periods 46 252757 RA_Int_pp01-pp50.indd 46 252757 RA_Int_pp01-pp50.indd 46 09/05/2019 18:46 09/05/2019 18:46 E T A R O P R O C E C N A N R E V O G 252757 RA_Int_pp01-pp50.indd 47 252757 RA_Int_pp01-pp50.indd 47 09/05/2019 18:46 09/05/2019 18:46 47 DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The Company is a leading provider of services to remote locations in Africa and the Middle East. It off ers its services through three channels: construction, integrated facilities management and support services. The Company has three main client groups: humanitarian and aid agencies, governments and commercial customers, predominantly in the oil and gas and has over time created a reliable and mining sectors. trusted brand within its sector. The Company provides comprehensive, ﬂ exible, mission critical support to its clients enabling them to focus on the delivery of their RESULTS AND DIVIDENDS The proﬁ t for the year was USD 9,954,000. respective businesses and services. Subject to shareholder approval at The Company’s focus on integrity and the 2019 AGM, the ﬁ nal dividend for values alongside on-going investment 2018 will become due and payable on in people, locations and operations 3 July 2019. DIRECTORS The Directors who served during the period and at the date of this Report are as follows: Name Role Appointment Date 1 2 3 4 5 6 7 Sangita Shah Soraya Narfeldt Lars Narfeldt Andrew Bolter Alec Carstairs Ian Henderson Non-Executive Chair 3 May 2018 to present Executive Director Executive Director Executive Director 13 March 2018 to present 13 March to present 3 May 2018 to present Non-Executive Director 3 May 2018 to present Non-Executive Director 3 May 2018 to present Philip Haydn-Slater Non-Executive Director 3 May 2018 to present SUBSTANTIAL SHAREHOLDERS AUDITOR As at 31 December 2018, the Company Each person who is a Director at the was aware of the following major date of approval of this annual report shareholdings, representing 3% or conﬁ rms that: more of the voting rights attached to the issued Ordinary Share capital of the Company: Blackrock Investment Management (UK) Limited 4.9% Jupiter Asset Management Limited • So far as the Director is aware, there is no relevant audit information of which the auditor is unaware; and • The Director has taken all steps that he ought to have taken as a 3% Director to make himself aware The Directors are not aware of any notiﬁ cations of changes to any major shareholdings between 31 December 2018 and 9 April 2019. of any relevant audit information and to establish that the auditor is aware of that information. This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. 48 252757 RA_Int_pp01-pp50.indd 48 252757 RA_Int_pp01-pp50.indd 48 09/05/2019 18:46 09/05/2019 18:46 DIRECTORS’ INTERESTS The Directors who held offi ce at 31 December 2018 had the following interests in the Ordinary Shares in the capital of the Company: Sangita Shah Soraya Narfeldt Lars Narfeldt Andrew Bolter Alec Carstairs Ian Henderson Philip Haydn-Slater Total Shares Held at 31 December 2018 42,983 95,857,145 42,000,000 714,285 108,743 - 100,000 E T A R O P R O C E C N A N R E V O G GOING CONCERN Based on an assessment made using STRATEGIC REPORT The ﬁ nancial information for the the Group’s anticipated activities The Company is required by the year to 31 December 2018 has been for the next 12 months from the Companies Act 2006 to include prepared assuming that the Group will date of authorisation of the ﬁ nancial a Strategic Report in its Annual continue as a going concern. statements, the Directors have formed Report. The information that fulﬁ ls Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. a judgement that the going concern this requirement can be found from basis should be adopted in preparing page 4-28. the ﬁ nancial statements. Signed by order of the Directors On behalf of the Board Amanda Bateman For and on behalf of AMBA Secretaries Limited Company Secretary 10 April 2019 252757 RA_Int_pp01-pp50.indd 49 252757 RA_Int_pp01-pp50.indd 49 09/05/2019 18:46 09/05/2019 18:46 49 DIRECTORS’ RESPONSIBILITY STATEMENT The Directors are responsible for the Company and of the proﬁ t or loss Group and the Company and hence preparing the Annual Report and the of the Group for that period. for taking reasonable steps for the ﬁ nancial statements in accordance with applicable law and regulations. In preparing each of the Group and Company ﬁ nancial statements, the prevention and detection of fraud and other irregularities. Company law requires the Directors to Directors are required to: The Directors are responsible for the prepare Group and Company ﬁ nancial statements for each ﬁ nancial year. The Directors are required by the AIM • select suitable accounting policies and apply them consistently; Rules of the London Stock Exchange • make judgements and accounting to prepare Group ﬁ nancial statements estimates that are reasonable; maintenance and integrity of the corporate and ﬁ nancial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and have elected under company law to prepare the Company ﬁ nancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101). The Group ﬁ nancial statements are required by law and IFRS adopted by the EU to present fairly the ﬁ nancial position and performance of the Group; the Companies Act 2006 • for the Group ﬁ nancial statements, ﬁ nancial statements may diff er from state whether they have been legislation in other jurisdictions. prepared in accordance with IFRS as adopted by the EU and, for the On behalf of Board Company ﬁ nancial statements, ANDREW BOLTER state whether applicable UK Chief Financial Offi cer accounting standards have been followed, subject to any material departures disclosed and explained in the Company ﬁ nancial statements; and • prepare the ﬁ nancial statements on a going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. 10 April 2019 provides in relation to such ﬁ nancial The Directors are responsible for statements that references in the keeping adequate accounting records relevant part of that Act to ﬁ nancial that are suffi cient to show and explain statements giving a true and fair view the Group’s and the Company’s are references to their achieving a fair transactions and disclose with presentation. Under company law the Directors must not approve the ﬁ nancial statements unless they are satisﬁ ed that they give a true and fair view of the state of aff airs of the Group and reasonable accuracy at any time the ﬁ nancial position of the Group and the Company and enable them to ensure that the ﬁ nancial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the 50 252757 RA_Int_pp01-pp50.indd 50 252757 RA_Int_pp01-pp50.indd 50 09/05/2019 18:46 09/05/2019 18:46 FINANCIAL REPORT T R O P E R I L A C N A N I F 51 252757 RA_Int_pp51-pp58.indd 51 252757 RA_Int_pp51-pp58.indd 51 09/05/2019 18:48 09/05/2019 18:48 AUDITOR’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 OPINION In our opinion: • RA International Group PLC’s Group ﬁ nancial statements and parent company ﬁ nancial statements (the “ﬁ nancial statements”) give a true and fair view of the state of the Group’s and of the parent company’s aff airs as at 31 December 2018 and of the Group’s proﬁ t for the year then ended; • the Group ﬁ nancial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union; • the parent company ﬁ nancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the ﬁ nancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the ﬁ nancial statements of RA International Group PLC which comprise: Group Parent company Consolidated statement of ﬁ nancial position as at 31 Company statement of ﬁ nancial position as at December 2018 31 December 2018 Consolidated statement of comprehensive income for the Statement of changes in equity for the year then ended year then ended Consolidated statement of changes in equity for the year Related notes 1 to 9 to the ﬁ nancial statements including a then ended summary of signiﬁ cant accounting policies Consolidated statement of cash ﬂ ows for the year then ended Related notes 1 to 32 to the ﬁ nancial statements, including a summary of signiﬁ cant accounting policies The ﬁ nancial reporting framework that has been applied in the preparation of the Group ﬁ nancial statements is applicable law and IFRS International Financial Reporting Standards (IFRSs) as adopted by the European Union. The ﬁ nancial reporting framework that has been applied in the preparation of the parent company ﬁ nancial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁ nancial statements section of our report below. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the ﬁ nancial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulﬁ lled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion. 52 252757 RA_Int_pp51-pp58.indd 52 252757 RA_Int_pp51-pp58.indd 52 09/05/2019 18:48 09/05/2019 18:48 CONCLUSIONS RELATING TO GOING CONCERN We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the Directors’ use of the going concern basis of accounting in the preparation of the ﬁ nancial statements is not appropriate; or • the Directors have not disclosed in the ﬁ nancial statements any identiﬁ ed material uncertainties that may cast signiﬁ cant doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the ﬁ nancial statements are authorised for issue. OVERVIEW OF OUR AUDIT APPROACH Key audit matters • Risk of misstatement due to management override, fraud and error, speciﬁ cally around revenue recognition • Risk of misstatement due to Group re-organisation and subsequent initial public off ering (“IPO”) • Risk of non-compliance with laws and regulations Audit scope • We performed an audit of the complete ﬁ nancial information of all components Materiality • Overall Group materiality of USD 600,000 which represents 5% of proﬁ t before tax (excluding exceptional items) T R O P E R I L A C N A N I F KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most signiﬁ cance in our audit of the ﬁ nancial statements of the current period and include the most signiﬁ cant assessed risks of material misstatement (whether or not due to fraud) that we identiﬁ ed. These matters included those which had the greatest eff ect on: the overall audit strategy, the allocation of resources in the audit; and directing the eff orts of the engagement team. These matters were addressed in the context of our audit of the ﬁ nancial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. 252757 RA_Int_pp51-pp58.indd 53 252757 RA_Int_pp51-pp58.indd 53 09/05/2019 18:48 09/05/2019 18:48 53 AUDITOR’S REPORT CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Risk Our response to the risk Key observations communicated to the Audit Committee Risk of misstatement due to Our principal audit procedures included: We have concluded that management override, fraud and error, speciﬁ cally around revenue recognition. Refer to Basis of preparation and consolidation (page 63) and Note 8 of the Consolidated • Performed walkthroughs of the revenue cycle to gain an understanding of when the revenue should be recognised, to map out the relevant controls end to end and the processes in place. We have assessed the design and implementation of these revenue recognition accounting policies adopted are appropriate and have been applied consistently. controls to be eff ective. Financial Statements (page 72). • Obtaining an understanding and evaluating the Auditing standards require that we consider the risk of fraud or management override of internal controls in revenue recognition. We recognise that sales arrangements vary depending on the service being provided with accommodation and supply requiring minimal judgement. Accordingly, we focussed on construction and longer-term services contracts. The complexity and judgments are mainly related to estimation of the cost to complete of the projects, expected revenues and the related percentage of key internal controls which support the project management and accounting. These include on the percentage of completion, estimates to complete for both revenue and costs and provisions for loss making projects or unbilled receivables. • Detailed substantive procedures on individually signiﬁ cant projects as well as high risk projects, such as loss making or particular locations. This included challenging the assumptions and estimates applied by management and substantiating transactions with underlying documents like contracts and change orders. • Utilising computer assisted data analytics techniques to examine the correlation of revenue streams through debtors to cash; highlighting unexpected data ﬂ ows (business activities) which sat outside of the expected pathways. completion which the Group • Making enquiries of non-ﬁ nance staff such as to applies for recognising revenues. discuss the status of particular projects with the The determination of the cost respective project managers. Speciﬁ c attention to complete impacts the value given to the collection and valuation risks related to and timing of revenue and proﬁ t the increased ageing of the unbilled receivables. recognised over the life of the project, and it is an estimate that requires expertise and judgment. (USD 1.7m of risk, PY comparative USD 1.5m) • Detailed manual journal entry testing, applying particular focus to individually unusual and/or material revenue manual journals, particularly those posted around the year end. • Reviewing management’s assessment of IFRS 15 and challenging key assumptions applied in their assessment to determine whether they meet the requirements of the standard. We performed full scope audit procedures over this risk area, which covered 100% of the risk amount. 54 252757 RA_Int_pp51-pp58.indd 54 252757 RA_Int_pp51-pp58.indd 54 09/05/2019 18:48 09/05/2019 18:48 that IPO costs were appropriately recognised and accounted for. Share gifts were appropriately accounted for and disclosed. T R O P E R I L A C N A N I F Risk Our response to the risk Key observations communicated to the Audit Committee Risk of misstatement due to Our principal audit procedures on the Group We have concluded that Group re-organisation and reorganisation included: subsequent initial public off ering (IPO) Refer to Accounting policies (page 64) and Notes 5 and 6 • Inspecting documentation to support the share split of RA International FZCO (RA), share exchange agreement between RA International Group PLC We have concluded (RAI) and the Shareholders of RA. the Group re-organisation has been accounted for appropriately. of the Consolidated Financial • Statements (pages 68-71). Agreeing the issuance and placement of new RAI shares on 29 June 2018 to support accounting We consider the main risks of adopted. the Group re-organisation and • Reviewing and considering the technical accounting IPO to be as follows: for the above transactions to ensure this is in line The technical accounting for the with IAS 27. Group re-organisation is complex • Assessing the adequacy of related disclosures in in nature and is not a routine the Group’s ﬁ nancial statements. transaction, the risk is therefore that the accounting entries made do not comply with the requirements of IAS 27. IPO costs associated with the issue of new equity are overstated and as a result, an incorrect cost is set off against equity rather than recognised through the income statement. Accounting for the gift of shares is another complex area — as a result there is a risk that the entries made to record this transaction do not meet the requirements of IFRS 2. Our principal audit procedures on the accounting for IPO costs and the share gifts included: • Verifying a sample of the IPO costs to third party supporting documentation. • Reviewing and challenging the nature of the IPO costs determined by management to be incremental and directly attributable to the share issue. • Determining whether the IPO costs recorded by management as a cost of issuing new equity meet the requirements of IAS 32. • Obtaining an understanding of the warrants issued. In addition, we reviewed and challenged the assumptions applied by management to determine the fair value. • Ensuring that the accounting for the share gift complies with the requirements of IFRS 2 assessing the adequacy of related disclosures in the Group’s ﬁ nancial statements. We performed full scope audit procedures over this risk area, which covered 100% of the risk amount. 252757 RA_Int_pp51-pp58.indd 55 252757 RA_Int_pp51-pp58.indd 55 09/05/2019 18:48 09/05/2019 18:48 55 AUDITOR’S REPORT CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Key observations communicated to the Audit Committee Based on the audit procedures performed no instances of non- compliance with laws and regulations were noted. Risk Our response to the risk Risk of non-compliance with Our principal audit procedures included: laws and regulations Refer to Accounting policies (page 67) and Notes 11 and 12 of the Consolidated Financial • Enquiries of management, and, when appropriate, those charged with governance as to whether the entity is in compliance with such laws and regulations. Statements (pages 75-76). • Inspect correspondence, if any, with the relevant Auditing standards require licensing or regulatory authorities. that we consider the risk of • Furthermore, performance of targeted procedures non-compliance with laws on the procurement process: and regulation on the ﬁ nancial statements. o Performed walkthrough of the expenditure cycle to gain an understanding of diff erent RA International operates in procurement process and to map out the countries that rank amongst the relevant controls end to end. We have assessed highest on the Transparency the design and implementation of these International Corruption controls to be eff ective. o Unusual journal posting originating from cash (such as manual cash payments and receipts) o Detailed testing of cash payments and higher risk expenditure (including travel and entertainment, advances and bonuses). Perceptions Index and have limited legal structures. Both factors increase the risk of corruption and bribery. There is a risk that if that if the controls and policies in place are not suffi cient to prevent or detect bribery there would be a material impact on the ﬁ nancial statements. We performed full scope audit procedures over this risk area. AN OVERVIEW OF THE SCOPE OF OUR AUDIT Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated ﬁ nancial statements. The majority of the trading activity is recorded through 1 subsidiary entity. We have classiﬁ ed this entity as full scope and this together with our other procedures provides 100% coverage of the Group. All audit work was performed by the primary audit engagement team. Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the eff ect of identiﬁ ed misstatements on the audit and in forming our audit opinion. 56 252757 RA_Int_pp51-pp58.indd 56 252757 RA_Int_pp51-pp58.indd 56 09/05/2019 18:48 09/05/2019 18:48 Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to inﬂ uence the economic decisions of the users of the ﬁ nancial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be USD 641,000 which is 5% of proﬁ t before tax (excluding exceptional items). We believe that proﬁ t before tax (excluding exceptional items) provides us with an appropriate basis for determining misstatements of importance to the users of the ﬁ nancial statements. We determined materiality for the parent company to be USD 511,000, which is 1% of total equity. The parent company is not a trading entity, therefore we consider it appropriate to prepare materiality on a diff erent basis. During the course of our audit, we reassessed materiality based on the ﬁ nal position and this resulted in ﬁ nal materiality being USD 600,000 which is a decrease of USD 41,000. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 50% of our planning materiality, namely USD 320,000. We have set performance materiality at this percentage due to this being a ﬁ rst year audit of the entity within its current listed Group structure. Reporting threshold An amount below which identiﬁ ed misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to them all uncorrected audit diff erences in excess of USD 32,000, which is set at 5% of planning materiality, as well as diff erences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. Other information The other information comprises the information included in the annual report other than the ﬁ nancial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the ﬁ nancial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. In connection with our audit of the ﬁ nancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁ nancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the ﬁ nancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the Directors’ report for the ﬁ nancial year for which the ﬁ nancial statements are prepared is consistent with the ﬁ nancial statements; and • the strategic report and Directors’ report have been prepared in accordance with applicable legal requirements. T R O P E R I L A C N A N I F 252757 RA_Int_pp51-pp58.indd 57 252757 RA_Int_pp51-pp58.indd 57 09/05/2019 18:48 09/05/2019 18:48 57 AUDITOR’S REPORT CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not identiﬁ ed material misstatements in the strategic report or the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company ﬁ nancial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration speciﬁ ed by law are not made; or we have not received all the information and explanations we require for our audit Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 50, the Directors are responsible for the preparation of the ﬁ nancial statements and for being satisﬁ ed that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of ﬁ nancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁ nancial statements, the Directors are responsible for assessing the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the ﬁ nancial statements Our objectives are to obtain reasonable assurance about whether the ﬁ nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂ uence the economic decisions of users taken on the basis of these ﬁ nancial statements. A further description of our responsibilities for the audit of the ﬁ nancial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Paul Copland (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh Date: 10 April 2019 Notes: 1. The maintenance and integrity of the RA International Group PLC web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the ﬁ nancial statements since they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of ﬁ nancial statements may diff er from legislation in other jurisdictions. 58 252757 RA_Int_pp51-pp58.indd 58 252757 RA_Int_pp51-pp58.indd 58 09/05/2019 18:48 09/05/2019 18:48 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 Revenue Direct costs Gross proﬁ t Administrative expenses Underlying operating proﬁ t Acquisition costs Holding company expenses Operating proﬁ t Investment revenue Finance costs Underlying proﬁ t Unrealised diff erences on translation of foreign balances Exceptional items Proﬁ t and total comprehensive income for the period Basic and diluted earnings per share (cents) Normalised basic and diluted earnings per share (cents) Notes 7 11 11 13 15 15 2018 USD’000 54,805 (34,168) 20,637 (6,425) 14,212 (82) (505) 13,625 34 (407) 13,252 (364) (2,934) 9,954 6.3 8.4 2017 USD’000 Restated 51,215 (31,268) 19,947 (6,362) 13,585 – – 13,585 – (1,114) 12,471 (46) – 12,425 8.9 8.9 T R O P E R I L A C N A N I F The attached notes 1 to 32 form part of the Financial Statements. 59 252757 RA_Int_pp59-end.indd 59 252757 RA_Int_pp59-end.indd 59 09/05/2019 18:48 09/05/2019 18:48 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 Assets Non-current assets Property, plant, and equipment Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Equity Share capital Additional contributed capital Share premium Merger reserve Share based payment reserve Retained earnings Total equity Non-current liabilities Term loans and notes Employees’ end of service beneﬁ ts Current liabilities Term loans and notes Trade and other payables Total liabilities Total equity and liabilities Notes 2018 USD’000 2017 USD’000 Restated 19 20 21 22 23 23 24 25 24 26 16,395 9,170 4,263 15,962 27,804 48,029 64,424 24,300 – 18,254 (17,803) 16 34,427 59,194 – 350 350 – 4,880 4,880 5,230 64,424 2,660 12,669 7,469 22,798 31,968 272 1,809 – – – 23,020 25,101 6 251 257 1,861 4,749 6,610 6,867 31,968 The ﬁ nancial statements were approved by the Board of Directors on 10 April 2019 and signed on its behalf by: _________________________________ _________________________________ Soraya Narfeldt CEO Andrew Bolter CFO The attached notes 1 to 32 form part of the Financial Statements. 60 252757 RA_Int_pp59-end.indd 60 252757 RA_Int_pp59-end.indd 60 09/05/2019 18:48 09/05/2019 18:48 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Share Capital USD’000 Additional Contributed Capital USD’000 Share Premium USD’000 Merger Reserve* USD’000 Share Based Payment Reserve USD’000 As at 1 January 2017 272 1,809 Total comprehensive income for the period** Dividends declared and paid (note 17) As at 31 December 2017 Total comprehensive income for the period Share exchange (note 8) Issue of share capital (note 8) Non-cash employee compensation (note 16) Share based payments (note 16) Dividends declared and paid (note 17) – – 272 – 19,612 4,416 – – – As at 31 December 2018 24,300 – – 1,809 – (1,809) – – – – – – – – – – – 18,254 – – – – – – – – (17,803) – – – – 18,254 (17,803) – – – – – – – – 16 – 16 Retained Earnings USD’000 11,370 12,425 Total USD’000 13,451 12,425 (775) (775) 23,020 9,954 – – 1,578 – (125) 25,101 9,954 – 22,670 1,578 16 (125) 34,427 59,194 * Merger reserve represents the diff erence 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 2017 has been restated due to the adoption of IFRS 15 (note 5). T R O P E R I L A C N A N I F The attached notes 1 to 32 form part of the Financial Statements. 61 252757 RA_Int_pp59-end.indd 61 252757 RA_Int_pp59-end.indd 61 09/05/2019 18:48 09/05/2019 18:48 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 Operating activities Proﬁ t for the period Adjustments for non-cash and other items: Depreciation on property, plant, and equipment Loss on disposal of property, plant, and equipment Amortisation of intangible assets Investment revenue Finance costs Unrealised diff erences on translation of foreign balances Provision for employees’ end of service beneﬁ ts Share based payments Exceptional items Working capital adjustments: Inventories Trade and other receivables Trade and other payables Cash ﬂ ows generated from operations Employees’ end of service beneﬁ ts paid Stock-based compensation and related costs Net cash ﬂ ows from operating activities Investing activities Release / (deposit) of cash margin against guarantees issued Deposits under lien released during the year Purchase of property, plant, and equipment Proceeds from disposal of property, plant, and equipment Acquisition of subsidiary (net of cash acquired) Net cash ﬂ ows used in investing activities Financing activities Repayment of term loans and notes Proceeds from term loans and notes Investment revenue received Finance costs paid Dividends paid Share listing costs Issue of share capital (net of issue costs paid) Net cash ﬂ ows from / (used in) ﬁ nancing activities Net increase in cash and cash equivalents Cash and cash equivalents as at start of the period Eff ect of foreign exchange on cash and cash equivalents Cash and cash equivalents as at end of the period The attached notes 1 to 32 form part of the Financial Statements. 62 Notes 2018 USD’000 2017 USD’000 Restated 9,954 12,425 19 19 25 16 13 25 16 22 22 19 19 10 24 24 17 13 8 22 22 1,310 120 – (34) 407 364 116 16 2,934 15,187 (1,587) (2,627) (58) 10,915 (17) (24) 10,874 2,000 – (8,683) 97 (565) (7,151) (1,867) – 34 (406) (125) (1,332) 22,672 18,976 22,699 5,469 (364) 27,804 935 163 17 – 1,114 46 283 – – 14,983 685 (2,589) (580) 12,499 (221) – 12,278 (2,000) 201 (3,405) 23 – (5,181) (3,160) 2,432 – (1,114) (775) – – (2,617) 4,480 1,035 (46) 5,469 252757 RA_Int_pp59-end.indd 62 252757 RA_Int_pp59-end.indd 62 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 T R O P E R I L A C N A N I F 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 offi ce 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 speciﬁ c accounting guidance under IFRS. Consequently, the integration of the Company has been accounted for using merger accounting principles. The policy, which does not conﬂ ict with International Financial Reporting Standards (IFRS), reﬂ ects 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 ﬁ nancial statements of the Group represent a continuation of the ﬁ nancial statements of RA International FZCO, the former parent of the Group. Comparative information presented in these ﬁ nancial statements, relate to that of RA, not the Group. 2 BASIS OF PREPARATION The ﬁ nancial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) 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 Company. The ﬁ nancial information set out in this preliminary announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2018 or 2017 but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 will be delivered to the Registrar of companies in due course. The auditor has reported on the accounts; its report was unqualiﬁ ed, did not contain an emphasis of matter reference and did not contain statements under section 498 (2) or (3) of the Companies Act 2006. 3 BASIS OF CONSOLIDATION The ﬁ nancial statements comprise the ﬁ nancial statements of the Company and its subsidiaries as at 31 December 2018. 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 aff ect those returns through its power over the investee. Speciﬁ cally, 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 aff ect 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 ﬁ nancial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. 63 252757 RA_Int_pp59-end.indd 63 252757 RA_Int_pp59-end.indd 63 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 When necessary adjustments are made to the ﬁ nancial 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 ﬂ ows 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 proﬁ t 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 identiﬁ able 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 administrative expenses. When the Group acquires a business, it assesses the ﬁ nancial assets and liabilities assumed for appropriate classiﬁ cation 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 reﬂ ects 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 the signiﬁ cant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Construction Revenue from construction contracts is recognised at a point in time when performance obligations have been met. Services Revenue from rendering of services is recognised over time, using the output method to measure progress towards complete satisfaction of the service. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the eff ective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁ nancial asset to that asset’s net carrying amount. 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 fulﬁ lling 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 reclassiﬁ ed as a trade receivable. 64 252757 RA_Int_pp59-end.indd 64 252757 RA_Int_pp59-end.indd 64 09/05/2019 18:48 09/05/2019 18:48 T R O P E R I L A C N A N I F 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. TAXATION Current tax expense is based on taxable proﬁ t for the year and is recognised in proﬁ t or loss. Taxable proﬁ t may diff er from net proﬁ t 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 ﬁ nancial 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 ﬁ xtures Shipping containers IT equipment Tools and equipment Motor vehicles 5 years 20 years 5 years 5 to 10 years 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 proﬁ t 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 beneﬁ ts of the related item of property, plant, and equipment. All other expenditure is recognised in proﬁ t or loss as the expense is incurred. An item of property, plant, and equipment is derecognised upon disposal or when no future economic beneﬁ ts are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the diff erence between the net disposal proceeds and carrying amount of the asset) is included in the proﬁ t or loss in the year the asset is derecognised. Assets’ residual values, useful lives, and methods of depreciation are reviewed at each ﬁ nancial year end, and adjusted prospectively, if appropriate. 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 using the weighted average method. Net realisable value is based on estimated selling price less any further costs expected to be incurred in disposal. 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 inﬂ ows 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 65 252757 RA_Int_pp59-end.indd 65 252757 RA_Int_pp59-end.indd 65 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 amount. In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c 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 ﬁ ve years. For longer periods, a long-term growth rate is calculated and applied to project future cash ﬂ ows after the ﬁ fth 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 proﬁ t or loss. FINANCIAL INSTRUMENTS i) Financial assets Initial recognition and measurement The classiﬁ cation of ﬁ nancial assets at initial recognition depends on the ﬁ nancial asset’s contractual cash ﬂ ow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a signiﬁ cant ﬁ nancing component or for which the Group has applied the practical expedient, the Group initially measures a ﬁ nancial asset at its fair value plus, in the case of a ﬁ nancial asset not at fair value through proﬁ t or loss, transaction costs. Trade receivables that do not contain a signiﬁ cant ﬁ nancing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Derecognition of ﬁ nancial assets A ﬁ nancial asset (or, where applicable a part of a ﬁ nancial asset or part of a group of similar ﬁ nancial assets) is derecognised when the rights to receive cash ﬂ ows from the asset has expired. Impairment of ﬁ nancial assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through proﬁ t or loss. ECLs are based on the diff erence between the contractual cash ﬂ ows due in accordance with the contract and all the cash ﬂ ows that the Group expects to receive, discounted at an approximation of the original eff ective interest rate. The expected cash ﬂ ows will include cash ﬂ ows 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 signiﬁ cant 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 signiﬁ cant 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 simpliﬁ ed 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. 66 252757 RA_Int_pp59-end.indd 66 252757 RA_Int_pp59-end.indd 66 09/05/2019 18:48 09/05/2019 18:48 T R O P E R I L A C N A N I F A ﬁ nancial asset is deemed to be impaired 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 ﬁ nancial asset is written off when there is no reasonable expectation of recovering the contractual cash ﬂ ows. ii) Financial liabilities Initial recognition and measurement Financial liabilities are initially recognised at fair value and subsequently classiﬁ ed at fair value through proﬁ t or loss, loans and borrowings, or payables. Loans and borrowings and payables are recognised net of directly attributable transaction costs. The Group’s ﬁ nancial liabilities include trade and other payables. Subsequent measurement The measurement of ﬁ nancial liabilities depends on their classiﬁ cation as described below: Financial liabilities at fair value through proﬁ t or loss Financial liabilities at fair value through proﬁ t or loss include ﬁ nancial liabilities held for trading and ﬁ nancial liabilities designated upon initial recognition as held at fair value through proﬁ t or loss. Financial liabilities designated upon initial recognition at fair value through proﬁ t or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisﬁ ed. The Group has not designated any ﬁ nancial liability as at fair value through proﬁ t or loss. Financial liabilities are classiﬁ ed as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative ﬁ nancial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as deﬁ ned by IFRS 9. Separated embedded derivatives are also classiﬁ ed as held for trading unless they are designated as eff ective hedging instruments. Loans and borrowings 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 proﬁ t 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 ﬁ nance costs in the statement of proﬁ t or loss. Derecognition of ﬁ nancial liabilities A ﬁ nancial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing ﬁ nancial liability is replaced by another from the same lender on substantially diff erent terms, or the terms of an existing liability are substantially modiﬁ ed, such an exchange or modiﬁ cation is treated as a derecognition of the original liability and the recognition of a new liability, and the diff erence in the respective carrying amounts is recognised in the proﬁ t or loss. EMPLOYEES’ END OF SERVICE BENEFITS The Group provides end of service beneﬁ ts to its employees in accordance with local labour laws. The entitlement to these beneﬁ ts is based upon the employees’ ﬁ nal salary and length of service, subject to the completion of a minimum service period. The expected costs of these beneﬁ ts 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 given in note 16. 67 252757 RA_Int_pp59-end.indd 67 252757 RA_Int_pp59-end.indd 67 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 That cost is recognised in employee beneﬁ ts 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 fulﬁ lled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reﬂ ects 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 proﬁ t 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 reﬂ ected 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 reﬂ ected 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 satisﬁ ed, provided that all other performance and/or service conditions are satisﬁ ed. The dilutive eff ect of outstanding options is reﬂ ected as additional share dilution in the computation of diluted earnings per share. LEASES Leases where the lessor retains substantially all the risks and beneﬁ ts of ownership of the asset are classiﬁ ed as operating leases. Operating lease payments are recognised as an expense in the consolidated statement of comprehensive income on a straight-line basis over the lease term. CONTINGENCIES Contingent liabilities are not recognised in the ﬁ nancial statements, they are disclosed unless the possibility of an outﬂ ow of resources embodying economic beneﬁ ts is remote. A contingent asset is not recognised in the ﬁ nancial statements but disclosed when an inﬂ ow of economic beneﬁ ts is probable. FOREIGN CURRENCIES The Group’s ﬁ nancial statements are presented in USD, which is the functional currency of all Group companies. Items included in the ﬁ nancial 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 diff erences are taken to proﬁ t 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 15 for the ﬁ rst time, using a fully retrospective approach. The nature and eff ect of the changes as a result of the adoption of this new accounting standard are described below. Several other amendments and interpretations apply for the ﬁ rst time in 2018, such as IFRS 9 Financial Instruments. Following assessment, there were no reclassiﬁ cations or estimated credit losses and therefore the adoption of IFRS 9 did not have a signiﬁ cant impact on the ﬁ nancial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet eff ective. 68 252757 RA_Int_pp59-end.indd 68 252757 RA_Int_pp59-end.indd 68 09/05/2019 18:48 09/05/2019 18:48 IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue, and related interpretations. It applies, with limited exceptions, to all revenue arising from contracts with customers. IFRS 15 establishes a ﬁ ve-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reﬂ ects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. IFRS 15 requires entities to exercise judgement, taking into consideration all relevant facts and circumstances when applying each step of the model to contracts with their customers. Where deemed appropriate, the Group will utilise the practical expedient within IFRS15, allowing revenue to be recognised at the amount which the Group has the right to invoice, where that amount corresponds directly with the value to the customer of the Group’s performance completed to date. The standard also speciﬁ es the accounting for the incremental costs of obtaining a contract and the costs directly related to fulﬁ lling a contract. In addition, the standard requires extensive disclosures. The Group is principally engaged in construction, integrated facilities management, and supply chain services in demanding and remote areas. For contracts with customers in which the sale of goods is generally the only performance obligation, adoption of IFRS 15 does not have any signiﬁ cant impact on the Group’s revenue and proﬁ t or loss. The Group’s revenue recognition occurs at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods. With respect to services income, services are satisﬁ ed over time given that the customer simultaneously receives and consumes the beneﬁ ts provided by the Group. Consequently, under IFRS 15 the Group continues to recognise revenue for these service contracts and the service components of hybrid contracts over time rather than at a point of time. (a) Construction revenue Before the adoption of IFRS 15, all construction revenue was recognised using the percentage of completion method. When performing a review of contracts in connection with the implementation of IFRS 15, the Group assessed that certain contracts contained speciﬁ c performance obligations that were required to be met before revenue could be recognised in accordance with the requirements of the new standard. As a result, revenue reported in 2017 decreased by USD 2,188,000. There was a corresponding increase in customer advances of USD 780,000, a decrease in accrued revenue of USD 1,367,000 and a decrease in retention receivables of USD 41,000. A decrease in direct costs of USD 939,000 was also recognised, together with the corresponding increase in prepayments. There was no impact to balances reported in relation to any accounting periods beginning prior to 1 January 2017. (b) Reclassiﬁ cation of other income Other income has been reclassiﬁ ed to be included in revenue and direct costs. The Group assessed the nature of other income balances and concluded it partly reﬂ ects: (i) the continuing trade of the business to be classiﬁ ed as revenue under IFRS 15; and (ii) reimbursement of non-contracted costs recognised as expenses in prior periods to be recognised in the same expense category as where the cost was originally recorded. T R O P E R I L A C N A N I F 252757 RA_Int_pp59-end.indd 69 252757 RA_Int_pp59-end.indd 69 09/05/2019 18:48 09/05/2019 18:48 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Impact on statement of proﬁ t or loss (increase/(decrease) in proﬁ t) Revenue Direct costs Gross proﬁ t Other income Administrative expenses Underlying proﬁ t from operations Acquisition costs Holding company expenses Operating proﬁ t Basic and diluted earnings per share (cents) Normalised basic and diluted earnings per share (cents) Impact on the consolidated statement of ﬁ nancial position (increase/(decrease)) Current assets Trade and other receivables Total assets Equity and liabilities Equity Retained earnings Total equity Current liabilities Trade and other payables Total liabilities Total equity and liabilities Adjustments (a),(b) (a),(b) (b) Adjustments (a) (a) (a) 2017 USD’000 (2,045) 1,948 (97) (1,152) – (1,249) – – (1,249) (0.9) (0.9) 2017 USD’000 (469) (469) (1,249) (1,249) 780 780 (469) The impact on the statement of cash ﬂ ows for the year ended 31 December 2017 only relates to the changes in proﬁ t before tax from continuing operations, certain adjustments to reconcile proﬁ t before tax to net cash ﬂ ows from operating activities and working capital adjustments. There was no impact on the net cash ﬂ ows from operating, investing or ﬁ nancing activities. 6 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the ﬁ nancial statements requires management to make judgements, estimates and assumptions that may aff ect the reported amount of assets and liabilities, revenues, 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 diff er 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 aff ected. 70 252757 RA_Int_pp59-end.indd 70 252757 RA_Int_pp59-end.indd 70 09/05/2019 18:48 09/05/2019 18:48 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 proﬁ tability. In practice, these are commonly referred to as ‘exceptional’ items, but this is not a concept deﬁ ned 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 are 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 veriﬁ cation of percentage-of-completion calculations as at ﬁ nancial reporting dates. The accuracy of percentage-of-completion estimates has a material impact on the amount of revenue and related proﬁ t recognised. As at 31 December 2018, USD 1,676,000 of accrued revenue had been calculated using the percentage-of- completion method (2017: USD 1,486,000). Revisions to proﬁ t 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 T R O P E R I L A C N A N I F Board of Directors. OPERATING SEGMENTS Revenue, operating results, assets and liabilities presented in the ﬁ nancial statements relate to the provision of services in demanding and remote areas. Revenue by service channel: Construction Integrated facilities management Supply chain services 2018 USD’000 29,479 23,145 2,181 54,805 2017 USD’000 22,821 25,414 2,980 51,215 The Group allocates a contract to a speciﬁ c service channel based on the nature of the primary deliverable to the customer. The Group does not allocate revenue to multiple service channels from a contract. If the Group were to allocate revenue to multiple service channels from its contracts, a signiﬁ cant value of construction revenue would be reclassiﬁ ed to the other service channels; additionally, a signiﬁ cant value of integrated facilities management revenue would be reclassiﬁ ed to supply chain services. 252757 RA_Int_pp59-end.indd 71 252757 RA_Int_pp59-end.indd 71 09/05/2019 18:48 09/05/2019 18:48 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 GEOGRAPHIC SEGMENTS The Group solely operates in Africa and the Middle East and the CODM considers this 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: Africa Other Non-current assets by geographic area: Africa Other 8 GROUP REORGANISATION SHARE FOR SHARE EXCHANGE 2018 USD’000 48,003 6,802 54,805 2018 USD’000 14,378 2,017 16,395 2017 USD’000 51,045 170 51,215 2017 USD’000 8,935 235 9,170 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 speciﬁ c criteria, the new parent measures cost at the carrying amount of its share of the equity items shown in the separate ﬁ nancial 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 29,278,000, being the carrying amount of the equity of RA at the date of the Exchange. Equity balances of RA at date of Exchange Share capital Additional contributed capital Retained earnings Total equity balances of RA at date of Exchange USD’000 272 1,809 27,700 29,781 The consideration paid to the Shareholders of RA was 139,999,998 ordinary shares of GBP 0.10 each. The diff erence 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 diff erence 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. 72 252757 RA_Int_pp59-end.indd 72 252757 RA_Int_pp59-end.indd 72 09/05/2019 18:48 09/05/2019 18:48 INITIAL PUBLIC OFFERING On 29 June 2018, RAI undertook an initial public off ering (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. Reconciliation of IPO proceeds Proceeds from issue of share capital Costs incurred and attributable to issue of share capital Net proceeds from issue of share capital USD’000 24,731 (2,059) 22,672 T R O P E R I L A C N A N I F 252757 RA_Int_pp59-end.indd 73 252757 RA_Int_pp59-end.indd 73 09/05/2019 18:48 09/05/2019 18:48 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 9 GROUP INFORMATION The Company operates through its subsidiaries, listed below, which are legally or beneﬁ cially, directly or indirectly owned and controlled by the Company. The extent of the Company’s beneﬁ cial ownership and the principal activities of the subsidiaries are as follows: Name of the entity RA Africa Holdings Limited Country of incorporation British Virgin Islands Beneﬁ cial ownership Principal activities 2018 100% 2017 100% Holding of residual shareholdings in Company subsidiaries. RA International Limited Cameroon 100% 100% Construction, integrated facilities management, and supply chain services. RA International RCA Central African Republic 100% 100% Construction, integrated facilities management, and supply chain services. RA International Chad Chad 100% – Construction, integrated facilities management, and supply chain services. RA International DRC SARL Democratic Republic of Congo 100% 100% Construction, integrated facilities management, and supply chain services. Raints Ghana Limited Ghana 100% 100% Construction, integrated facilities management, and supply chain services. Windward Insurance PCC Limited – Berkshire Cell Guernsey 100% 100% Providing intra-group insurance services. Raints Kenya Limited Kenya 100% 100% Construction, integrated facilities management, and supply chain services. RA International Limited Malawi 100% 100% Construction, integrated facilities management, and supply chain services. Raints Mali Mali 100% – Construction, integrated facilities management, and supply chain services. RA International Limitada Mozambique 100% 100% Construction, integrated facilities management, and supply chain services. RA International Niger Niger 100% – Construction, integrated facilities management, and supply chain services. RA International* Somalia 100% 100% Construction, integrated facilities management, and supply chain services. RA International FZCO South Sudan 100% 100% Construction, integrated facilities management, and supply chain services. Reconstruction and Assistance Company Ltd Sudan 100% – Construction, integrated facilities management, and supply chain services. RA International Limited Tanzania 100% 100% Construction, integrated facilities RA International FZCO RA International General Trading LLC RA SB Ltd. UAE UAE UAE management, and supply chain services. 100% 100% 100% Providing intra-group administrative services. 100% Providing intra-group administrative services. 100% – Holding of residual shareholdings in Company subsidiaries. RA International Limited Uganda 100% 100% Construction, integrated facilities management, and supply chain services. REMSCO Uganda (SMC) Limited Uganda 100% – Construction, integrated facilities management, and supply chain services. * RA International in Somalia is not an incorporated legal entity. 74 252757 RA_Int_pp59-end.indd 74 252757 RA_Int_pp59-end.indd 74 09/05/2019 18:48 09/05/2019 18:48 10 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 identiﬁ able assets and liabilities of RASB as at the date of acquisition were: Assets Property, plant, and equipment Inventories Accounts receivable, deposits, and other receivables Bank balances and cash Liabilities Accounts payable and accruals Net assets Net cash outﬂ ow on acquisition Consideration paid Less: Bank balances and cash acquired T R O P E R I L A C N A N I F USD’000 69 16 688 29 (208) 594 USD’000 594 (29) 565 Acquisition costs of USD 6,000 relating to the acquisition of RASB are included in acquisition costs within the current accounting period. For the year ended 31 December 2018, RASB contributed USD 1,754,000 revenue and USD 350,000 proﬁ t before ﬁ nance costs to the Group results. 11 PROFIT FOR THE PERIOD Proﬁ t for the period is stated after charging: Staff costs Materials Depreciation 2018 USD’000 20,518 10,688 1,310 2017 USD’000 18,732 9,966 935 75 252757 RA_Int_pp59-end.indd 75 252757 RA_Int_pp59-end.indd 75 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Amounts paid or payable by the Group in respect of audit and non-audit services to the Auditor are shown below. Fees for the audit of the interim accounts Fees for the audit of the Company annual accounts Fees for the audit of the subsidiary annual accounts Total audit fees Audit related assurance services Non-audit related services Fees in relation to the IPO Total non-audit fees 2018 USD’000 2017 USD’000 25 116 60 201 – 75 457 532 – – 60 60 – – – – The non-audit fees incurred in the current 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 2019 (see note 32). 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: Directors Executive management Staff The aggregate remuneration of the above employees was: Wages and salaries Social security costs 2018 4 5 2,016 2,025 2018 USD’000 15,836 34 15,870 2017 – 5 1,856 1,861 2017 USD’000 13,765 2 13,767 The remuneration of the Directors and other key management personnel of the Group are detailed in note 30. 76 252757 RA_Int_pp59-end.indd 76 252757 RA_Int_pp59-end.indd 76 09/05/2019 18:48 09/05/2019 18:48 13 EXCEPTIONAL ITEMS Share listing costs* Stock-based compensation and related costs (note 16) 2018 USD’000 2017 USD’000 1,332 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 TAXATION The tax charge on the proﬁ t for the year is as follows: Current tax: UK corporation tax on proﬁ t for the year Non-UK corporation tax Tax charge for the year Factors aff ecting the tax charge 2018 USD’000 2017 USD’000 – – – – – – T R O P E R I L A C N A N I F The tax assessed for the year varies from the standard rate of corporation tax in the UK. The diff erence is explained below: Proﬁ t before tax Expected tax charge based on the standard average rate of corporation tax in the UK of 19% (2017: 19%) Eff ects of: Expenses not deductible* Deferred tax asset not recognised Exemptions and foreign tax rate diff erence Tax charge for the year 2018 USD’000 9,954 2017 USD’000 12,425 1,891 2,361 257 39 (2,187) – – – (2,361) – *Expenses not deductible represent the costs incurred relating to the share for share exchange and IPO. Based on an evaluation performed by management on its operations, management has assessed that the Group is not exposed to any corporate tax liabilities. This is primarily a result of the Group beneﬁ tting 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. 15 EARNINGS PER SHARE The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the proﬁ t 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 proﬁ t 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. 77 252757 RA_Int_pp59-end.indd 77 252757 RA_Int_pp59-end.indd 77 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Normalised earnings per share is calculated by dividing the proﬁ t before exceptional items and unrealised diff erences on translation of foreign balances attributable to ordinary Shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Since a new parent entity was established by means of a share for share exchange and the Group’s ﬁ nancial statements have been presented as a continuation of the existing Group, the number of shares taken as being in issue for both the current and preceding periods are the number of shares issued by the new parent entity. As a result, 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. Proﬁ t for the period (USD’000) Basic weighted average number of ordinary shares Eff ect of warrants Eff ect of employee share options 2018 9,954 2017 12,425 157,109,829 139,999,998 – – – – Diluted weighted average number of shares 157,109,829 139,999,998 Basic earnings per share (cents) Diluted earnings per share (cents) Proﬁ t for the period before exceptional items and unrealised diff erences in foreign balances (USD’000) Normalised basic earnings per share (cents) Normalised diluted earnings per share (cents) 16 SHARE BASED PAYMENT EXPENSE The Group recognised the following expenses related to equity-settled payment transactions: Performance Share Plan Other share based payments PERFORMANCE SHARE PLAN 6.3 6.3 13,252 8.4 8.4 8.9 8.9 12,471 8.9 8.9 2018 USD’000 2017 USD’000 16 1,602 1,618 – – – During the 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. Outstanding at 1 January Granted during the year Outstanding at 31 December Number of options 2018 – 2,826,085 2,826,085 Weighted average exercise price 2018 GBP’000 – 0.10 0.10 Number of options 2017 – – – Weighted average exercise price 2017 GBP’000 – – – 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. 78 252757 RA_Int_pp59-end.indd 78 252757 RA_Int_pp59-end.indd 78 09/05/2019 18:48 09/05/2019 18:48 T R O P E R I L A C N A N I F The fair value of the options at the grant date was USD 96,000 and a charge of USD 16,000 (2017: nil) was recognised in administrative expenses for the ﬁ scal year ended 2018. 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 ﬁ ve 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 (2017: nil) was recognised in exceptional items. The Monte Carlo and Black-Scholes models used the following inputs: Weighted average share price Expected volatility Risk free rate 2018 56p (USD 0.74) 10.10% 1.24% 17 DIVIDENDS Before the Group reorganisation, dividends of USD 12,500 per share (10 shares) totalling USD 125,000 were declared and paid in 2018 (2017: USD 77,466 per share (10 shares) totalling USD 774,660). Proposed dividends on ordinary shares are subject to approval at the annual general meeting and are not recognised as a liability as at 31 December. 18 ALTERNATIVE PERFORMANCE MEASURES APMs used by the Group are deﬁ ned 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 ﬁ nancial 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 Proﬁ t to better compare the proﬁ tability of its operations across ﬁ nancial periods. UOP is calculated as Operating Proﬁ t 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 are anticipated to be incurred in 2019. Both holding company expenses and acquisition costs do not relate to the day-to-day operating business of the Group. Previously, the Group had used earnings before interest, tax, depreciation and amortisation (EBITDA) to assess the underlying performance of the business however so as to better align internal budgeting and forecasting with ﬁ nancial reporting the Group has reclassiﬁ ed depreciation so as to be included in the calculation of UOP and Operating Proﬁ t. Underlying Operating Margin is calculated as UOP divided by revenue. UNDERLYING PROFIT (UP) The Group uses UP as an alternative measure to Proﬁ t so as to better compare the proﬁ tability of the Group across ﬁ nancial periods. To calculate UP exceptional items and unrealised diff erences on translation of foreign balances are deducted from Proﬁ t. 79 252757 RA_Int_pp59-end.indd 79 252757 RA_Int_pp59-end.indd 79 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 Exceptional items are excluded as they are by deﬁ nition incurred outside of the normal operating practice of the Group. Unrealised diff erences on translation of foreign balances are temporary gains or losses in the value of foreign denominated cash balances held by the Group at the reporting date. These foreign cash balances are held to settle expenses arising in future periods in the same currencies. Underlying Proﬁ t Margin is calculated as UP divided by revenue. NORMALISED EARNINGS PER SHARE (NORMALISED EPS) Normalised EPS represents earnings per share calculated as dividing UP by the weighted average number of ordinary shares outstanding during the period. Normalised EPS provides a more comparable ﬁ gure when analysing proﬁ tability on a per share basis across ﬁ nancial periods. NET CASH Net cash represents cash less overdraft balances, term loans and notes outstanding. 19 PROPERTY, PLANT, AND EQUIPMENT Machinery, motor vehicles, furniture and equipment USD’000 Leasehold improvements USD’000 Total USD’000 6,010 4,668 52 (215) 10,515 2,391 951 (109) 3,233 126 325 – – 451 26 29 – 55 12,147 8,683 69 (328) 20,571 2,977 1,310 (111) 4,176 Buildings USD’000 6,011 3,690 17 (113) 9,605 560 330 (2) 888 8,717 7,282 396 16,395 Cost: At 1 January 2018 Additions Acquired on business combination Disposals At 31 December 2018 Depreciation: At 1 January 2018 Charge for the year Relating to disposals At 31 December 2018 Net carrying amount: At 31 December 2018 80 252757 RA_Int_pp59-end.indd 80 252757 RA_Int_pp59-end.indd 80 09/05/2019 18:48 09/05/2019 18:48 Machinery, motor vehicles, furniture and equipment USD’000 5,057 1,285 (332) 6,010 1,846 691 (146) 2,391 Buildings USD’000 3,952 2,059 – 6,011 326 234 – 560 Leasehold improvements USD’000 Total USD’000 65 61 – 126 16 10 – 26 9,074 3,405 (332) 12,147 2,188 935 (146) 2,977 5,451 3,619 100 9,170 T R O P E R I L A C N A N I F Cost: At 1 January 2017 Additions Disposals At 31 December 2017 Depreciation: At 1 January 2017 Charge for the year Relating to disposals At 31 December 2017 Net carrying amount: At 31 December 2017 20 INVENTORIES Materials and consumables Goods-in-transit There was no provision recognised in relation to inventory as at 31 December 2018 (2017: nil). 21 ACCOUNTS RECEIVABLE, DEPOSITS, AND OTHER RECEIVABLES Trade receivables Accrued revenue Deposits Prepayments Other receivables 2018 USD’000 2017 USD’000 3,241 1,022 4,263 1,786 874 2,660 2018 USD’000 9,992 3,393 213 584 1,780 15,962 2017 USD’000 Restated 6,214 4,176 180 1,404 695 12,669 Trade receivables are non-interest bearing and are generally on terms of 30 days. As at 31 December 2018 no trade receivables were impaired (2017: nil). During the year 100% of accrued revenue was subsequently billed and transferred to trade receivables from the opening unbilled balance in the period (2017: 100%). 252757 RA_Int_pp59-end.indd 81 252757 RA_Int_pp59-end.indd 81 09/05/2019 18:48 09/05/2019 18:48 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 As at 31 December the ageing of unimpaired trade receivables was as follows: Neither impaired nor past due Not impaired but overdue by less than 30 days Not impaired but overdue by between 30 and 60 days Not impaired but overdue by more than 60 days 2018 USD’000 2017 USD’000 5,912 3,249 285 546 9,992 1,270 1,200 792 2,952 6,214 Unimpaired 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 ﬁ nancial position comprised of cash at bank of USD 27,804,000 (2017: USD 7,469,000). Of the total balance of cash and cash equivalents, USD 1,719,000 (2017: USD 2,000,000) represents restricted cash. The balance of restricted cash held by the Group at 31 December 2018 relates to cash held in Group bank accounts which cannot be withdrawn on demand. The balance of restricted cash held by the Group at 31 December 2017 relates to cash margin provided to a commercial bank against the issuance of a guarantee to a subsidiary. Due to the respective terms, restricted cash is considered to be liquid. 23 SHARE CAPITAL Authorised, issued and fully paid 173,575,741 shares (2017: 10 shares) of GBP 0.10 (2017: AED 100,000) each Additional contributed capital 2018 USD’000 2017 USD’000 24,300 – 272 1,809 Additional contributed capital did not carry interest and was payable to the Shareholders only upon the liquidation of the Group. 24 TERM LOANS AND NOTES Current: Term loans and notes Non-current: Term loans and notes 1 January 2018 USD’000 Cash ﬂ ows USD’000 Other USD’000 31 December 2018 USD’000 1,861 (1,867) 6 – 6 (6) – – 82 252757 RA_Int_pp59-end.indd 82 252757 RA_Int_pp59-end.indd 82 09/05/2019 18:48 09/05/2019 18:48 Current: Term loans and notes Non-current: Term loans and notes 1 January 2017 USD’000 2,011 584 Cash ﬂ ows USD’000 Other USD’000 31 December 2017 USD’000 (728) 578 1,861 – (578) 6 In 2017 the term loans carried interest rates ranging from LIBOR plus 5.50% per annum to LIBOR plus 8.76% per annum. The term loans were fully settled during the prior year. Notes carried a ﬁ xed interest rate ranging from 5.50% (guaranteed notes) to 8.00% (unguaranteed notes) per annum. The terms of the notes were 10 or 18 months and principal was repaid as a bullet payment upon maturity. Interest was paid on a quarterly basis, semi-annual basis, or at maturity, at the option of the investor. The guaranteed notes were 80% principal guaranteed through insurance. 25 EMPLOYEES’ END OF SERVICE BENEFITS Movements in the provision recognised in the consolidated statement of ﬁ nancial position are as follows: As at 1 January Provided during the year End of service beneﬁ ts paid As at 31 December 26 ACCOUNTS PAYABLE AND ACCRUALS Accounts payable Accrued expenses Customer advances 2018 USD’000 2017 USD’000 251 116 (17) 350 2018 USD’000 3,440 1,412 28 4,880 189 283 (221) 251 2017 USD’000 Restated 1,635 1,942 1,172 4,749 All customer advances recorded at 31 December 2017 were subsequently recognised as revenue in 2018 and all customer advances held at 31 December 2018 are expected to be recognised as revenue in the next 12 months. T R O P E R I L A C N A N I F 252757 RA_Int_pp59-end.indd 83 252757 RA_Int_pp59-end.indd 83 09/05/2019 18:48 09/05/2019 18:48 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 27 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES INTEREST RATE RISK Interest rate risk is the risk that the fair value or future cash ﬂ ows of a ﬁ nancial instrument will ﬂ uctuate because of changes in market interest rates. The Group was not exposed to any signiﬁ cant interest rate risk on its interest-bearing liabilities (vehicle loans and notes). FOREIGN CURRENCY RISK Foreign currency risk is the risk that the fair value or future cash ﬂ ows of a ﬁ nancial instrument will ﬂ uctuate 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 diff erent currency from the Group’s functional currency, as well as cash and cash equivalents held in foreign currency accounts. At 31 December 2018, the Group held foreign cash and cash equivalents of GBP 4,432,000 (USD 5,624,000). UK pound sterling is primarily held by the Group to settle payment obligations denominated in GBP. As at 31 December 2017, the Group held GBP 319,000 (USD 430,000). 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 ﬁ nancial instrument will fail to discharge an obligation and cause the other party to incur a ﬁ nancial 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 and with respect to customers by only dealing with credit worthy customers and continuously monitoring outstanding receivables. Its 5 largest customers account for 78% of outstanding accounts receivable at 31 December 2018 (2017: 95%). Revenue split by customer Customer A Customer B Customer C Other 2018 % 30 26 13 31 100 2017 % 59 12 11 18 100 No material credit risk is deemed to exist due to the nature of the Group’s customers. LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial 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. Liabilities falling due within 12 months are recognised as current on the consolidated statement of ﬁ nancial position. Liabilities falling due after 12 months are recognised as non-current. The unutilised bank overdraft facilities at 31 December 2018 amounted to USD 2,000,000 (2017: USD 2,000,000) and carry interest of 1.50% per annum (2017: 1.50%). The facilities require a cash margin guarantee to be paid upfront; 100% margin for USD drawdowns and 120% margin for GBP drawdowns. 84 252757 RA_Int_pp59-end.indd 84 252757 RA_Int_pp59-end.indd 84 09/05/2019 18:48 09/05/2019 18:48 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 2018. Capital comprises share capital, share premium, merger reserve, share based payment reserve and retained earnings and is measured at USD 59,541,000 as at 31 December 2018 (2017: USD 25,101,000). 28 OPERATING LEASE COMMITMENTS Commitments under non-cancellable operating leases at the current rates approximate to the following: Future minimum lease payments: Within one year After one year but not more than ﬁ ve years More than ﬁ ve years 2018 USD’000 2017 USD’000 336 1,298 1,522 3,156 245 979 1,714 2,938 29 RELATED PARTY DISCLOSURES Related parties represent Shareholders, Directors and key management personnel of the Group, and entities controlled, jointly controlled, or signiﬁ cantly inﬂ uenced 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. See note 10 for further details. There were no outstanding balances with related parties included in the consolidated statement of ﬁ nancial position at 31 December 2018 (2017: nil). 30 COMPENSATION COMPENSATION OF KEY MANAGEMENT PERSONNEL The remuneration of key management during the year was as follows: Short-term beneﬁ ts Stock based compensation 2018 USD’000 2017 USD’000 1,367 1,672 3,039 662 – 662 The key management personnel comprise of 5 (2017: 2) individuals. Included in key management personnel are 3 (2017: 2) Directors. T R O P E R I L A C N A N I F 252757 RA_Int_pp59-end.indd 85 252757 RA_Int_pp59-end.indd 85 09/05/2019 18:48 09/05/2019 18:48 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2018 COMPENSATION OF DIRECTORS The remuneration of Directors during the year was as follows: Short-term beneﬁ ts Stock based compensation HIGHEST PAID DIRECTOR The remuneration of the highest paid Director during the year was as follows: Short-term beneﬁ ts Stock based compensation 2018 USD’000 2017 USD’000 1,071 569 1,640 662 – 662 2018 USD’000 2017 USD’000 276 569 845 560 – 560 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. 31 STANDARDS ISSUED BUT NOT YET EFFECTIVE The new and amended standards and interpretations that are issued, but not yet eff ective, up to the date of issuance of the Group’s ﬁ nancial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become eff ective. IFRS 16 LEASES IFRS 16 was issued in January 2016 and it 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 the accounting for ﬁ nance leases under IAS 17. The standard includes two recognition exemptions for lessees — leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or 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. IFRS 16, which is eff ective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17. The Group will continue to assess the potential eff ect of IFRS 16 on its ﬁ nancial statements and is yet to quantify the anticipated impact of the adoption of IFRS 16. Please refer to note 28 for an indication of the Group’s current operating leases. 86 252757 RA_Int_pp59-end.indd 86 252757 RA_Int_pp59-end.indd 86 09/05/2019 18:48 09/05/2019 18:48 Transition to IFRS 16 The Group plans to adopt IFRS 16 retrospectively to each prior reporting period presented. No other standards and interpretations that are issued, but not yet eff ective, up to the date of issuance of the Group’s ﬁ nancial statements are expected to have a material impact on the Group. 32 SUBSEQUENT EVENTS Subsequent to year end, the Group expanded its operations in Mozambique. through acquiring a parcel of land in Northern Mozambique. Additionally, the Group purchased a 49% shareholding in Royal Food Solutions S.A, a family-owned Mozambique based provider of integrated facilities management services. T R O P E R I L A C N A N I F 87 252757 RA_Int_pp59-end.indd 87 252757 RA_Int_pp59-end.indd 87 09/05/2019 18:48 09/05/2019 18:48 COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 Assets Non-current assets Investments Current assets Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Equity Share capital Share premium Merger reserve Share based payment reserve Retained earnings Total equity Current liabilities Trade and other payables Total equity and liabilities Notes 2018 USD’000 4 5 8 6 50,047 361 669 1,030 51,077 24,300 18,254 9,897 16 (1,561) 50,906 171 51,077 The Company has taken the exemption conferred by section 408 of the Companies Act 2006 not to publish the proﬁ t and loss of the parent company within these accounts. The result for the Company for the year was a loss of USD 1,561,000. The ﬁ nancial statements of the Company (registration number 11252957) were approved by the Board of Directors on 10 April 2019 and signed on its behalf by: _________________________________ _________________________________ Soraya Narfeldt CEO Andrew Bolter CFO The attached notes 1 to 9 form part of the Financial Statements. 88 252757 RA_Int_pp59-end.indd 88 252757 RA_Int_pp59-end.indd 88 09/05/2019 18:48 09/05/2019 18:48 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Share Capital USD’000 Share Premium USD’000 Merger Reserve USD’000 Share Based Payment Reserve USD’000 Retained Earnings USD’000 As at 1 January 2018 Preference shares issued on incorporation Issue of share capital on reorganisation Share exchange Issue of share capital on Admission Share based payments Redemption of preference shares Total comprehensive income for the period – 70 19,884 – 4,416 – (70) – – – – – 18,254 – – – – – – 9,897 – – – – As at 31 December 2018 24,300 18,254 9,897 – – – – – 16 – – 16 – – – – – – – (1,561) (1,561) Total USD’000 – 70 19,884 9,897 22,670 16 (70) (1,561) 50,906 T R O P E R I L A C N A N I F The attached notes 1 to 9 form part of the Financial Statements. 89 252757 RA_Int_pp59-end.indd 89 252757 RA_Int_pp59-end.indd 89 09/05/2019 18:48 09/05/2019 18:48 NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 1 BASIS OF PREPARATION The ﬁ nancial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), 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. Speciﬁ cally, 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), 38(c), 38(d) 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; (g) 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 (h) 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: Directors The aggregate remuneration of the above employees was: Wages and salaries Social security costs 4 INVESTMENTS Cost and net book value On incorporation Acquisition of RA International FZCO Additional capital in RA International FZCO 90 2018 4 2018 USD’000 203 23 226 2018 USD’000 – 29,781 20,266 50,047 252757 RA_Int_pp59-end.indd 90 252757 RA_Int_pp59-end.indd 90 09/05/2019 18:48 09/05/2019 18:48 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 Prepayments Due from subsidiary VAT recoverable 6 TRADE AND OTHER PAYABLES Trade payables Accruals 2018 USD’000 16 297 48 361 2018 USD’000 87 84 171 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 Authorised, issued and fully paid: Ordinary shares of GBP 0.10 each 9 SUBSEQUENT EVENTS There were no subsequent events relating to the Company post 31 December 2018. 2018 Number 2018 USD’000 173,575,741 24,300 T R O P E R I L A C N A N I F 252757 RA_Int_pp59-end.indd 91 252757 RA_Int_pp59-end.indd 91 09/05/2019 18:48 09/05/2019 18:48 91 SHAREHOLDER INFORMATION CORPORATE INFORMATION: ADVISERS: REGISTERED OFFICE One Fleet Place London EC4M 7WS WEBSITE www.raints.com REGISTERED NUMBER 11252957 LEGAL ENTITY IDENTIFIER CODE 213800N6RTATELJU6797 LISTING INFORMATION AIM, London Symbol: RAI DATE OF ANNUAL GENERAL MEETING 24 June 2019 NOMINATED ADVISER AND BROKER Cenkos Securities plc 66 Hanover Street Edinburgh EH2 1EL SHAREHOLDER QUERIES: The investors section of our website contains a wide range of information of interest to institutional and private investors, including: latest news and press releases, annual reports, investor presentations and sustainability 6.7.8 Tokenhouse Yard reports. London EC2R 7AS For speciﬁ c Investor queries please email: SOLICITORS TO THE COMPANY rainternational@hudsonsandler.com Dentons UK and Middle East LLP One Fleet Place London EC4M 7WS Level 18 Boulevard Plaza 2 Burj Khalifa District PO Box 1756 Dubai United Arab Emirates AUDITORS Ernst & Young LLP 144 Morrison St Edinburgh EH3 8EX FINANCIAL PR Hudson Sandler 25 Charterhouse Square London EC1M 6AE REGISTRARS Computershare Investor Services PLC The Pavillions Bridgwater Road Bristol BS13 8AE COMPANY SECRETARY AMBA Secretaries Limited 400 Thames Valley Park Drive Reading RG6 1PT 92 Perivan Financial Print 252757 252757 RA_Int_pp59-end.indd 92 252757 RA_Int_pp59-end.indd 92 09/05/2019 18:48 09/05/2019 18:48

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