RA International Group PLC
Annual Report 2020

Plain-text annual report

Annual Report 2020 R A I N T E R N A T I O N A L A N N U A L R E P O R T 2 0 2 0 WWW.RAINTS.COM We deliver. Regardless. Contents Highlights Chair’s statement STRATEGIC REPORT RA International at a glance Business model Our markets Our strategy Stakeholders and Section 172 statement Key performance indicators Operating review Financial review Risk management CORPORATE GOVERNANCE Board of Directors Executive Management Team Chair’s corporate governance statement Review of the Board’s effectiveness Directors’ report Directors’ responsibility statement Remuneration Committee report Audit Committee report FINANCIAL REPORT Independent Auditor’s report Consolidated statement of comprehensive income Consolidated statement of financial position 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 1 2 4 8 10 12 14 16 18 21 25 30 32 33 37 38 40 41 44 48 56 57 58 59 60 84 85 86 88 REVENUE 2019 69.1 2020 64.4 ORDER BOOK AT YEAR END -7% 2019 141 2020 187 REVENUE 2019 69.1 2020 64.4 ORDER BOOK AT YEAR END REVENUE NUMBER OF OPERATING COUNTRIES ORDER BOOK AT YEAR END -7% 2019 2019 141 69.1 2020 2020 187 64.4 2019 11 2019 2020 2020 141 12 187 +33% -7% HIGHLIGHTS NUMBER OF OPERATING COUNTRIES NUMBER OF OPERATING COUNTRIES 2019 11 2020 12 Underlying EBITDA 2019 16.3 2020 14.2 -13% 2019 11 +1% 2020 DIVIDEND 12 2019 1.25p 2020 1.35p +33% +1% +33% +1% +8% 16.3 2019 Underlying EBITDA 2020 has tested all businesses and we believe it has highlighted the strengths and resilience of RA International. We have delivered a step change in order book size and quality since IPO, in line with our +8% customer-led growth strategy. DIVIDEND Underlying EBITDA 2019 1.25p 2019 -13% -13% 1.35p 14.2 2020 2020 14.2 2020 16.3 DIVIDEND 2019 1.25p 2020 1.35p +8% Sustainable growth Social responsibility REVENUE USD 64.4m REVENUE 2019 69.1 2020 64.4 LOCAL LABOUR PARTICIPATION 55% LOCAL LABOUR PARTICIPATION ORDER BOOK AT YEAR END LOST TIME INCIDENT RATE -7% 2019 141 2019 61 2020 187 2020 55 -10% +33% 2019 117 2020 59 -50% ORDER BOOK AT YEAR END USD 187m ORDER BOOK AT YEAR END ORDER BOOK AT YEAR END LOCAL LABOUR PARTICIPATION NUMBER OF OPERATING COUNTRIES LOST TIME INCIDENT RATE TOTAL CARBON EMISSIONS (TCO2E)* 59 LOST TIME INCIDENT RATE LOCAL LABOUR PARTICIPATION 2019 11 LOST TIME INCIDENT RATE 2020 2019 2019 2019 12 2020 2020 2020 11,296 117 61 7,397 59 55 -50% -35% -10% +1% 2019 117 2020 59 -50% 61 55 -10% +33% +33% -7% -7% 2019 2019 2020 2020 141 2019 141 187 2020 187 Underlying EBITDA Underlying EBITDA 2019 2019 2020 2020 16.3 16.3 14.2 14.2 -13% -13% REVENUE REVENUE 2019 2019 2020 2020 69.1 69.1 64.4 64.4 2019 2019 2020 2020 61 61 55 55 2019 2019 2020 2020 11,296 11,296 7,397 7,397 NUMBER OF OPERATING COUNTRIES NUMBER OF OPERATING COUNTRIES TOTAL CARBON EMISSIONS (TCO2E)* 12 countries NUMBER OF OPERATING COUNTRIES REVENUE REVENUE 11 2019 TOTAL CARBON EMISSIONS 7,397 (tCO2e)* TOTAL CARBON EMISSIONS (TCO2E)* ORDER BOOK AT YEAR END ORDER BOOK AT YEAR END 2019 2019 2020 2020 2020 2019 2019 11,296 69.1 2019 11 69.1 12 Underlying EBITDA 7,397 2020 12 64.4 64.4 16.3 2020 -35% -7% +1% +1% -7% 2019 2019 11,296 141 2019 141 DIVIDEND 2020 7,397 187 187 2020 2019 1.25p 2020 -35% +33% +33% 2020 14.2 -13% DIVIDEND DIVIDEND 2020 1.35p *For further information on the methodology of calculation and locations of measurement please refer to the Company’s 2020 Sustainability Report. +8% NUMBER OF OPERATING COUNTRIES NUMBER OF OPERATING COUNTRIES 2019 11 2019 11 2020 12 2020 12 +1% +1% 2019 1.25p 2019 1.25p 2020 2020 +8% Shareholder returns +8% 1.35p 1.35p UNDERLYING EBITDA USD 14.2m Underlying EBITDA Underlying EBITDA DIVIDEND GBP 1.35p DIVIDEND DIVIDEND 2019 16.3 2019 16.3 2020 14.2 2020 14.2 -13% -13% 2019 1.25p 2019 1.25p 2020 1.35p 2020 1.35p +8% +8% LOCAL LABOUR PARTICIPATION LOST TIME INCIDENT RATE 2019 61 2020 55 -10% 2019 117 2020 59 -50% We deliver. Regardless. | 1 LOCAL LABOUR PARTICIPATION LOCAL LABOUR PARTICIPATION TOTAL CARBON EMISSIONS (TCO2E)* LOST TIME INCIDENT RATE LOST TIME INCIDENT RATE -10% -10% 2019 2019 2019 2020 2020 2020 11,296 117 117 7,397 59 59 -35% -50% -50% TOTAL CARBON EMISSIONS (TCO2E)* TOTAL CARBON EMISSIONS (TCO2E)* LOCAL LABOUR PARTICIPATION LOCAL LABOUR PARTICIPATION LOST TIME INCIDENT RATE LOST TIME INCIDENT RATE -35% -35% 2019 61 2019 61 2020 55 2020 55 -10% -10% 2019 117 2019 117 2020 59 2020 59 -50% -50% TOTAL CARBON EMISSIONS (TCO2E)* TOTAL CARBON EMISSIONS (TCO2E)* 2019 11,296 2019 11,296 2020 7,397 2020 7,397 -35% -35% CHAIR’S STATEMENT Sangita Shah | Non-Executive Chair Whilst the impact of COVID-19 was a constant during most of the year and has tested all businesses, I believe it has highlighted the strengths and resilience of RA. Our relentless focus on our customers and on anticipating and responding to their changing needs is at the heart of our strategy. This approach has created a business that is built on strong foundations, has transformed in scale and opportunity since IPO and has a clear roadmap ahead for sustained profitable growth. RA has been building on this position over the last 17 years - I believe the potential of this business is only starting to be realised and the best part of the RA journey lies ahead. FINANCIAL PERFORMANCE AND STRATEGIC EXECUTION Our financial performance highlights the durability of the business model. From a revenue perspective, we have seen growth year on year in our IFM and Supply Chain channels. Construction activity was most affected by COVID-19, however, the Group maintained robust profitability despite the resultant contraction in revenue. In 2020, we have continued to focus on strengthening our business and invested in future growth, most notably our investment to build an 1,800-person camp in a strategically important location in Northern Mozambique. In spite of the ongoing instability in the region, we remain confident that by virtue of the considerable multinational commercial investment and the significance to both Mozambique and the international community, the project will come into fruition. This is a very significant project for RA. We built up capability in the country over a number of years which allowed us to secure the USD 60m contract we announced in August 2020. This is a great example of how our measured, research-led approach, combined with our ability to anticipate customer requirements and to demonstrate local understanding and capability, sets us apart. The business has been transformed since RA’s IPO in 2018. We came to market with a business concentrated in supporting humanitarian agencies in Somalia. The opportunity ahead was to diversify the business, expand into new geographies and broaden our customer mix to government and commercial clients, secure larger contracts and maintain profitability, particularly by growing our IFM contract base. With these results and with the composition of our record order book of USD 187m, we have delivered on the commitments made at IPO. Progress has not been linear but progress is clear, and is testament to the hard work and dedication of RA’s committed employees. The customer-led growth strategy is working and we have even more opportunity ahead, with the growth of our order book establishing a stronger financial baseline year on year. 2020 was dominated by the rapid adjustments which had to be made in the wake of the unprecedented health emergency and world-wide response that unfolded during the course of the year. Whilst we are used to dealing with crisis situations, the response of our colleagues has been truly remarkable throughout this period as they have concurrently dealt with the personal adversity that continues to affect families and communities. On behalf of the Board, it is fitting that I start this report by paying tribute to their exemplary professionalism, dedication and commitment during these challenging times. Thank you. 2 | RA International | Annual Report 2020 In terms of managing the impact of COVID-19 on RA, we have provided comprehensive reviews of our response in previous market communications, most recently our 2020 interim results announcement on 8 September 2020 and provided an update in our current trading announcement on 15 December 2020. As a Board, we continue to monitor the situation closely. COVID-19 remains a challenge for our customers and clearly the pandemic continues to be a major health crisis at the time of preparing this report. Whilst the situation will continue to evolve, the substance of our approach will not change. We will remain operational, we will continue to manage the challenges related to ensuring the health and safety of our staff and clients, and we will be there for our clients as they return to a more normal working environment. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) STRATEGY AND CORPORATE CULTURE The success of RA International comes from operating responsibly and sustainably. Since the business was founded in 2004, being a responsible company and employer was placed firmly at the heart of everything we do. Growing the business sustainably is a key pillar of our growth strategy and sustainability is integral to our core business activities with consideration for the environmental, social and financial impacts of the decisions we make embedded in our culture. Our approach is encapsulated in our purpose “to deliver immediate results and lasting change”. Lars Narfeldt, our COO, leads our Sustainability efforts. In 2018, we adopted a formal sustainability strategy centred around the UN Sustainable Development Goals (“UN SDGs”) to support us in delivering our objectives and measuring our progress. Our focus areas are Resource Management, People & Skills Development, and Labour Rights as these are the areas we have identified where we can have most impact. Our sustainability strategy is set out in our dedicated Sustainability Report and I am pleased to report that we have published our third such report, which can be found on our website at www. rainternationalservices.com/sustainability/. Embedded within this report are our ESG indicators, inclusive of climate objectives. This year we have expanded our disclosure framework to highlight how our established focus areas within the UN SDGs align to the environment, social and governance structure. The Sustainability Report also helps to explain how in supporting communities we are able to foster strong relationships that are integral to working effectively and efficiently to the benefit of our clients. We will continue to review and revise the report in the future to include further detailed disclosure on our supply chain and environmental impacts. Related to our commitment to doing business the right way, we have been particularly alert to the wider consequences of the pandemic for colleagues and the communities in which we operate. We advocated with clients to allow us to continue to execute our projects in planned timelines, taking all necessary and recommended precautions, to continue economic activity in vulnerable communities. We also maintained staff remuneration for all employees irrespective of lockdowns prohibiting their attendance on site and made certain additional payments to staff in recognition of their continued efforts under challenging circumstances. DIVIDEND AND SHAREHOLDER RETURNS The Board is recommending a final dividend of 1.35p per share to be paid on 8 July 2021 to shareholders on the register as of 28 May 2021. The ex-dividend date is 27 May 2021. We see the dividend decision this year, to increase the dividend per share by 8%, or 21% in USD terms, despite the impact of COVID-19, as an important indication of both the financial strength of RA and our confidence in the future prospects of our business. We continue to adopt a progressive dividend policy and intend to increase or maintain the dividend in future years, subject to retaining sufficient liquidity to meet the needs of the business and to fund continued growth. A FINAL NOTE On behalf of the non-executive Board members, I would like to thank the Executive Management Team for their exemplary leadership through the challenges of 2020, our customers for their support and for trusting us to help solve their problems and, again, our colleagues for it is only with their resilience and adaptability that we are able to deliver for our customers regardless of the challenges that are put in front of them. Sangita Shah Non-Executive Chair 30 March 2021 We deliver. Regardless. | 3 STRATEGIC REPORT Sustainable competitive advantage RA INTERNATIONAL AT A GLANCE 1,658 STAFF (2020 AVERAGE) 45+ NATIONALITIES 12 COUNTRIES GROUP HQ IN THE UK OPERATIONAL HQ IN DUBAI REGIONAL OFFICES ACROSS AFRICA UN GLOBAL COMPACT SIGNATORY SINCE 2008 PARTICIPANT SINCE 2018 4 | RA International | Annual Report 2020 RA International is a leading global provider of supply chain, construction and integrated facilities management services on behalf of humanitarian agencies, governments and commercial customers. Listed on AIM since 2018, the Group was founded in 2004 in response to the needs of large organisations, to better manage and deliver mission-critical humanitarian and peacekeeping projects in remote locations and often in challenging circumstances. Our work often takes place in locations that lack a functioning infrastructure and a skilled workforce. Through a combination of experience, innovation and determination, we find that we can resolve most challenges. This is summed up by our Company motto: We deliver. Regardless. REVENUE BY SECTOR Humanitarian agencies Government and commercial SERVICES One-supplier model for organisations seeking to operate in remote and difficult locations 2020 2019 2018 52% 44% 32% 68% 56% 48% REVENUE BY SERVICE Integrated facilities management Construction Supply chain 21% 19% 2020 2019 4% 2018 42% 41% 49% 30% 40% 54% SUPPLY CHAIN USD 14.1m (2019: USD 12.8m) • Local, regional and global procurement of mission-critical equipment, material and consumables Consolidation and repacking services Land, sea and air logistics Last mile logistics Warehousing and yard management Inventory control Freight forwarding and clearance of goods • • • • • • CONSTRUCTION USD 19.1m (2019: USD 27.6m) • • • • Project management Horizontal and vertical engineering Design and build of permanent, semi- permanent and temporary facilities such as accommodation camps, workshops, warehouses, embassies and offices Design and build of permanent, semi- permanent and temporary infrastructure including power generation, water and waste management plants and landfills INTEGRATED FACILITIES MANAGEMENT USD 31.3m (2019: USD 28.6m) • • Facilities management and maintenance Plant and equipment operation and maintenance Catering, hospitality and accommodation Cleaning and laundry Waste management Vehicle fleet operation and maintenance Pest and vector control • • • • • We deliver. Regardless. | 5 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTRA’S ONE-SUPPLIER OFFERING As a remote service provider, RA has the broadest service offering on the market. By designing, building and running what are, in effect, full-functioning urban environments, we make it possible for our clients and their staff to live comfortably in remote locations and to keep facilities, vehicles, plant and equipment operational – leaving them free to focus on the job at hand. Building full-service camps in remote locations Facilities Catering 6 | RA International | Annual Report 2020 Guest welfare Infrastructure Facilities management We deliver. Regardless. | 7 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTA DIVERSIFIED BUSINESS MODEL Our business model is predicated on supplying all our customers’ needs when operating in remote and challenging locations more efficiently and effectively than they can themselves. Our approach allows our customers to focus on their own objectives, while offering employment to local people, supporting small businesses and communities and generating returns to our investors. WHAT WE DO INPUTS Through a one-supplier model, we can supply our customers with all their needs when operating in remote and challenging locations. SUPPLY CHAIN For many companies, the entry point into our services is through the supply of project-critical equipment, goods and machinery. CONSTRUCTION Once established, we are invited to undertake construction works of temporary and permanent facilities and infrastructure. INTEGRATED FACILITIES MANAGEMENT (IFM) Our relationships evolve into long-term service contracts, supporting and maintaining the facilities and infrastructure our customers occupy. 8 | RA International | Annual Report 2020 STAFF Our people are our biggest asset. We are firm believers in providing stable employment and rewarding career opportunities, and we invest heavily in skills and career development so that we can provide unparalleled service to our customers. We aim to employ over 60% of all our staff locally and subcontract only when it is absolutely necessary. CENTRAL HEAD OFFICE AND REGIONAL OPERATING OFFICES Our Dubai head office, central PMO, and network of local offices enable global delivery of our services. FACILITIES AND EQUIPMENT Owning our own facilities and equipment gives us control over the quality and delivery of our services. Our facilities include fixed and temporary accommodation, offices and leisure facilities. Where it is practical to do so, we own our vehicles and machinery to limit our reliance on hiring equipment. This approach allows us to progress our projects without interruption. STRONG BALANCE SHEET A strong balance sheet enables us to bid for larger long- term contracts and enables the rapid mobilisation of people, materials and equipment. INTERNATIONAL AND LOCAL COMPLIANCE We work to ensure that we are meeting all international and local standards. T N E R R A E P L B D R E LI A N D A E T S U R T W O R K I N G T O I N T E R N A T I O N A L S TANDARDS REP U T A TI O N F O R I N T E G R I T Y We deliver. Regardless. T N E M E G A N R IS K M A N S O F O C U OUR COMPETITIVE ADVANTAGE DELIVERING VALUE ONE SUPPLIER MODEL CUSTOMERS By offering all the services our customer may need, we are able to provide a more efficient solution than if they were to source materials, equipment or services from multiple organisations. USD 187m order book Enabling and delivering complex projects, allowing organisations to focus on their core objectives and improve efficiency. SPECIALISED KNOWLEDGE AND LOCAL INTELLIGENCE EMPLOYEES We have long-standing presence and relationships in the countries where we operate, giving us valuable insight into the local environment. Because of this, we can find solutions where others may struggle and alter our implementation approach as changes on the ground occur. 56% local labour participation Providing job opportunities, training and financial security to local people who may have been affected by conflict, natural disaster or lack of employment opportunities. STRONG AND LONG-STANDING CUSTOMER RELATIONSHIPS For over 15 years we have worked with UN organisations and NGOs. More recently we have established relationships with western governments and commercial businesses. As a result of our focus on customer delivery, our relationships with our customers tend to grow over time, both in terms of the size of projects we are asked to undertake, and in geographic spread. ENVIRONMENT, SOCIAL AND LABOUR 3 sustainability goals we directly impact Positive impact on communities though people and skills development and upholding labour rights, and minimising the negative impacts to the environment through carbon reduction targets, and water and waste management initiatives. POWERFUL REPUTATION FOR DELIVERING SERVICES RESPONSIBLY INVESTORS Over many years we have built trust amongst our customers and communities and our relationships are based on a strong ethical foundation to do things right. Our reputation and experience provides us with our license to operate in challenging locations and supports our ability to win new business. GBP 1.35p dividend Delivering long-term shareholder value through a clear growth strategy. We deliver. Regardless. | 9 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORT OUR MARKETS EXPLAINED Clear addressable markets RA International supports organisations through the delivery of complex projects in demanding environments. Since we started operating in 2004, we have built a strong reputation for service delivery and have delivered over USD 600m of contracts, which highlights the scale of the market opportunity we have. Our growth has been customer driven, meaning we often follow our customers from one country to another as we are called upon to support their mandates and workload. This is critical to understanding the growth trajectory of the Company and specifically why we operate in many of the countries where we do. Our addressable market is best defined as humanitarian and western government spend on official development assistance (ODA) and commercial investment, which is typically in the infrastructure and natural resources sectors. We work with reputable organisations only and, when approached by potential customers, we perform a significant amount of due diligence. We split our clients into three categories reflecting these addressable markets: humanitarian, government, and commercial. Humanitarian organisations Western governments Commercial clients Our work with humanitarian organisations is primarily based on supporting their peacekeeping and stabilisation activities in challenging locations. UN, NGOs, and International Agencies providing aid or peacekeeping activities in these environments require experienced service providers to support them. RA’s track record at operating in dynamic environments and improving local economies through creation of local employment and commercial opportunities, makes us a reliable partner. Our biggest client in this sector is the UN, which is made up of 15 specialised agencies, 12 peacekeeping missions and many other entities, bodies, funds, programmes, and related organisations spread across the world. RA currently supports more than 10 UN entities. Western governments frequently work alongside humanitarian organisations in many of the challenging and remote areas we tend to operate in, with their focus often being capacity building and advancing the rule of law. With a solid reputation for service delivery, it was a natural progression for RA to expand into providing services for these government clients. Our two largest clients in this sector are the US and UK Governments, with RA supporting amongst others the US State Department, UK Ministry of Defence, and the Foreign, Commonwealth and Development Office (FCO). More recently, we are being asked to support government clients outside of Africa. The work we have done with the US State Department in Denmark is a good example of this. Our track record with humanitarian agencies and governments demonstrates the efficacy of our approach, and with corporate clients in the commercial sector we have an emerging and complementary market opportunity. RA has been contracted by a range of corporate clients involved in infrastructure development, mineral exploration and production, and oil and gas extraction. Our commercial partners seek out reliable service providers who can meet their stringent HSE and compliance requirements, while ensuring that their projects are delivered on time, to the required standards, and within budget. With our track record as a single supplier of supply chain, construction and IFM services, we have a strong value proposition to offer clients in this sector. In the last 12 months, we have announced landmark contracts with corporate clients, including a contract to build and operate a camp for a mining company in North East Africa and a USD 60m contract to build and operate a remote camp in Southern Africa. 10 | RA International | Annual Report 2020 OUR ADDRESSABLE MARKETS Within the humanitarian, peacekeeping and stability, and commercial sectors there are substantial budgets that we have opportunities to tap into. Taken together, the budgets for these markets run into the hundreds of billions of dollars. Limiting our market to the sectors and geographies where we currently operate, we estimate a market size of at least USD 100b in annual expenditure. Of this, we estimate that 2% to 4% of this budget directly relates to the services we provide. In addressing these opportunities, it is important we develop winning strategies and remain focused on maintaining a long-term competitive advantage. We therefore adopt a research-based, intelligence-led approach to target this customer spend effectively, often starting our research and reconnaissance years before a project may begin. We started our business mainly within the humanitarian sector supporting UN and peacekeeping missions in Afghanistan, Sudan and Somalia and at the time of our IPO in 2018, nearly 90% of our revenue came from this sector. Now, approximately 50% of our revenue comes from government and commercial sectors. Broadening our activity in this way is an important part of our sustainable growth strategy. WHY CLIENTS SEEK OUT RA’S SERVICES Our clients find that attempting to navigate the regulatory and logistical challenges in establishing and managing a support system for their staff can be a major distraction to their core purpose. By putting their trust in RA, our clients benefit from having secure, well-appointed, and well-maintained facilities; reliable infrastructure, excellent life-support in the form of catering, cleaning, laundry, and pest control; and a reliable supply chain. Where clients are already well established in a location, they value that RA has the ability to mobilise quickly and operate independently, without having to rely on them for assistance in managing the local operating environment. HOW OUR STRATEGY TO GROW INTO THESE LARGE ADDRESSABLE MARKETS IS WORKING Looking at our progress since we came to market in 2018 shows the successful execution of our growth strategy in transforming our business. We are winning larger contracts with increased traction bidding for contracts between USD 10m and USD 100m, we are operating in more countries, and the scale and quality of our order-book is improving such that we are establishing a stronger financial baseline for the business year on year. Further information on our strategy can be found on page 12. MARKET DEVELOPMENTS IN 2020 AND LOOKING AHEAD The health emergency relating to the COVID-19 pandemic affected all businesses in 2020. Despite the challenges raised by this crisis, particularly the impact on our customers’ ability to commence new projects, we continued to focus on the opportunities to grow and strengthen our business by growing with our customers and winning contracts with new customers. During the year we secured USD 110m of new contract awards, uplifts and extensions, and closed 2020 with a record order book value of USD 187m. With over 60% of the order book represented by IFM contracts, the order book composition is weighted towards contracts which are high quality, high value and recurring in nature. We are winning and delivering contracts in more geographies, including outside of Africa. This is all in line with our growth strategy and demonstrates the need for a high quality and trusted service provider in the markets in which we operate. Looking ahead, the level of business development activity in which we are involved is particularly strong. This is buoyed by the work we have put in to developing relationships with large US corporations such as Cherokee Nation, and with commercial customers such as Danakali in the mining sector. In addition, we are bidding on contracts that will increase our global reach and that are larger, longer-term and higher- value, underpinning the future growth of the business. We deliver. Regardless. | 11 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTOUR STRATEGY Customer-led growth • Diversify the customer base • Target large, addressable markets Achievements in 2020 Future priorities Government and commercial customers accounted for 52% of revenues. Awarded USD 60m IFM contract in Mozambique following significant forward investment in the country. Continue to grow the Government and commercial client base. Target long-term service contracts. Continue to invest into new territories where there is an identifiable demand for our services in order to attract customers. Target hybrid or one-supplier contracts • Extol the benefits of a one-supplier model. • Cross sell services to new and existing customers. Achievements in 2020 Future priorities IFM revenue increased by 9% despite the COVID-19 operating environment. Over 50% of our order book was awarded through sole source contracts. Continue to cross-sell services to our existing customer base and move more towards one- supplier contracts. Win more one-supplier contracts with commercial customers. Grow the business sustainably • Earn a return for shareholders that is commensurate with expectations and sustainable. • Invest in the skills and development of employees; target 60% average local labour participation. • Manage RA’s resources to maximise positive social impact and minimise the environmental impacts of both our own and our clients’ operations. • Introduce innovative new services that will create greater efficiency for our clients. Achievements in 2020 Future priorities Underlying EBITDA margin of 22.0% (2019: 23.5%) despite operating many construction projects at or around breakeven during COVID-19 related suspension periods. Promoted 2% of local staff. Set a science-based carbon reduction target of 21% by 2024. Implemented a company-wide approach that will enable RA to track a wider range of sustainability metrics in a uniform manner. Generate stable or increasing underlying EBITDA margins, to fuel cash generation, and a progressive dividend policy. Refresh goals 2021 to reset our sustainability strategy for the next three years. Increase data gathering of key sustainability metrics following data gathering. Adopt innovative construction technology. Look to return local labour participation to 60%. Maintain financial strength • Grow the Company’s order Achievements in 2020 Future priorities book through winning larger and long-term service contracts. • Maintain a strong balance sheet and access to capital markets. Awarded USD 110m in contracts during 2020 increasing RA’s order book to USD 187m at 30 December 2020. Continue to grow our order book which underpins future growth plans and provides confidence for long-term investment. Maintain adequate liquidity to both bid for and execute large contracts. RA is winning larger, longer-term contracts; the current order book is weighted over 2/3 to IFM. Net cash of USD 11.2m at year end provides significant liquidity following a period of extraordinary period of capital investment. 12 | RA International | Annual Report 2020 I S T R A T E G C R E P O R T C O R P O R A T E G O V E R N A N C E I I F N A N C A L R E P O R T OUR STRATEGY IN ACTION: customer-led growth C A S E S T U D Y PARTNERING WITH CHEROKEE NATION FOR US STATE DEPARTMENT CONTRACTS In 2019, Cherokee Nation Mechanical (CN) hired RA International as the main construction sub-contractor for the security upgrades at the US Embassy in Juba, South Sudan. CN had very limited experience working in challenging environments, relying heavily on RA for all aspects of the project. The contract was a pilot project for the US State Department, Overseas Building Operations (OBO) with a stated objective to increase the speed of execution of projects through sole source contracts and compression of the normal OBO construction cycle. The Security Upgrades contract consisted of 13 separate construction projects to include interior and exterior replacements and improvements to operational and security specifications. Our team of experienced technicians covered all aspects of horizontal and vertical construction and executed them to OBO’s exacting standards. Additionally, RA provided life support services for the RA and CN staff working on the project at RA’s own fully- serviced accommodation including dining and leisure facilities, and transportation. Since then, OBO has started the Rapid Engineering & Construction (REC) program which includes several sole-source eligible companies on small to mid-range construction contracts of USD 5m to USD 50m. Based on the success and the performance of the CN and RA partnership on the Juba project, CN designated RA as its sole teaming partner for the program. Together, we have since received awards for two additional projects and we expect that our partnership will continue to grow given the scope and opportunities in the REC program. “RA have been essential to our success working with OBO. Getting the right skilled and qualified craft labour into some of the countries and areas where we operate is difficult and RA does this very well. They are particularly equipped to operate in high-threat and austere environments. Right from the start, when we put people on the ground in South Sudan, I was just impressed how efficiently they put things in place to get things done.” Bill Owens, Operations General Manager, Cherokee Nation Mechanical We deliver. Regardless. | 13 STAKEHOLDERS The Board seeks to understand the expectations and interests of the Company’s stakeholders, and to reflect these in the choices it makes in its efforts towards the long-term success of the business. Engagement with RA’s stakeholders, including employees, clients, contractors, suppliers, and investors forms a central part in the Company’s decision-making process. The Board tailors its engagement approach to each stakeholder group in order to foster effective, sustainable and mutually beneficial relationships. The Board’s understanding of its stakeholder interests is taken into consideration within boardroom discussions in relation to strategy and planning. The Board considers how stakeholder expectations may be addressed and how the Board’s decisions may impact stakeholder interests. Stakeholder expectations are determined through information gathered and provided by management and by direct engagement. The priority of each stakeholder group may increase or decrease, depending on the impact a decision may have. This section of the report serves as our Section 172 (1) Statement of the Companies Act, and should be read in conjunction with the Corporate Governance Report. The statement requires the Directors to act in a way that they consider, in good faith, would most likely promote the success of the Company for the benefit of its members as a whole, taking into account the factors listed in Section 172. The table below sets out the key stakeholder groups, their interests and how RA International has engaged with them over the reporting period. Why they are important How we engage Stakeholder feedback and key concerns How we respond and link to strategy EMPLOYEES We employ 1,658 staff from over 45 nationalities. Our employees are one of the primary assets of the business and a key resource which enables us to deliver our services and our goals. • Ongoing training and • Stable and long-term development employment • Formulation of career paths • Freely available company policies and procedures • Staff engagement surveys • Personal development • Competitive pay and employee benefits • Training, development and career prospects • Working conditions reviews and work appraisals • Labour rights • Newsletters and • Human rights management updates • Team-building and social events • Health and safety • Diversity and inclusion We aim to do business the right way, offering competitive pay and rewarding careers to both international and local staff. We seek to develop local staff, aiming for an overall average of 60% local staff year on year, although this may fluctuate due to contract cycles. We apply international employment standards for all our staff. CUSTOMERS Our customers are made up of UN organisations, NGOs, western governments and large commercial businesses predominantly working in the natural resources sectors. Strong business relationships with customers is a vital part of our growth. Over 95% of our revenue in 2020 was repeat business from the previous year. These long- term relationships and our reputation with our customers strengthens our position in new bids and tender processes. • Day-to-day working relationships and project management • Progress reports • Client meetings • Marketing and communications • Company website • Delivery of projects on time, to the required quality and within budget • Working with organisations whose goals and values are aligned to their own • Upholding ABC, labour and human rights • Close working relationships based on trust and quality of delivery • Health and safety We work with customers that uphold the same values as our own. Our business model enables us to grow with our customers, often starting with supply chain and/or construction contracts, that can lead into long-term IFM service contracts. By engaging with our customers and carrying out extensive research, we are able to identity future requirements, developing services accordingly. 14 | RA International | Annual Report 2020 Why they are important How we engage Stakeholder feedback and key concerns How we respond and link to strategy SUPPLIERS Our suppliers consist of international organisations, as well as local suppliers, meeting our needs on the ground and supporting us in delivering our objectives. We rely on local and international suppliers to support us to deliver materials, equipment and services. • Initial supplier vetting and • Prompt payment of invoices selection • Purchase orders, contracts and master service agreements • Regular day-to-day communication to allow for future planning and quick resolution of issues • Regular supplier follow-up • Health and safety • Regular supplier visits and • Working conditions audits • Regular product inspections We work with suppliers who have comparable business practices to our own. We aim to develop local suppliers to source goods locally thereby reducing our carbon footprint. We ensure that our local suppliers uphold the same values, ethics and policies as we apply to our business practices and staff through contractual arrangements. REGULATORY AUTHORITIES, LOCAL GOVERNMENTS AND COMMUNITIES We work to international standards, are signatories to the UN Global Compact and have adopted the Quoted Companies Alliance Corporate Governance Code 2018. We operate side by side with local communities and work with local governments to secure any necessary permits and permissions. While our contracts are exclusively with international organisations, engagement and good working relationships with local governments and communities provides us with our license to operate in the locations where we have a presence. In some locations, we are an important source of employment, supporting families, local services and institutions. • Regular contact • Regulatory compliance through meetings and correspondence • Sustainability and Annual Reports • Working with local and international organisations to provide charitable support and assistance to local communities • Participation in working groups • Employment opportunities • Human rights • Community investment and support, including educational opportunities, sanitation and health care • Health and safety • Protection and enhancement of the environment • Commitment towards net- zero carbon INVESTORS Our major shareholders are listed on page 38 of this report and on our website. If needed, access to the capital markets provides RA with necessary funds to fuel growth. The Company recognises the significance of transparent and effective communications with shareholders. • Regular meetings • Submission of management information and financial reporting • Presentations • Communication through • Financial performance and investor returns through capital gain and/or dividend • High standards of corporate governance • Ethical behaviour briefings with management • Awareness of strategy and • Annual report • AGM • Company website potential risks Customer-led growth Hybrid contracts Sustainable growth Financial strength Each year we publish a sustainability report and an annual report describing our strategy, our approach to sustainability, our governance structures and performance. We set priorities that support us to meet the expectations of regulatory authorities, local governments and communities. The primary communication tool with our shareholders is through the Regulatory News Service (“RNS”), on regulatory matters and matters of material substance. We gather feedback from all investor meetings to identify any key concerns and areas for improvement. An increased focus on Environmental, Social and Governance (“ESG”) has led us to change the way in which we presented our sustainability reporting for 2020. We deliver. Regardless. | 15 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORT KEY PERFORMANCE INDICATORS The Directors use a range of financial and non-financial KPIs as a measure of the Company’s performance against its defined strategy. Revenue (USDm) Dividend Financial KPIs 2016 2017 2018 2019 2020 37.0 51.2 54.8 69.1 64.4 Revenue (USDm) REVENUE (USD’m) 2016 2017 2018 2019 2020 -7% UNDERLYING OPERATING PROFIT (USD’m) -29% Underlying operating profit Dividend 37.0 51.2 54.8 69.1 64.4 6.0 2016 2017 2018 2018 2019 2019 2020 2020 1.00 13.9 14.2 14.7 1.25 10.4 1.35 2018 2019 2020 Order book 2016 2017 2018 2019 2020 1.00 1.25 1.35 100 112 119 141 187 51.2 13.9 14.2 37.0 6.0 Definition Revenue is defined as the amounts received or receivable for Underlying operating profit services delivered during the course of the year. In line with our Revenue (USDm) strategy, we aim to grow our revenue by winning new clients and 2016 cross selling services to new and existing clients. 2017 2016 2018 2017 Performance 14.7 2019 2018 The resilience of IFM and Supply Chain revenue helped offset 2020 2019 the lower revenue contribution from Construction which resulted 2020 from clients slowing or temporarily suspending projects during the year as the health risks relating to COVID-19 became apparent and global lockdowns became more widespread. As a result a Underlying EBITDA (USD’m) Underlying operating profit significant value of construction work was deferred and will likely now be recognised in 2021. 2016 2016 2017 Link to strategy: 2017 2018 2018 2019 2019 2020 2020 6.9 6.0 14.2 16.3 54.8 64.4 10.4 14.9 69.1 14.2 14.7 13.9 15.2 10.4 Order book Definition The Company uses underlying operating profit (“UOP”) as an alternative measure to operating profit to better compare the Underlying EBITDA (USD’m) profitability of its operations across financial periods. UOP is calculated as operating profit adjusted for costs which are considered to be 2016 unrelated to the Group’s underlying trading performance. 14.9 2017 Dividend 2016 2017 100 6.9 112 2018 119 2019 2018 2020 2019 Performance 2018 Underlying operating profit for 2020 was USD 10.4m (2019: USD 2019 13.7m). UOP margin was 16.1% (2019: 19.8%). With administrative 2020 expenses of USD 8.4m (2019: USD 8.2m) remaining broadly consistent year on year, the variance in UOP margin was driven by variances in revenue and gross margin. 16.3 1.25 2020 1.00 14.2 1.35 15.2 141 187 Order book 2016 Link to strategy: 2017 2018 2019 2020 Revenue (USDm) Underlying EBITDA (USD’m) UNDERLYING EBITDA (USD’m) Local labour participation (%) -13% DIVIDEND (PENCE PER SHARE) Dividend 2016 2016 2017 2016 2017 2018 6.9 37.0 51.2 54.8 14.9 15.2 2018 2020 2018 2019 2020 Local labour participation (%) 69.1 14.2 64.4 16.3 2019 Lost time incident rate 2020 1.25 1.35 100 112 119 187 67 +8% 69 141 63 61 55 1.00 2016 2017 Definition The dividend is the share of profits that the Company pays out to Order book its shareholders. It is the Board’s intention to maintain or increase the annual dividend whilst retaining sufficient working capital to 100 2016 meet the needs of the business and to fund continued growth. 2017 2019 2018 150 617 117 112 561 2020 59 2018 2019 2020 119 141 187 Performance The Board sees the decision to increase the dividend per share by 8%, or 21% in USD terms, despite the impact of COVID-19, as an important indication of both the financial strength of RA and its confidence in the future prospects of the business. The Board continues to adopt a progressive dividend policy and intends to increase or maintain the dividend in future years, subject to retaining sufficient liquidity to meet the needs of the business and to fund continued growth. Link to strategy: Hybrid contracts Sustainable growth Financial strength 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Underlying operating profit 2016 63 67 69 2017 2018 2016 6.0 2020 61 13.9 Definition Management defines underlying EBITDA as operating profit adjusted for depreciation, share based payments, and costs which are considered to be unrelated to the Group’s underlying trading performance. Underlying EBITDA facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures, tax positions and the age and booked Lost time incident rate depreciation on assets. Local labour participation (%) 2016 Performance Underlying EBITDA of USD 14.2m helped drive a strong cash 2017 2016 conversion ratio of 291% (2019: 66%), leading to net cash flows 2018 2016 from operations of USD 21.3m in the year (2019: USD 8.7m). 2019 2017 2020 2018 617 63 10.4 14.2 14.7 561 6.9 117 69 59 55 67 61 150 Underlying EBITDA (USD’m) 2020 Link to strategy: Lost time incident rate 2016 2017 2018 2019 150 117 2020 59 Customer-led growth 14.9 55 15.2 14.2 561 16.3 617 16 | RA International | Annual Report 2020 Local labour participation (%) 2016 2016 2017 2018 2020 2016 2017 2018 2019 2020 59 150 117 Lost time incident rate 63 61 67 69 55 561 617 Revenue (USDm) Dividend 2016 2017 2018 2019 2020 37.0 51.2 54.8 69.1 64.4 2018 2019 2020 1.00 1.25 1.35 Underlying operating profit Order book 6.0 2016 2017 2018 2019 2020 13.9 14.2 14.7 10.4 2016 2017 2018 2019 2020 100 112 119 141 187 “We see the dividend decision this year, to increase the dividend per share by 8% as an important indication of both the financial strength of RA and our confidence in the future prospects of our business.” Dividend 2020 37.0 54.8 64.4 14.9 69.1 14.2 16.3 51.2 15.2 6.9 Underlying EBITDA (USD’m) Revenue (USDm) 2016 2017 2016 2018 2017 2019 2018 2020 2019 Financial KPIs 69.1 64.4 2018 2019 2020 Underlying operating profit Order book ORDER BOOK (USD’m) 13.9 14.2 14.7 10.4 2016 2017 2018 2019 2020 100 112 119 Underlying operating profit Non-financial KPIs 6.0 1.00 1.25 1.35 +33% 2016 2017 2018 2019 2020 10.4 Local labour participation (%) LOCAL LABOUR PARTICIPATION (%) 2016 2016 Underlying EBITDA (USD’m) 2017 141 187 2018 2016 2020 2017 6.9 13.9 14.2 14.7 -10% 63 61 67 69 55 14.9 Dividend 2018 2019 2020 Order book 2016 2017 2018 2019 2020 1.00 1.25 1.35 100 112 119 141 187 Definition: The order book is the estimated value of future revenue expected to be recognised from the remaining performance obligations on existing contractual arrangements. It excludes framework agreements and contracts where the Company cannot estimate with sufficient certainty the expected value of specific task orders. See page 78 for further information related to the remaining performance obligations on existing contractual arrangements. Performance The Company’s order book at 31 December 2020 stood at USD 187 million, an increase of USD 55m from 30 June 2020, with 62% comprising high value IFM work. The growth in our order book and proven resilience of IFM revenue provides confidence to continue to make long-term investment decisions, even in these dynamic times. Link to strategy: 15.2 2018 Definition Local labour participation measures the average percentage of full- 2019 Lost time incident rate time workers employed in their country of origin over the course of a 2020 calendar year. The Company aims to recruit and develop local people 2016 wherever it is practical to do so. We will often deploy a team of highly 2017 skilled international staff to mobilise new projects if the necessary 2018 skills are not available on the ground. This can cause variations in 2019 local labour participation while local hiring initiatives and training are 2020 ongoing and a handover to local staff is not yet complete. 14.2 16.3 150 561 617 117 59 Performance The reduction in average local labour participation in 2020 primarily resulted from the Company successfully completing a number of construction projects during the year, while the commencement of new Local labour participation (%) construction projects has been delayed as a result of the pandemic. We anticipate local labour participation to increase again by 2022. 2016 Link to strategy: 2016 63 67 SUSTAINABILITY STRATEGY Lost time incident rate LOST TIME INCIDENT RATE 2017 2018 2020 Our sustainability strategy is set out in our dedicated Sustainability Report 2020 which can be found on our website. Embedded within this report are our ESG indicators, inclusive of climate objectives. 2016 2017 2018 2019 150 117 2020 59 69 61 55 -50% 561 617 Definition The lost time incident rate is the number of RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013) reportable accidents multiplied by 100,000 and divided by the average number of employees. Included within the types of accidents reportable under RIDDOR are injuries to workers which result in their absence from work for more than 7 days. Prior to 2018, our HSE statistics included injuries to workers which resulted in their incapacitation for more than 3 days. The change in methodology, made so as to ensure the Group was fully compliant with RIDDOR reporting requirements, partially contributed to the decrease in Lost Time Incident Rate from 2017 to 2018. Performance The Group had only one reportable incident in 2020 and no major incidents. COVID-19 is a global concern and RA introduced a Triage Standing Operating Procedure early in 2020 to assist in preventing the spread of the disease within its locations. This is updated in accordance with UK Government and World Health Organisation guidance. The Company has introduced HSE software to improve the level of reporting for accidents and incidents. This software system is also allowing for better trend analysis of both injuries and near miss incidences which is being used to drive accident and incident prevention. 2020 SUSTAINABILITY REPORT Link to strategy: We deliver. Regardless. | 17 Revenue (USDm) 37.0 51.2 54.8 6.0 6.9 Underlying EBITDA (USD’m) 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Local labour participation (%) 2016 2016 2017 2018 2020 2016 2017 2018 2019 2020 59 150 117 Lost time incident rate 14.9 15.2 16.3 14.2 63 61 67 69 55 561 617 STRATEGIC REPORT OPERATING REVIEW Soraya Narfeldt | Chief Executive Officer The contracts we announced in the second half of 2020 highlighted how our ability to respond quickly and demonstrate a “business as usual” approach has been a key differentiator for us. Our success has continued into 2021 where in March we were appointed as teaming partner to Cherokee Nation in connection with two significant US Government construction projects in the Middle East and East Asia. We stand ready to mobilise as and when travel restrictions are lifted, allowing the respective projects to commence. As we have grown RA over the years, we have relentlessly and successfully focused on the diversification of our business, in terms of geography, customer concentration, and service channel. We believe this approach will continue to set us apart, allow us to mitigate the impacts of adverse events taking place on a local and global scale and drive sustainable growth through further expansion into our very significant addressable markets. Our results for 2020 are a good marker of the strong foundations we have built as a business, with revenue of USD 64.4m and underlying operating profit of USD 10.4m highlighting the financial resilience of our business. Underpinning this performance is the work we have done to build relationships with our blue-chip clients and to support them through the challenges of the pandemic. Whilst construction revenue decreased by USD 8.5m, we saw year on year growth in IFM revenue, our highest margin service channel, and in supply chain revenue. IFM revenue represents 49% of revenue for the year and IFM contracts now represent 62% of our order book. These are high quality, higher margin contracts, recurring in nature and are important indicators of the improving quality of the business we are building. CONTRACTS During 2020, we were awarded new contracts, uplifts, and extensions to existing contracts of USD 110m. This builds on our annual track record for contract wins of USD 62m in 2018 and USD 91m in 2019, despite the disruption relating to the COVID-19 pandemic. We see growing our customer base and winning larger, long- term contracts as the primary drivers of sustainable long-term business growth. During the year, our business development activity was focused on these objectives, particularly with respect to the commercial sector. We achieved notable success in being awarded our largest ever contract in the commercial sector and also being named a preferred supplier to support Danakali in developing the Colluli Mine in Eritrea. We expect this contract value to be in excess of USD 20m. The current order book of USD 187m does not include any potential revenue from the Danakali project. Our customers rely on us and trust us to deliver under the most challenging of circumstances. OVERVIEW The spread of COVID-19 throughout the world was rapid and required us to demonstrate agility and control in our response, often in an environment of conflicting information, and in major lockdowns with sites being shut down, and staff and clients unable to return home. Through the period of the pandemic, we have continued to execute on our strategy of supporting our customers, anticipating and responding to their changing requirements and not letting them down. Now, more than ever, we can see this strategy is working and we believe our actions during the crisis will reinforce in our customers’ minds the value we bring. This said, clearly the pandemic has not receded as a health crisis and government enforced restrictions and lock-down provisions remain in place across the world. While we have been able to continue executing previously contracted work, we are seeing new contract awards being delayed as clients are unable to travel to project worksites. As a result, we remain cautious about the near-term commercial outlook, albeit encouraged we continued to receive contract awards and that bid activity has been high. 18 | RA International | Annual Report 2020 We have delivered a step-change in order book size and quality since IPO, in-line with our customer-led growth strategy Contract order book (USD’m) 91 62 112 119 (55) 141 (69) 110 187 (64) 300 250 200 150 100 50 0 2018 Opening order book Contract awards, uplifts, and extensions Contracted revenue delivered 2019 Opening order book Contract awards, uplifts, and extensions Contracted revenue delivered 2020 Opening order book Contract awards, uplifts, and extensions Contracted revenue delivered 2021 Opening order book In 2020 we had continued success in diversifying our customer base, including increasing the percentage of revenue generated from government and commercial customers. For 2020, government and commercial customers represented 52% of revenue, up from 44% last year and 34% from the time of our IPO in 2018. As we diversify our customer base, we continue to work closely with the humanitarian agencies and during the year we were awarded IFM contracts for the United Nations Mission in South Sudan (“UNMISS”) and the United Nations Interim Security Force for Abyei (“UNISFA”); each contract has a value in excess of USD 5m. As referenced above, in August 2020 we announced our award of a USD 60m contract to provide IFM services for a large international engineering customer in Mozambique. This landmark contract, initially awarded for a two-year period, would see RA utilise the 1,800-person camp we are developing in the strategically important Afungi Peninsula. As has been widely reported, this area of Northern Mozambique has seen a persistent threat from local insurgencies, including Islamic terrorist activity. These security concerns, alongside COVID-19 and extreme weather, have led to delays and suspension in development work related to the project we are supporting. We maintained a very constructive dialogue with our client through this extended period of disruption, and prior to the escalation of hostile activity over the last week, were in final discussions to agree a one-year extension to the contract, which we had expected to commence substantially in the second half of this year. Before the recent suspension of our activity on the ground, we had continued to develop the camp such that we would operate the facility on a full or near-full occupancy basis when the contract commences, whereas the initial contract scope anticipated occupancy to ramp up over the first year of the contract. Based on these revised contractual arrangements, we expected the overall contract value would be higher than the original value of USD 60m. Our expectation was that the contract would make a meaningful financial contribution in the second half of 2021, but as we announced in our market communication on 29 March 2021, the Board now expects there will be further delays in the project that are likely to impact on the overall financial performance of the Company in the current financial year. As we have stated, this impact is expected at the current time to be up to USD 10m of revenue, which the Board now expects will be recognised in a later financial period. Our established market presence with global, blue- chip customers remains a key pillar in expanding our geographical presence. We have made good progress in recent years in broadening and deepening our geographical footprint, such that in 2020, we delivered contracts across 12 countries. We expect our strategy to diversify into new geographies will continue to bear fruit reflecting both the quality of our research-led approach, We deliver. Regardless. | 19 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTOPERATING REVIEW CONTINUED which enables us to anticipate the location of future contracts, and through the deepening relationships we have with existing customers which leads to opportunities to support them in new geographies. Importantly, we have increasing engagement with customers asking us to deliver material projects outside of Africa, of which our contract awarded to renovate the US Embassy in Denmark and recently announced contract awards to undertake works in the Middle East and East Asia are good examples. The Company’s order book at 31 December 2020 stood at USD 187m, an increase of USD 55m from 30 June 2020, with 62% comprising high value IFM work. The growth in our order book and proven resilience of IFM revenue provides confidence to continue to make long-term investment decisions, even in these dynamic times. To this point, at the time of IPO we invested in the Company to ensure it could support annual revenue in the region of USD 100m. With a growing order book approaching USD 200m and with a number of large bids outstanding, we need to ensure RA has the capacity to deal with a step change in activity. As a result we have commenced a 12 to 24 month investment programme which will put additional resources in place to manage the anticipated growth of the business going forward. An initial step taken in 2020 was the consolidation of two UAE offices and relocation of a number of regional staff to the larger Dubai based Head Office. We recognise that as broad commercial activity returns to more normal patterns, we could see heightened levels of project activity by existing and new clients. Effective business planning to make sure RA is positioned to deliver on the significant opportunities ahead is currently a key priority for our business. CURRENT TRADING AND OUTLOOK The last few days have been challenging for everyone connected with RA as we have responded to the hostile activity in Cabo Delgado, Mozambique where RA has been operational for the last few years. In these circumstances, this is a somewhat complex trading update to provide. On the one hand, we are more confident than ever about the long-term outlook for our business, and this is reflected in the Board’s decision to increase our recommended dividend payment to 1.35p per share. Our order book and cash profile underpin this confidence and the last 12 months have highlighted the strengths of our business, including notably the value of our longer-term and higher-margin IFM contracts. This confidence needs to be tempered for the current financial year given the prevailing external conditions with the situation in Mozambique uncertain and, more generally, COVID-19 continuing to determine customers’ ability to commence new projects. Prior to the events 20 | RA International | Annual Report 2020 of the last week, we were expecting to see a stronger second half performance in 2021, as large contracted projects commenced. Revenue from the deployment of our camp in Mozambique was a material component of this phasing, and as we highlighted in our announcement yesterday, our current expectation is there will be delays to the commencement of our Mozambique project which may lead to USD 10m of revenue being deferred to later financial periods. It may be that this ends up being an overly conservative view, but it is the prudent view to provide to our shareholders at this time. Shareholders should also be aware that the level of business development activity we are involved in is particularly strong with encouraging new bid activity on contracts ranging from USD 10m to USD 50m in value. We have developed and expanded new relationships with large US corporations, setting up partnerships and teaming agreements for new projects in relation to existing global government programmes. Our recent teaming partner announcement with Cherokee Nation is a great example of this and we continue to pursue more contracts together. We are also now bidding on global UK government programmes as a prime contractor. These programmes run for three to five years, providing RA a pool of future potential work on long term contracts. Our new bids to existing clients see RA having the opportunity to expand our geographical footprint to a potential five new countries in 2021/22. This is an unprecedented level of new business activity relating to high value contracts. We also expect heightened levels of project starts from existing and new clients as commercial activity returns to normal. Depending on timing, this could materially strengthen our financial position in the current financial year but, in any event, we expect the anticipated acceleration in activity during the course of this year will bridge to an even stronger performance in 2022. Soraya Narfeldt Chief Executive Officer 30 March 2021 FINANCIAL REVIEW Andrew Bolter | Chief Financial Officer OVERVIEW Revenue of USD 64.4m and gross margin of 29.2% highlight our financial performance for the year. Results for the second half are in line with guidance we provided in December and we are encouraged by continued strong cash generation from our operations. FINANCIAL HIGHLIGHTS: Revenue Gross profit Gross profit margin Underlying operating profit Underlying operating profit margin Operating profit Operating profit margin Profit before tax Profit before tax margin Underlying EBITDA Underlying EBITDA margin EPS, basic (cents) Underlying EPS, basic (cents)* Net cash (end of period) 2020 USD’m 64.4 18.8 29.2% 10.4 16.1% 7.3 11.3% 6.6 10.3% 14.2 22.0% 3.8 5.6 11.2 2019 USD’m 69.1 21.9 31.7% 13.7 19.8% 13.6 19.7% 13.3 19.2% 16.3 23.5% 7.4 7.4 21.4 The resilience of IFM and supply chain revenue helped offset the lower revenue and profit contribution from construction which resulted from clients slowing or temporarily suspending projects during the year as the health risks relating to COVID-19 became apparent and global lockdowns became more widespread. As a result, a significant value of construction work was deferred and will likely now be recognised in 2021. The business generated cash flows from operations of USD 21.3m during 2020, reflecting strong cash profitability, with Underlying EBITDA of USD 14.2m, and working capital benefits from strong receivable collections. We continued to invest in growth, spending USD 24.5m on capital expenditure during the year to develop remote camp facilities in Mozambique and East Africa, both of which are owned by the Company and leased to clients on a long-term basis. These investments were undertaken whilst maintaining significant liquidity to both execute and bid for large projects. REVENUE Reported revenue for 2020 of USD 64.4m (2019: USD 69.1m) represents a 6.8% decrease year on year. This decrease resulted from construction projects being suspended due to COVID-19. These projects recommenced in the second half of the year, however work progress continued to be affected by COVID-19 related restrictions and delays. As previously highlighted, revenue relating to the suspended construction contracts is deferred in nature rather than cancelled. * Underlying EPS reflects UOP after deducting net finance costs and taxation, divided by the weighted average number of ordinary shares outstanding during the period. We deliver. Regardless. | 21 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTFINANCIAL REVIEW CONTINUED In terms of the wider business, we saw IFM and supply chain revenue increase 9% and 10% respectively. Revenue from the IFM service channel proved particularly resilient during 2020, whilst revenue from supply chain activities benefitted from USD 2.7m in contracts awarded in the first half which related to the COVID-19 response in Europe. Excluding these one-off orders, approximately 75% of supply chain revenue was earned from long-term contracts, often three to five years in length. Revenue by service channel: Integrated facilities management Construction Supply chain services Total revenue PROFIT MARGIN 2020 USD’000 31.3 19.1 14.1 64.4 2019 USD’000 28.6 27.6 12.8 69.1 Gross margin in 2020 was 29.2% (2019: 31.7%), with the decrease primarily resulting from many construction projects operating at or around gross margin during periods of project suspension. Overall, we chose to take a pragmatic approach to support our clients’ interests during periods of disruption, maintaining project momentum and some level of commercial activity where possible. While in some cases this led to inefficient project execution, we believe this strategy will lead to long-term benefits. Reconciliation of profit to underlying EBITDA: Profit Tax expense Profit before tax Finance costs Investment income Operating profit Non-underlying items Underlying operating profit Share based payments Depreciation Underlying EBITDA 2020 USD’000 6.6 2019 USD’000 12.9 0.1 6.6 1.0 (0.3) 7.3 3.0 10.4 0.1 3.7 14.2 0.4 13.3 0.7 (0.3) 13.6 0.0 13.7 0.0 2.6 16.3 Underlying EBITDA margin in 2020 was 22.0% (2019: 23.5%) and underlying operating profit margin was 16.1% (2019: 19.8%). With administrative expenses of USD 8.4m (2019: USD 8.2m) remaining broadly consistent year on year, the variance in both Underlying EBITDA and UOP was driven by variances in revenue and gross margin. 22 | RA International | Annual Report 2020 During the year, the Company incurred non-underlying costs of USD 3.0m (2019: USD 0.0m). COVID-19 costs of USD 1.4m are almost entirely incremental staff costs relating to the pandemic. Further detail on these costs can be found in note 9 of the consolidated financial statements. The share based payments charge of USD 1.2m, relates to the issue of 1.8m restricted Ordinary Shares in October 2020. Further detail can be found in note 13 of the consolidated financial statements. In addition, there were modest expenses incurred in relation to restructuring, resulting from consolidating two office facilities and relocating staff to the new Dubai head office, and acquisition costs related to potential corporate acquisitions which were being explored in the first half of 2020. These transactions were halted for various reasons including the incremental level of uncertainty COVID-19 added to target operating forecasts. Non-underlying items: COVID-19 costs Other share based payments Restructuring costs Acquisition costs Total non-underlying items 2020 USD’000 1.4 2019 USD’000 - 1.2 0.3 0.2 3.0 - - 0.0 0.0 Finance Costs net of Investment Revenue increased to USD 0.7m (2019: USD 0.4m). The Company earned a lower return on bank deposits and realised increased foreign exchange losses resulting primarily from the appreciation in the Euro and volatility of the UK Pound. EARNINGS PER SHARE Basic earnings per share was 3.8 cents in the current period (2019: 7.4 cents), a reduction of 49% on the prior year, reflecting the reduction in year-on-year profit and the impact of certain non-recurring costs described in the profit margin commentary. Adjusting for non-underlying items, underlying earnings per share was 5.6 cents (2019: 7.4 cents), a reduction of 24% on the prior year. The share buyback programme, which was in operation from June to September 2020, reduced the weighted average number of ordinary shares in issue to 172.5m (2019: 173.6m), partially offsetting the reduction in year-on-year profits. CASH FLOW BALANCE SHEET AND LIQUIDITY Cash flows generated from operations were USD 21.3m in the year (2019: USD 8.9m), driving a 291% cash conversion ratio*; a significant improvement from the prior period (2019: 66%). The strong cash conversion ratio was driven by underlying EBITDA of USD 14.2m and a period of strong collections of accounts receivable balances. This was partially offset by the build up of inventory related to the Company’s purchase of a 2500-person prefabricated camp facility, a significant portion of which is being held for use in upcoming projects we anticipate will commence in H2 2021. Summary cash flows: Cash flows generated from operations Tax and end of service benefits paid Net cash flows from operating activities Investing activities (excluding Capital Expenditure) Capital Expenditure Net cash flows from investing activities Financing activities (excluding borrowings) Proceeds from borrowing Net cash flows from financing activities Net change in cash during the period 2020 USD’000 21.3 2019 USD’000 8.9 (0.2) (0.3) 21.1 0.3 (24.5) (24.1) (6.8) 6.1 (0.7) (3.8) 8.7 0.4 (12.4) (12.0) (3.2) - (3.2) (6.6) During the year we invested USD 24.5m in capital expenditure with the majority of spend relating to developing our property in Mozambique and expanding another owned facility in East Africa. We also consolidated two office premises into a larger newly leased facility in Dubai. This property will serve as our new Head Office and has been fit out to allow for expansion in the coming years. Capital expenditure: Construction of Mozambique Facility Expansion of East Africa Facility Dubai Head Office Other Total capital expenditure 2020 USD’000 18.7 3.8 0.9 1.1 24.5 We anticipate capital expenditure of USD 7m to USD 10m in 2021, with the majority being related to completing the construction of the Mozambique camp. Incremental spend is only expected if specifically linked to new projects. Net assets at 31 December 2020 were USD 72.1m (2019: USD 69.5m) with fixed assets comprising the majority of the total balance sheet following the significant capital expenditure in the year. Excluding right-to-use assets, 72% of fixed assets relate to land and buildings which are leased on a long-term basis to clients or used to support our other projects through their use as workshops, warehouses, staff accommodation facilities and offices. Breakup of net assets: Cash and cash equivalents Loan notes Net cash Net working capital Non-current assets Tangible owned assets Right-to-use assets Goodwill Lease liabilities and end of service benefit Net assets 2020 USD’000 17.6 2019 USD’000 21.4 (6.5) 11.2 14.4 51.0 47.3 3.5 0.1 (4.5) 72.1 - 21.4 22.7 28.5 26.1 2.4 0.1 (3.2) 69.5 Net cash of USD 11.2m at 31 December 2020 reflects a decrease from USD 21.4m at the previous year end yet still provides the business with significant liquidity after a period during which we have invested significantly in our Mozambique facility. The Company raised USD 6.5m of debt under the Medium- Term Note programme launched in the second half of 2020. This debt was raised to accelerate the development of our Mozambique facility and more generally in response to an increase in client inquiries relating to undertaking large projects. Under the terms of the MTN programme, a subsidiary of the Company issued unsecured notes to investors repayable in the second half of 2022. The programme was closed on 31 December 2020. Further details can be found in note 23 of the consolidated financial statements. Liquidity and available cash are often assessed by potential customers during the contract adjudication process. Given the strength of our balance sheet, strong cash flow generated by our ongoing contracts, and the success of the MTN programme, we are satisfied that both metrics are sufficient so that we can continue to bid for larger projects and have the financial capacity to mobilise multiple large projects simultaneously. * Cash conversion is calculated as cash flows generated from operations divided by operating profit. We deliver. Regardless. | 23 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTFINANCIAL REVIEW CONTINUED 24 | RA International | Annual Report 2020 SHARE BUYBACK PROGRAMME On 8 June 2020, the Company commenced a Share Buyback Programme (the “Buyback”) to provide the Company with a pool of shares that can be used to incentivise and retain key directors, officers, and staff. On 9 September 2020, it was announced that the Board had elected to conclude the Buyback with immediate effect given the budgeted amount had been reached. In total, 3.9m shares were repurchased which represents 2.2% of the issued share capital of the Company prior to the Buyback commencing. On 20 October 2020, the company announced it had re-issued 1.8m of these shares as restricted ordinary shares (“Restricted Shares”) to key senior members of staff, including certain persons discharging managerial responsibilities, as detailed in the announcement. The Restricted Shares are subject to a six-month lock-in from the date of issue, during which they cannot be sold or transferred. At the same time, the Company announced the issuance of 1.8m share options which are scheduled to vest over a three-year period. Further details can be found in note 13 of the consolidated financial statements. DIVIDEND The Board is recommending a dividend of 1.35p per share which, subject to shareholder approval, will be paid on 8 July 2021 to all shareholders on the register at 28 May 2021. A dividend of 1.25p per share totalling USD 2.7m was declared and authorised during 2020 (2019: USD 2.2m) and was subsequently paid on 9 July 2020. Dividends declared 2020 GBP’pence 1.35 2019 GBP’pence 1.25 2018 GBP’pence 1.00 The Board’s intention continues to be to adopt a progressive dividend policy and to increase the dividend in future years while retaining sufficient liquidity to meet the needs of the business and to fund continued growth. The Board believes the continued growth in our customer base and the pursuit of a one-supplier model will provide a basis for continued earnings growth in the future. Andrew Bolter Chief Financial Officer 30 March 2021 RISK MANAGEMENT Here, we outline the principle risks to RA International’s business, together with how they are managed. Working in remote and challenging locations requires the Group to have robust risk controls and policies that are integrated into all levels of the business. The Audit Committee considers the Group’s risks at scheduled meetings (minimum three times per year) and ensures the Group’s risks are properly understood, quantified and appropriately managed by the Board. Day-to-day risk management is the responsibility of the Executive Management Team (“EMT”) and the Country Managers. The EMT continually assesses the Group’s exposure to risk and seeks to ensure that risks are mitigated wherever possible. RA’s risk register is maintained by the in-house Legal Officer and changes in risk and mitigating actions are discussed regularly at Executive Management Team meetings The principle risks that the Board believe are most likely to affect the business operations, impact strategy and financial performance, and influence reputation are set out below. There may be other risks that are currently unknown to the Group or which may become material in the future. STRATEGIC RISKS Risk level PROFITABLE GROWTH Failure to retain and win profitable business will impact our financial performance and growth. The business is influenced by ODA budgets, political stability, attitudes towards outsourcing services, and our reputation in the marketplace. Key risks: • mispricing bids, • inability to resource sufficient labour, equipment, and materials, • not understanding or meeting our customers or stakeholder expectations, and • inadequate capacity of back- office functions to support the sales and execution process. Controls: • An intelligence-led approach to bidding for contracts, using local intelligence in respect of labour, materials and regional variances feeds into the tender processes, protecting operating margins. • Comprehensive bid review process. • Project timeline and quality of delivery controlled by minimising the sub-contracting of works. • Investment in local labour and capacity building where possible and practical to enhance local intelligence. • Supplier onboarding and review procedures. • Long-term contracts with suppliers to optimise pricing. Mitigation Priorities: • Continue to improve and refine the bidding process and ensure our value proposition remains competitive. • Hire qualified personnel and subject matter experts with relevant technical expertise. • Continuous focus on supplier quality, undertaking periodic reviews of suppliers’ facilities, policies and procedures. • Identify new suppliers and increase capacity-building efforts to ensure both local and international suppliers can meet our expanding requirements. • Continue to invest in departments that enable our sales and execution teams; specifically. Compliance, QHSE, Human Resources, and project management. • Further develop and expand our use of Customer Relationship Management processes. 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 affect our ability to operate in new and existing geographies, attract growth capital, and attract individuals with the necessary skills and talent. Key risks: • bribery and corruption issues either by our employees or counterparties, Controls: • Stakeholder relationship management programmes in place. • A zero-tolerance stance on bribery and corruption along with ongoing training programs on ABC risk management. • violations of ILO standards, and • An independent whistleblowing channel. human rights, • failure to respond and manage incidents in a responsible manner, • not delivering projects on time or to required standards, and • cyber risks and data security resulting from cyber attack or unintentional breaches of company or client trade secrets, and confidential or otherwise protected data. • HR policies in place to safeguard ILO rights and meticulous supervision and audit of local labour supplier companies, and continuous assessment of their adherence to labour rights and regulations. • Policies in place with respect to modern slavery, discrimination, and gifts and hospitality. • Crisis management training undertaken, and crisis team formed. Mitigation priorities: • Provide regular training and encourage all employees to use the whistleblowing tool. • Provide regular training sessions across the whole company on ethical and compliance related subjects. • Continuous review and updating of company policies in relation to compliance related subjects led by the in-house Compliance Officer. • Continue to refine crisis management procedures and identify additional suppliers of crisis/ catastrophe services. • Enhance internal due diligence procedures for suppliers and third-party contractors. • Increase the hiring of local HR representatives on worksites. • Undertaking cyber security audits and executing improvement implementation plan. We deliver. Regardless. | 25 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTRISK MANAGEMENT CONTINUED FINANCIAL RISKS Risk level FINANCIAL CONTROL FAILURE Failure to impose strong financial controls may result in: inaccurate and delayed reporting of financial results, the inability to meet financial 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 financial transactions. In turn, this could lead to financial instability, potential business losses and a negative impact on our reputation. Key risks: • inadequate internal financial Controls: • Group finance processes and procedures. controls surrounding authorisations, receipts, payments, and cash management, • inaccurate budgets and forecasts, • failure to adequately manage cash flow, and • misappropriation of assets, theft or fraud. • Limit cash payments to the greatest extent possible and limit those staff who have access to cash. Operations funded on a weekly basis. • Detailed monitoring of weekly cash flow forecasts. • Centralisation of payments with CFO approving significant transactions. Mitigation Priorities: • Continuous review and enhancement of Group financial policies and procedures. • Continuous improvement of forecasting and reporting processes. • Continue to refine group budgeting process. • Increased focus on training and development of staff to ensure their skillsets meet the expanding requirements of the Group. • Continue to put systems in place which allow for greater accuracy in the allocation of shared costs. LEGAL AND COMPLIANCE RISKS Risk level CONTRACT NON-COMPLIANCE Failure to deliver on contracted client requirements or failure to meet and report against agreed service performance levels may lead to significant financial penalties, legal notices, onerous contract provisions, or early termination of contracts. Failure to meet obligations to employees or suppliers may mead to litigation, work stoppages and reputational damage. Key risk: • failure to adhere to contract Controls: • Standard Operating Procedures consistent across the Group. commitments to clients, employees, suppliers, and other stakeholders. • Standard supplier terms and conditions. • Local professional advisors in all operating jurisdictions. • Flat organisation structure whereby project and functional managers can access the EMT or relevant technical experts to interpret and discuss contractual requirements. Mitigation Priorities: • Continued refinement of standard operating procedures and project management and performance monitoring. • Continued review and enhancement of internal management system (RAMS). RESPONSIBLE AND ETHICAL BEHAVIOUR Irresponsible or unethical behaviour can lead to breach of human rights, labour rights, inadequate health and safety measures leading to sickness, injury or death, issues relating to gender rights and child labour. This behaviour can arise from the actions of individual employees or as a result of a poor company culture. The result might be the loss of clients, inability to win new business and loss of reputation. Key risks: • failure to communicate the Controls: • All new employees undergo induction training to explain the Company’s values, Code of Conduct, Company’s purpose and values, company policies and expected behaviour. • quality, health and safety • Reporting of unethical behaviour or malpractice through the whistleblowing tool. practices not adhered to or ignored, and • inadequate monitoring of employee actions. • All staff handling equipment and materials receive health and safety training where behavioural norms and attitudes towards health and safety are challenged. • Labour rights initiatives of governments in countries of operation are supported consistently. • Health and safety compliant software adopted for reporting accidents and incidents that assists with trend analysis, which then leads to accident/incident prevention. Mitigation Priorities: • Continue to provide regular training and encourage all employees to use the whistleblowing tool. • Encourage more employees to become advocates for responsible behaviour through the engagement of the Company’s sustainability strategy. • Daily training on worksites about health and safety. • Hiring subject matter experts to understand local culture when hiring local labour. 26 | RA International | Annual Report 2020 I S T R A T E G C R E P O R T OPERATIONAL RISKS Risk level FAILURE IN MANAGING RESOURCES Failure to attract, acquire or develop adequate resources could impact financial and operational performance, and reputation. COVID-19, travel restrictions and delays to the movement of goods has the potential to impact RA’s logistics and operations in the short term. Key risks: • delivery delays of goods, Controls: • Standard procurement processes and quality control procedures. • heightened travel and • Alternative material and logistics providers in place in order to manage any potential delays, and transportation restrictions due to COVID-pandemic and civil unrest, • quality-related issues with equipment and materials procured, and • inability to recruit or mobilise the right skills and labour. where necessary and economically feasible, RA invests in its own logistics infrastructure. • Manpower requirements and skillsets are reviewed by several departments to ensure accuracy. • Group talent acquisition team focused on recruitment with improvements continuously being made to retention schemes and succession planning, including expansion of reward programmes linked to performance. • Flexible working hours and locations where practical. Mitigation Priorities: • Potential logistics issues are closely monitored and prioritised to ensure timely delivery of people, goods and services. • Establishing RA’s own logistics capabilities in territories where delays are likely to continue to occur. • Close contact maintained with clients to ensure any delays are communicated and mitigated.. • Continuous improvement of quality control and full life-cycle maintenance activities. CATASTROPHIC EVENTS Failure to effectively respond to events that result from our own actions or events that are beyond our control such as adverse weather, political upheaval, violence, pandemic (COVID-19), climate change or war. Such events can result in multiple fatalities, severe property and asset damage, travel restrictions, work stoppages, and/or very serious long-term environmental damage. Key risks: • lack of appropriate procedures Controls: • Crisis training is undertaken and incident emergency response plans in place. to tackle incidents, • delays to contract starts and/ or contract delivery leading to a reduction and/or delay in revenues, and • inadequate or delayed response to catastrophic events due to poor health and safety procedures and policies. • HSE team includes medical professionals and those with significant experience in crises. • Triage Standing Operating Procedure introduced in early in 2020 in response to COVID-19 outbreak to assist in preventing the spread of the disease. • Group run medical facilities where third-party providers are non-existent or deemed inadequate. • Internal capacity to perform COVID-19 testing. • Adequate risk transfer via insurance. • Strong balance sheet and adequate liquidity to trade through periods of reduced turnover. Mitigation Priorities: • Continuous research of environmental risk factors that may affect contract performance. • Continuous investment in security risk management tools and reports as well as other sources of local intelligence. • Continued enhancement of the breadth of insurance coverage. • Continuous review of crisis management, disaster recovery and business continuity plans. • Constant update of COVID-19 protocols in line with the UK Government and World Health Organisation requirements. We deliver. Regardless. | 27 CORPORATE GOVERNANCEFINANCIAL REPORT CORPORATE GOVERNANCE A strong corporate culture Since the business was founded in 2004, being a responsible company and employer was placed firmly at the heart of everything we do. Growing the business sustainably is a key pillar of our growth strategy and sustainability is integral to our core business activities with consideration for the environmental, social and financial impacts of the decisions we make embedded in our culture. CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORTBOARD OF DIRECTORS The Board is responsible for formulating, reviewing and approving the Company’s strategy, budget and corporate actions. SANGITA SHAH Non-Executive Chair SORAYA NARFELDT Chief Executive Officer LARS NARFELDT Chief Operating Officer ANDREW BOLTER Chief Financial Officer Date of appointment: 3 May 2018 Date of appointment: 13 March 2018 Date of appointment: 13 March 2018 Date of appointment: 3 May 2018 Sangita is a qualified accountant and has extensive experience in corporate finance, journalism and senior consultancy. Sangita brings with her a wealth of AIM listed and public market experience. 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 Office. Sangita is a frequent keynote speaker in forums for the Windsor Leadership Trust, European Parliament and European School of Management. External appointments: Non-Executive Chair of AIM traded Bilby plc, a director of NASDAQ listed Forward Industries Inc., a director to Global Reach Technology EMEA Limited and a director of the Quoted Companies Alliance. Committee membership: R A Soraya founded RA International in 2004 with Lars Narfeldt after witnessing large organisations unable to provide a comprehensive range of services or manage or implement projects effectively when operating in remote locations. This resulted in inefficiencies that hindered the progress of peacekeeping, humanitarian and commercial projects. Soraya has been selected as one of the most influential women leaders by Arabian Business three times and was also a finalist for the Ernst & Young Entrepreneur of the Year award in 2012. As a strong advocate and supporter of responsible business practices and community-based businesses, Soraya has contributed to several high-profile journals including the Forced Migration Review and has spoken at various international industry forums including the China Mining Summit, IPOA Annual Summit and the European Bank for Reconstruction and Development (EBRD) event. She has also consulted widely with officials in RA International’s countries of operations on issues such as Corporate Social Responsibility and on Aid Funded Projects. Lars has served for over two decades in pivotal leadership and development roles in some of the world’s most challenging environments. The first 15 years of his post university career were spent 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 COO, Lars is responsible for day-to-day operations across the company. His role encompasses setting the CSR strategy, HR, communications and marketing and compliance. He has been instrumental in developing the Company’s strong brand equity with clients, and in geographies and markets. Andrew joined RA International 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. He has advised on and executed equity and debt financing transactions, diligence, valuations, business planning services, merger mediations, hedge structuring and testing, and other general corporate finance transactions. He has also performed and managed projects relating to assurance services, tax structuring, risk management, internal control audits and system implementations. Upon joining, Andrew introduced the Group’s enterprise resource planning system and worked with the CEO to develop a long-term strategic plan which has contributed to a more diverse customer base and significant business growth. Committee Key: R Remuneration A Audit C Chair 30 | RA International | Annual Report 2020 ALEC CARSTAIRS Non-Executive Director PHILIP HAYDN-SLATER Non-Executive Director IAN HENDERSON Non-Executive Director Date of appointment: 3 May 2018 Date of appointment: 3 May 2018 Date of appointment: 3 May 2018 Alec is a qualified chartered accountant with over 35 years’ experience of advising companies ranging from new start-ups to multi-national corporations, principally in the oil and gas sector. During his time at Ernst & Young Alec acted as Head of UK Oil and Gas Mergers and Acquisitions, and becoming Managing Partner of its Aberdeen office and an elected member of the UK Governance Council. Alec has previously served as an independent Non-Executive Director of Ithaca Energy Inc. and was formerly President of the Aberdeen & Grampian Chamber of Commerce. External appointments: Director of Cela Consulting Limited, Director of Vine Trust and Director of Techfest. Committee membership: AC Philip has over 35 years of City experience, principally within institutional sales with a number of well-known firms. Philip was co-founder of HD Capital Partners Ltd, where he was a Director for over five 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 flotations 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 financial organisations that include ABN Amro, Bankers Trust, James Capel & Co and Bain Securities (Deutsche Bank) Sydney. External appointments: Non-Executive Chairman of RiverFort Global Opportunities plc, Director of ADX Energy Ltd., and Partner of Eclipse Film Partners No.35 LLP. Committee membership: RC A Ian is a qualified chartered accountant (ACA and FCA), and holds an LLB in Scots Law and 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 USD 10b, 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. External appointments: Non-Executive Director of BMO Capital Markets Limited and Bluejay Mining Plc. Committee membership: R We deliver. Regardless. | 31 CORPORATE GOVERNANCEFINANCIAL REPORTSTRATEGIC REPORT EXECUTIVE MANAGEMENT TEAM In addition to the CEO, COO and CFO, the EMT consists of senior members of RA International’s management team. Each member is involved in operations, often down to the level of field implementation, and has experience working in remote locations and a deep understanding of the profound impact seemingly small problems can have on project delivery. The EMT is supported by a committed team of management and senior staff spread across the Company, at Head Office, 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 RA works. SORAYA NARFELDT Chief Executive Officer LARS NARFELDT Chief Operating Officer ANDREW BOLTER Chief Financial Officer For details see page 30 For details see page 30 For details see page 30 TREVOR STRATFORD Business Development Director WILLIAM WARNOCK Director of US Business Development Date of appointment: April 2011 Date of appointment: January 2019 Trevor has over 20 years of 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. William 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. 32 | RA International | Annual Report 2020 CHAIR’S CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 DEAR SHAREHOLDER, I am pleased to introduce the corporate governance section of our report. The corporate governance section of our report explains how the Company’s governance framework supports the principles of integrity, strong ethical values and professionalism that are integral to our business. As Non-Executive Chair of the Company, it is my responsibility to work with my fellow Board members to ensure that the Company embraces corporate governance and delivers the highest standards we can. It is within my role to manage the Board in the best interests of our many stakeholders. As we said last year, as a Board we believe that practising good corporate governance is essential for building a successful and sustainable business. Our commitment to good corporate governance has allowed us to build a healthy corporate culture throughout the organisation. The Board is fully supportive of embracing the highest levels of corporate governance possible. The Company adopts the Quoted Companies Alliance Corporate Governance Code 2018 (the ‘QCA Code’) which it believes to be the most appropriate recognised corporate governance code for RA International. The QCA has ten principles which the Company is required to adhere to and to make certain disclosures both within this report and on its website. The Company’s website disclosures can be found at https://ragrpplc.co.uk/investors/corporate- governance/. Additional information relating to how we take into account wider stakeholder and social responsibilities can be found in the Company’s Sustainability Report 2020 which can be found at www.rainternationalservices.com/ sustainability/. 2020 has been a particularly challenging year, the impact of COVID-19 cannot be ignored and we, like virtually all businesses across the globe, have not been unaffected. The importance of a united Board working to ensure that the Company continues to deliver for its shareholders whilst maintaining high standards of corporate governance is imperative to the continuing success of the business. The importance of maintaining strong relationships and engaging with our shareholders continues, and we have an active investor relations and communications programme in place. The Board strives to ensure that there are numerous opportunities for investors to engage with both the Board and Executive Management Team. Due to COVID-19 the Company’s 2020 Annual General Meeting was held as a closed meeting and shareholders were encouraged to ask questions directly following the meeting. We continue to have an open dialogue with all our stakeholders and seek to ensure that our strategy, business model and performance are clearly understood. The Executive Management Team were virtually available to meet with institutional and retail shareholders and investment analysts, following the announcement of the Company’s interim and final results. CORPORATE GOVERNANCE FRAMEWORK The Board The Board retains full and effective control over the Company. The Company holds regularly scheduled Board meetings throughout the year at which financial, operations and other reports are considered and, where appropriate, voted on. Ad hoc Board meetings are held as and when the demands of the business require. The Board is responsible for the Group’s strategy, performance, key financial and compliance issues, approval of any major capital expenditure and the framework of internal controls. Individual Directors may engage outside advisors at the expense of the Company in appropriate circumstances. The Board is responsible for monitoring the activities of the Executive Management Team. The Directors believe that the Board as a whole has a broad range of commercial and professional skills which enable it to carry out its duties responsibly and effectively. At the date of this report, the Board has seven members comprising three Executive Directors and four Non- Executive Directors, and whose biographies and roles are set out on pages 30 to 31. The Non-Executive Directors bring an independent view to the Board. The Chair has the responsibility of ensuring that the Board discharges its responsibilities and is also responsible for facilitating full and constructive contributions from each member of the Board in determination of the Group’s strategy and overall commercial objectives. We deliver. Regardless. | 33 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCHAIR’S CORPORATE GOVERNANCE STATEMENT CONTINUED Roles and Responsibilities Position Chair Roles and Responsibilities • The Chair’s role is part-time, she is a Non-Executive Director. The Chair’s primary responsibility is the leadership of the Board, showing objective judgement and promoting a culture of openness and debate, and ensuring its effectiveness in all aspects of its role including maintaining effective communication with RA’s shareholders and other stakeholders. The Chair is also responsible for ensuring the integrity, openness and effectiveness of the Board/Executive relationship. This is effected through meetings, as well as contact with other Board members. • The Chair also has the responsibility, in conjunction with the Company Secretary, for ensuring that all Directors are aware of their duties and are able to perform them. • The Chair ensures that the Board Committees are appropriately structured. Executive Management Team • Non-Executive Directors • The Chief Executive Officer is responsible for the day to day running of the Group’s operations and for implementing the strategy agreed by the Board. She plays a pivotal role in developing and reviewing the strategy in consultation with the Board and executing it with the support of the Executive Management Team. The Chief Operating Officer is responsible for the Company’s daily operations and Company’s sustainability efforts, and the Chief Financial Officer is responsible for the Company’s financial controls and reporting to the Board. The Non-Executive Directors bring independent judgement and have a particular responsibility to challenge independently and constructively the performance of Executive Management and to monitor the performance of the Executive Management Team in the delivery of agreed objectives and targets. In meeting this responsibility, the Non-Executive Directors meet periodically without the Executive Management Team present who must be satisfied with the integrity of the Group’s financial statements and with the robustness of RA’s internal control. • • The Non-Executive Directors have the responsibility of ensuring that the Board discharges its responsibilities, and are also responsible for facilitating full and constructive contributions from each member of the Board in determination of the Company’s strategy and overall commercial objectives. The Non-Executive Directors are required to be free from any relationships or circumstances which are likely to affect the independence of their judgement and undertake that they have sufficient time to discharge their responsibilities effectively. Governance structure The Company is committed to a corporate culture that is based on sound ethical values and behaviours and it seeks to instil these values across the organisation as a whole. The Board is fully committed to taking this responsibility very seriously. The Company has adopted a code on dealings in securities which the Board regards as appropriate for an AIM listed company and is compliant with the UK Market Abuse Regulations. The Company takes all reasonable steps to ensure compliance by the Directors, employees and agents with the provisions of the AIM rules relating to dealings in the Company’s securities. The Directors take the issue of bribery and corruption seriously. The Directors acknowledge the importance of ensuring that the Company, its employees and those third parties to which the business engages with are operating within the requirements of the Bribery Act. The Company has adopted and implemented comprehensive anti-bribery and corruption policies and procedures (the ‘ABC Policies’) and the Directors impose a zero-tolerance approach to non-compliance. It is the Executive Directors’ responsibility to ensure that all of the Company’s employees, in the various locations, are complying with the ABC policies and that the Company has in place adequate procedures to ensure that its partners, contractors and suppliers do not engage in bribery or corrupt activity. Culture and social responsibility The Board believes that running a sustainable business should benefit everyone, including its customers, employees 34 | RA International | Annual Report 2020 and the host communities in locations in which the Company operates. Having a multi-cultural and multi- lingual workforce of people who are experienced with the way in which operations work in Africa and beyond is key to delivering this. Accordingly, the Company cooperates respectfully with people on the ground, building trust and goodwill. This has been especially important during this challenging year. The Company provides stable employment and training to local unskilled or semi-skilled labourers. To this end, the Company has a direct impact on the wellbeing of its employees’ families, and on the local economy in general. More information can be found in the Company’s Sustainability Report 2021, which is available on the Company’s website. Board diversity The Board recognises the benefits of diverse skill sets, capabilities, backgrounds and experience to the effective functioning of the Board and delivery of strategy. Both the CEO and the Chair are females representing 28.5% of the Board. Male Female 71.5% 28.5% Matters reserved for the Board The Board retains full and effective control over the Company and is responsible for the Company’s strategy and key financial and compliance issues. There are certain matters that are reserved for the Board, and they include but are not limited to: Strategy and Management Approval of: long-term objectives, commercial strategic aims, annual operating and capital expenditure budgets, extending the Company’s activities into new business, any decision to cease to operate all or any material part of the Company’s business. Structure and Capital Capital structure, major changes to the Company’s corporate structure, changes to the management and control structure, change to the Company’s listing, alteration of the Company’s articles of association, change in the Company’s accounting reference date, registered name or business name. Financial Reporting and Controls Approval of: interim and year end accounts, management statements and any other preliminary announcements of financial results, annual reports, dividend policy, declaration of any dividend and significant changes in accounting policies/practice. Internal Controls Ensuring maintenance of a sound system of internal control and risk management. Finance Raising new capital and confirmation of major financing facilities, recommendation of dividends, operating and capital expenditure budgets, granting of security over any material Company asset. Contracts All contracts above USD 7.0m, major capital expenditure over USD 2.5m, contracts which are material or strategic, contracts 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. Communications Approval or resolutions and documentation put forward to shareholders, approval of circulars, prospectuses and listing particulars and approval of press releases concerning matters decided by the Board. Board membership and other appointments Director and senior management appointments and the Company’s succession planning are evaluated on a regular basis. 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 Company’s overall corporate governance arrangements. We deliver. Regardless. | 35 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCHAIR’S CORPORATE GOVERNANCE STATEMENT CONTINUED Other Policies including the share dealing code, appointment or change of the Company’s principal professional advisers and auditors, overall levels of insurance for the Company, material litigation, any decision likely to have a material impact on the Company or Company from any perspective including, but not limited to, financial, operational, strategic 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. Board Committees The Board has two sub-Committees, namely the Audit Committee and Remuneration Committee, with delegated responsibility to monitor their respective areas and to report back to the full Board. Board Committees operate under clearly defined terms of reference to ensure proper functioning of the Committees and effective application of best practice. Board Committees are required to report back to the Board following a Committee meeting. The Remuneration Committee report can be found on page 41 and the Audit Committee report can be found on page 44 On behalf of the Board Sangita Shah Non-Executive Chair 30 March 2021 36 | RA International | Annual Report 2020 REVIEW OF THE BOARD’S EFFECTIVENESS FOR THE YEAR ENDED 31 DECEMBER 2020 HOW THE BOARD OPERATES The Board meets formally four times a year with ad hoc Board meetings as the business demands. There is a strong flow of communication between the Directors, and in particular between the CEO and Chair. The Board has a structured agenda for the year ensuring that all relevant matters are considered, with sufficient time allowed for discussion. Board meeting agendas are set in consultation with both the CEO and Chair, with consideration being given to both standing agenda items and the strategic and operational needs of the business. Comprehensive Board papers are circulated well in advance of meetings, giving Directors ample time to review the documentation and enabling an effective meeting. Minutes are drawn up to reflect a true record of the discussions and decisions made. Resulting actions are tracked for appropriate delivery and follow up. The Directors have a broad knowledge of the business and understand their duties as directors of a UK company quoted on AIM and are developing appropriate corporate governance procedures and looking forward to building further on the governance structure already in place. The Company’s Nomad provides annual board room training. The Directors have access to the Company’s Nominated Adviser (Nomad) who also provides an annual board room training and the Company Secretary helps keep the Board up to date in corporate governance and liaises with the Nomad on areas of AIM requirements. The Company Secretary has frequent communication with both the Chair and CEO and is 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. REVIEW OF BOARD EFFECTIVENESS The Board considers that its effectiveness and the individual performance of its Directors is vital to the success of the Company. The need to meet the requirements of the QCA that a formal Board evaluation process was recognised. In 2020, the Company conducted its second internal review of Board effectiveness. As part of the process, Directors were asked to evaluate the Board structure, membership and functioning, compensation, culture and ethics, and corporate governance. Following this, one-to-one interviews were held between the Chair and each Board member. BOARD AND BOARD COMMITTEE ATTENDANCE AT MEETINGS DURING 2020 Board meetings (4 scheduled) Audit Committee meetings (3) Remuneration Committee meetings (3) Sangita Shah Soraya Narfeldt Lars Narfeldt Andrew Bolter Alec Carstairs Ian Henderson Philip Haydn-Slater On behalf of the Board Sangita Shah Non-Executive Chair 30 March 2021 4 4 4 4 4 4 4 3 N/A N/A N/A 3 N/A 3 3 N/A N/A N/A N/A 3 3 We deliver. Regardless. | 37 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 PRINCIPAL ACTIVITIES SUBSTANTIAL SHAREHOLDERS The Company is a global provider of services in remote and challenging locations. It specialises in three service channels: construction, integrated facilities management, and supply chain. The Company has a strong and loyal customer base, largely comprising UN agencies, western governments and global corporations. The Company provides comprehensive, flexible, mission-critical support to its clients enabling them to focus on the delivery of their respective businesses and services. The Company’s focus on integrity and values alongside on-going investment in people, locations and operations has over time created a reliable and trusted brand within its sector. A detailed explanation of the Company’s principle activities and business model can be found on pages 4 to 7 and page 8 respectively. RESULTS AND DIVIDENDS During 2020, a final dividend payment of 1.25p per share was declared to shareholders of the Company on 9 July 2020. The profit for the year ended 31 December 2020 was USD 6.6m. The Board is recommending a final dividend of 1.35p per share. Subject to shareholder approval at the 2021 AGM, the final dividend for 2020 will become due and payable on 8 July 2021 to shareholders on the register as of 28 May 2021. DIRECTORS The Directors who served during the period and at the date of this Report are as follows: Sangita Shah Soraya Narfeldt Lars Narfeldt Andrew Bolter Alec Carstairs Ian Henderson Non-Executive Chair Executive Director Executive Director Executive Director Non-Executive Director Non-Executive Director Philip Haydn-Slater Non-Executive Director 38 | RA International | Annual Report 2020 As at 31 December 2020 the Company was aware of the following major shareholders representing 3% or more of voting rights attached to the issued Ordinary Share capital of the Company. Soraya Narfeldt Lars Narfeldt Jupiter Asset Management Limited River and Mercantile Asset Management Major shareholder representing 3% or more of voting rights 55.9% 24.5% 6.4% 3.1% DIRECTORS’ INTERESTS The Directors who held office at 31 December 2020 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 GOING CONCERN Number of ordinary shares 42,983 95,857,145 42,000,000 1,412,061 108,743 — 100,000 The financial information for the year to 31 December 2020 has been prepared assuming that the Company will continue as a going concern. 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. Appointment Date 3 May 2018 to present 13 March 2018 to present 13 March 2018 to present 3 May 2018 to present 3 May 2018 to present 3 May 2018 to present 3 May 2018 to present In assessing the basis of preparation of the financial statements, the Board has undertaken a rigorous assessment of going concern, considering financial forecasts covering a period to 30 June 2022 and utilising scenario analysis to test the adequacy of the Group’s liquidity. These include multiple scenarios which specifically forecast the continued impact of COVID-19 on the Group’s trading, principally the impact of delays relating to the timing of new project awards and commencement date of new projects. Under all scenarios, the Group has concluded that it has sufficient cash reserves to fund trading, continued capital investment and payment of proposed dividends through the going concern period. The Group has access to a USD 2m overdraft facility, which is not expected to be utilised at any point throughout the going concern period, and there are no capital repayments associated with the loan notes issued during the year. The Group has performed a comprehensive analysis with respect to the potential operational and financial risks associated with COVID-19. The primary impact of COVID-19 on the Group is that new contract awards and the commencement of new projects continue to be delayed as a result of the Group’s clients being unable to travel to project sites. Based on discussions with customers, the Board expects that many of these pending awards will be formally made in the second half of 2021 and that execution of substantial project work will commence towards the end of 2021 or early 2022. The Board has approved financial forecasts that take into account the above referenced scenario as well as potential downside sensitivities which include the delay of all new significant contract awards until 2022. Under all of these scenarios the Group continues to be cash positive and further mitigations, such as delaying capex spend, have been identified to preserve cash if required to provide additional headroom and remain cash positive if there was a worsening of conditions beyond the downside scenarios considered. Any scenario whereby trading performance is worse than those modelled is considered to be remote given the level of committed contracted work in place. The Board has also assessed the Group’s ability to overcome the operating challenges associated with continuing to service clients throughout the term of the pandemic and has concluded that the Group will be able to continue to meet its contractual commitments. The Board has come to this conclusion given that the Group has been able to meet its contractual requirements throughout the COVID-19 pandemic period. Additionally, the Group’s primary activity is undertaking projects in locations where a crisis situation is either ongoing or there is a reasonable expectation that a crisis will occur during the term of the project. As a result, the Group has existing plans in place to address the operating challenges associated with restrictions on both the movement of people and goods. It also has existing infrastructure, procedures, and insurance in place to address the safety and security of its staff and assets. Under all scenarios, the Group has sufficient cash reserves to be able to operate for the foreseeable future. On that basis, the Board is therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. AUDITOR Each person who is a Director at the date of approval of this Annual Report confirms that: • • So far as the Director is aware, there is no relevant audit information of which the auditor is unaware, and The Directors has taken all steps that they ought to have taken as a Director to make themselves aware 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. STREAMLINED ENERGY AND CARBON REPORTING The Directors are aware of the introduction of Streamlined Energy and Carbon Reporting Framework (SECR). Which requires companies subject to SECR to include information relating to their energy use and associated Green House Gas (GHG) emissions. The Company, being categorised as an unquoted company under the UK Companies Act, is required to report only the UK energy use, and UK; scope 1, scope 2 and scope 3 GHG emissions. Given RA has no physical trading operations located in the UK, the quantum for all categories for the current and prior period are nil. STRATEGIC REPORT The Company is required by the Companies Act 2006 to include a Strategic Report in its Annual Report. The information that fulfils this requirement can be found on pages 4 to 27. Please refer to our Section 172 statement, specifically page 14, for evidence of the Directors’ engagement with suppliers, customers and others during the financial year. Signed by order of the Directors On behalf of the Board AMBA Secretaries Limited Company Secretary 30 March 2021 We deliver. Regardless. | 39 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS’ RESPONSIBILITY STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, and have elected under company law to prepare the Company financial 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 Company financial statements are required by law and international accounting standards in conformity with the requirements of the Companies Act 2006 to present fairly the financial position and performance of the Company, the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Company for that period. In preparing each of the Group and Company financial statements, the Directors are required to: • provide additional disclosures when compliance with the specific requirements in IFRSs, and in respect of the parent company financial statements, FRS 101, is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company financial position and financial performance. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of Board • • • select suitable accounting policies and then apply them consistently, make judgements and accounting estimates that are reasonable, Andrew Bolter Chief Financial Officer 30 March 2021 for the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU and, for the Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Company financial statements, • prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business, and 40 | RA International | Annual Report 2020 REMUNERATION COMMITTEE REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 The Remuneration Committee held three meetings during 2020. Members’ attendance records are disclosed in the Corporate Governance Report on page 37 contained in this Annual Report. PLANS FOR 2021 • • Review third party advice to determine Director Remuneration packages including bonus levels linked to clear performance objectives. Upon obtaining third party advice, consider further awards to be made to the Executive Team and senior management team in the form of Long Term Incentive Awards. EXECUTIVE DIRECTORS’ SERVICE CONTRACTS The Company’s policy on Directors’ service contracts are indicated below: Director Effective term Notice period Soraya Narfeldt Lars Narfeldt Andrew Bolter 29 June 2018 29 June 2018 29 June 2018 6 months 6 months 6 months Non-Executive letters of appointment Director Sangita Shah Alec Carstairs Ian Henderson Effective term 29 June 2018 29 June 2018 29 June 2018 Philip Haydn-Slater 29 June 2018 Appointment Term 3 years 3 years 3 years 3 years 2020 ACTIVITIES • • • The Remuneration Committee engaged a third-party advisor during 2020 to provide guidance on the optimal structure of an Executive Directors’ remuneration package, including benchmarking on levels of annual bonuses and how this could be linked to performance. The Remuneration Committee explored and approved a share incentive scheme which was rolled out in October 2020 across the business. A Company-wide salary increase was agreed by the Remuneration Committee. THE REMUNERATION COMMITTEE The Remuneration Committee is a standing committee of the Board of the Company and is comprised of three Non- Executive Directors, whose names and profiles are set out on pages 30 to 31. It is the Remuneration Committee’s responsibility to review 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 assists the Board in discharging its oversight responsibilities relating to the attraction, compensation, evaluation and retention of Executive Directors and key senior management employees. It aims to ensure that the Company’s remuneration policy attracts and retains employees with the right skills and expertise needed to enable the Company to achieve its goals and strategies, and that fair and competitive compensation, with appropriate performance incentives, are awarded. The Remuneration Committee aims to ensure that the Company’s remuneration policy is aligned with and promotes the implementation of the Company’s strategy and effective risk management for the long term and all employees and Executive Directors are appropriately remunerated. The Remuneration Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any employee share option scheme or equity incentive plans in operation from time to time. We deliver. Regardless. | 41 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED DIRECTORS’ REMUNERATION Fees/basic salary1 GBP’000 Benefits in kind GBP’000 Other remuneration2 GBP’000 Total 2020 GBP’000 Total 2019 GBP’000 Executive Soraya Narfeldt Lars Narfeldt Andrew Bolter Non-Executive Sangita Shah Alec Carstairs Philip Haydn-Slater Ian Henderson Total 302 193 194 82 52 52 52 927 22 17 11 — — — — 50 18 6 282 — — — — 342 216 487 82 52 52 52 306 1,283 329 207 211 81 51 51 51 981 DIRECTORS’ SHARE OPTIONS The Directors recognise the need to attract, incentivise and retain employees and the importance of ensuring that all employees are well motivated and are able to identify closely with the performance of the Company. To that end, the Company introduced the Share Option Scheme 2018 (“Scheme”) under which options may be granted to eligible employees from time to time, acting through the Board and subject to the rules of the Scheme. The principle terms of the Scheme are summarised below. Option awards under the Scheme provide the right to acquire a certain number of ordinary shares in the Company in the future, subject to the satisfaction of any specified performance conditions set at the discretion of the Remuneration Committee. The Scheme is a UK non-tax advantaged, discretionary share option plan which provides for the grant of options to employees of the Company. The Board believes that the Scheme is an effective mechanism to incentivise key employees of the Company. Performance options under the Scheme were granted to Andrew Bolter (Executive Director) as set out on the below and have performance vesting conditions. Option holder Date of grant Share options Andrew Bolter 29 June 2018 1,304,347 Option exercise period (with performance conditions) From the third anniversary of Admission to the sixth anniversary of Admission Exercise price GBP 0.10 The vesting of options granted under the Scheme are conditional on continuous employment and the achievement of a hurdle total shareholder return as at the end of the three-year performance period. If at the end of the performance period, the performance condition is not satisfied, the option will immediately lapse and cease to be exercisable. The Company’s stock price was 51.50 pence as at the close of 31 December 2020. 1 The Executive Directors each have two employment contracts with the Company. One with the Company in connection with their role as a Director, and another with a subsidiary reflecting their role as a member of Executive Management. The above figure denotes the total base salary for both employment contracts. Executive Management contracts are denominated in United Arab Emirate dirhams and have been converted to UK Pounds at a rate of 1 UAE Dirham: GBP 0.2187, being the average exchange rate during 2020. 2 Other remuneration includes end of service benefits which are defined in note 25 of the annual financial statements and share based payments which are detailed in note 13. 42 | RA International | Annual Report 2020 NON-EXECUTIVE DIRECTORS The below represents the annual fees paid to the Non- Executive Directors. Non-Executive Directors Fees (GBP) Sangita Shah Alec Carstairs Philip Haydn-Slater Ian Henderson 82,000 52,000 52,000 52,000 CONSIDERATION BY THE 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 the Executive Management Team. The Committee works within its terms of reference, and its role includes: • • • • • Determining and agreeing with the Board, the Remuneration Policy for all Executive Directors and under guidance of the Executive Directors, other members of Executive Management Team. Ensuring Executive Director remuneration packages are competitive. Determining whether annual bonus payments should be made and approving levels for individual Executive Directors. Determining each year whether any awards/grants should be made under the incentive schemes and the value of such awards. Considering any new long-term incentive scheme awards and performance criteria. • Agreeing Directors’ service contracts and notice periods. The Company is committed to maintaining an open and transparent dialogue with shareholders on all aspects of Remuneration within the Company. Philip Haydn–Slater Remuneration Committee Chairman 30 March 2021 We deliver. Regardless. | 43 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTAUDIT COMMITTEE REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 during the financial year is set out in the Corporate Governance report on page 37. The Audit Committee has considered the Company’s internal control and risk management policies and systems, their effectiveness and the requirements for an internal audit function in the context of the Company’s overall risk management system. The Audit Committee is satisfied that the Company does not currently require an internal audit function, however, it will continue to periodically review the situation. 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 financial reporting, fraud, and bribery and ensure that appropriate follow up action is taken. No issues have been highlighted. The Audit Committee has assessed the impact of COVID-19 on the Company, both with respect to the viability of the business and the necessary disclosures required to be included in the financial accounts. Uncertainty surrounding the timing of new project awards and when recently awarded projects will begin to generate substantial revenue (and positive operating cash flows) is seen as the primary risk in the business achieving its short-term financial targets. The Audit Committee has reviewed multiple scenarios detailing how delays in project awards and commencement may affect the Company’s liquidity position and has challenged management on assumptions and judgements made in preparing these scenarios. The Audit Committee is satisfied that under adverse trading conditions, specifically an environment in which movement restrictions caused by COVID-19 remain widely prevalent throughout 2021, the Company will continue to trade as a going concern. The Audit Committee has also assessed COVID-19 costs, which have been presented within non-underlying items, and concluded that these expenses are primarily discretionary in nature and in all cases directly result from the ongoing COVID-19 pandemic. The external auditors, Ernst & Young, were re-appointed during the financial year by shareholders at the Company’s AGM. The Audit Committee shall undertake a comprehensive review of the quality, effectiveness, value and independence of the audit provided by Ernst & Young each year, seeking the views of the wider Board, together with relevant members of the Committee. 2020 ACTIVITIES: • • • Reviewed and approved the Company’s 2020 Interim Report. Reviewed and approved the 2020 audit plan presented by the Company’s auditors. Reviewed the independence and competence of the Company’s auditors, Ernst & Young. The Audit Committee is responsible for reviewing and monitoring the effectiveness of the Company’s financial reporting, internal control policies, and procedures for the identification, assessment and reporting of risk. The latter two areas are integral to the Company’s core management processes and the Committee devotes significant time to receiving and reviewing reports from the Executive Management Team and external auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee is also responsible for overseeing the relationship with the external auditor. An essential part of the integrity of the financial statements lies around the key assumptions and estimates or judgements to be made. The Committee reviews key judgements prior to publication of the financial statements at both the end of the financial year and at the end of the six-month interim period, as well as considering significant issues throughout the year. In particular, this includes reviewing any subjective material assumptions within the Company’s activities to enable an appropriate determination of asset valuation, provisioning and the accounting treatment thereof. The Audit Committee reviewed and was satisfied that the judgements exercised by management on material items contained within the Report and Financial Statements are reasonable. The Audit Committee comprises three Non-Executive Directors whose names and profiles are set out on page 30 and 31. Although not a member of the Audit Committee, the Chief Financial Officer, whose name and profile is set out on page 30 is invited to attend meetings. The Committee has engaged Ernst & Young LLP (EY) to act as external auditors and they are also invited to attend Committee meetings, unless they have a conflict of interest. The Audit Committee also meets with the auditors without management in attendance. The Audit Committee has committed to meet no less than three times in each financial year and has unrestricted access to the Company’s external auditors. In 2020, the Audit Committee met three times and the members attendance record at Committee meetings 44 | RA International | Annual Report 2020 RESPONSIBILITIES The Committee reviews and makes recommendations to the Board on: • any change in accounting policies, • • • • • • decisions requiring a major element of judgement and risk, compliance with accounting standards and legal and regulatory requirements, disclosures in the Interim and Annual Report and financial statements, reviewing the effectiveness of the Company’s financial and internal controls, any significant concerns of the external auditor about the conduct, results or overall outcome of the annual audit of the Company, and any matters that may significantly affect the independence of the external auditor. Alec Carstairs Chairman of the Audit Committee 30 March 2021 We deliver. Regardless. | 45 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTFINANCIAL STATEMENTS Resilient business model Our financial performance highlights the durability of the business model. From a revenue perspective, we have seen growth year on year in our IFM and supply chain channels. Construction activity was most affected by COVID-19, however, the Group maintained robust profitability despite the challenges presented throughout 2020. 46 | RA International | Annual Report 2020 We deliver. Regardless. | 47 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 OPINION In our opinion: • • • RA International Group plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of the Group’s profit for the year then ended, the Group financial statements have been properly prepared in international accounting standards conformity with the requirements of the Companies Act 2006, the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of RA International Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2020 which comprise: Group Consolidated balance sheet as at 31 December 2020 Parent company Balance sheet as at 31 December 2020 Consolidated income statement for the year then ended Statement of changes in equity for the year then ended Consolidated statement of comprehensive income for the year then ended Statement of cash flows for the year then ended Consolidated statement of changes in equity for the year then ended Related notes 1 to 8 to the financial statements including a summary of significant accounting policies Consolidated statement of cash flows for the year then ended Related notes 1 to 31 to the financial statements, including a summary of significant accounting policies The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006. The financial reporting framework that has been applied in the preparation of the Parent Company financial 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 financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included: • In conjunction with our walkthrough of the Group’s financial close process, we confirmed our understanding of management’s going concern assessment process and also engaged with management early to ensure all key factors were considered in their assessment. 48 | RA International | Annual Report 2020 • • • • • • We obtained management’s going concern assessment, including the cash forecasts and models for the going concern period ending 30 June 2022. The Group has modelled adverse scenarios, including delay of all new significant contract awards until 2022, in their forecasts in order to incorporate severe but plausible changes in key assumptions to the forecasted liquidity of the Group. We have tested the factors and assumptions included in each modelled scenario for the cash forecast and covenant calculation and we have tested the impact of COVID-19 included in each forecasted scenario. We considered the appropriateness of the methods used to calculate the cash forecasts and determined through inspection and testing of the methodology and calculations that the methods utilised were appropriately sophisticated to be able to make an assessment for the entity. We considered the mitigating factors included in the cash forecasts that are within the control of the Group, which included potential deferral of capital expenditure. This included our review of the Group’s non-operating cash outflows and evaluating the Group’s ability to control these outflows as mitigating actions if required. We also verified actual current cash positions and credit facilities available to the Group, as well as assumptions applied with respect to utilisation and capital repayments of loan notes. We have performed reverse stress testing, principally related to further delays in contract execution, in order to identify what factors, either in isolation or in combination with other factors, would lead to the Group utilising all liquidity during the going concern period. We reviewed the Group’s going concern disclosures included in the Annual Report in order to assess that the disclosures were appropriate and in conformity with the reporting standards. The Group experienced a decline in both revenue and profits generated during 2020 as a result of the impact of COVID-19. The continuation of this global pandemic is expected to cause further delays in commencement and execution of certain contracts over the going concern assessment period. CONCLUSION Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern from when the financial statements are authorised for issue until 30 June 2022. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern. OVERVIEW OF OUR AUDIT APPROACH Audit scope Key audit matters Materiality • • • • • We performed an audit of the complete financial information of all components. The components where we performed full audit procedures accounted for 100% of profit before tax 100% of revenue and 100% of total assets. Risk of misstatement due to management override, fraud and error, specifically around revenue recognition. Risk of non-compliance with laws and regulations. Overall Group materiality of $331,000 which represents 5% of profit before tax. We deliver. Regardless. | 49 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT CONTINUED AN OVERVIEW OF THE SCOPE OF THE PARENT COMPANY AND GROUP AUDITS Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. All trading activity is managed and reported through the Group’s Dubai subsidiary, and we have classified this entity as full scope providing 100% coverage of the Group’s trading activities. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other factors when assessing the level of work to be performed. In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, we designated the Dubai entity as full scope and performed an audit of the complete financial information. The reporting components where we performed audit procedures accounted for 100% (2019: 100%) of the Group’s profit before tax, 100% (2019: 100%) of the Group’s revenue and 100% (2019: 100%) of the Group’s total assets. All audit work performed for the purposes of the audit was undertaken by the primary audit team. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. 50 | RA International | Annual Report 2020 Risk Our response to the risk Key observations communicated to the Audit Committee We communicated to the Audit Committee that: • • • Through our walkthrough procedures performed, and assessment of key internal controls, we assessed the design and implementation of the controls in place to be appropriate. After examination of the correlations between revenue streams through debtors to cash, no material issues were identified. Through our journal entry testing, specifically revenue manual journal postings near year end and related to any judgements or assumptions applied by management, we had identified no material issues. • Revenue had been recorded appropriately. We concluded that revenue recognition accounting policies adopted are inline with requirements of IFRS15 and have been applied consistently. Risk of misstatement due to management override, fraud and error, specifically around revenue recognition. Refer to accounting policies (page 62) and Notes 5 and 6 of the consolidated financial statements (page 68). Auditing standards require that we consider the risk of fraud or management override of internal controls in relation to revenue recognition. The Group generates revenue through 3 service channels: integrated facilities management ($31.3m), construction ($19.1m) and supply chain services ($14.0m) (see accounting policies Note 4, page 62). We recognise that sales arrangements vary depending on the service being provided with accommodation and supply requiring minimal judgement. Accordingly, we focused on construction and longer- term services contracts. The complexity and judgements are mainly related to estimation of the cost to complete of the projects, expected revenues and the related percentage of completion which the group applies for recognising revenues. The determination of the cost to complete impacts the value and timing of revenue and profit recognised over the life of the project, and is the key area of judgement and estimation that could have a material impact on the financial statements. Our principal audit procedures included: • • • • • • • Performing walkthroughs of the different revenue cycles to gain an understanding of when the revenue should be recognised, identification and assessment of judgements or assumptions applied. Obtaining an understanding and evaluating the key internal controls which support the project management and accounting. These included 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 significant 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 including contracts and change orders. Utilising computer assisted data analytics techniques to examine the correlation of revenue streams through debtors to cash; highlighting anomalies and non-routine transactions (business activities) and perform focused procedures on these transactions. Made enquires of non-finance staff, to challenge our understanding and accounting applied on open or active projects at year end. Discussions undertaken with CEO, COO, in-country management team and project managers. Detailed manual journal entry testing and review of top side entries, applying particular focus to individually unusual and/or material revenue manual journals. Reviewing management’s assessment of IFRS 15 applied to new contracts and challenging key assumptions applied in their assessment to ensure consistent application of standard and accounting policies. We performed full scope audit procedures over this risk area, which covered 100% of the risk amount. We deliver. Regardless. | 51 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT CONTINUED Risk Our response to the risk Key observations communicated to the Audit Committee We communicated to the Audit Committee that: • • • Through our walkthrough of the expenditure cycle, we assessed the design and implementation of the relevant controls to be effective. Through our journal entry testing, specifically those manual journal postings affecting cash balances, no transactions of an unsupported or non-bona fide business nature were identified. Through our testing of large and unusual cash receipts and payments, all items tested were considered to be bona-fide business transactions. Based on the audit procedures performed, no instances of non-compliance with laws and regulations were noted. Risk of non-compliance with laws and regulations Refer to accounting policies and Note 4 of the consolidated financial statements (page 62). Auditing standards require that we consider the risk of non-compliance with laws and regulations on the financial statements. RA International operate in countries that rank amongst the highest on the Transparency International Corruption Perceptions Index and have limited legal structures. Both factors increase the risk of corruption and bribery. There is a risk that if the controls and policies in place are not sufficient to prevent or detect bribery or instances of corruption, there could be a material impact on the financial statements due to unrecorded liabilities or impact of reputational risk such as recoverability of assets or continued revenue / profit generation. Our principal audit procedures included: • • • Enquiries of management (including the Group’s Legal Counsel, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of the Group) as well as the Audit Committee, as to whether the entity is in compliance with such laws and regulations. Review of company policies and procedures related to risk management, including Anti Bribery and Corruption (“ABC”) and whistleblowing policies. Review of Board minutes, inspection of correspondence, if any, with the relevant licensing or regulatory authorities, review of significant contracts (including external advice on legal, tax and jurisdiction specific matters). • Performance of targeted procedures on the procurement process: o o o Performed walkthrough of the expenditure cycle to gain an understanding of different procurement processes and controls in place to address risks associated with ABC. Using data analytical tools to identify unusual journal postings originating from cash (such as manual cash payments and receipts). Detailed testing of cash payments and higher risk expenditure (including travel and entertainment, advances and bonuses). We performed full scope audit procedures over this risk area. 52 | RA International | Annual Report 2020 In the prior year, our Auditor’s Report included a key audit matter in relation to management’s consideration of the potential impact on going concern due to the impact of COVID-19 on the wider financial markets and the Company’s share price. In the current year, there is greater certainty as to the impact of COVID-19 and implications from a going concern perspective. The level of uncertainty and need for significant judgements to be applied by management has reduced, as a result we no longer consider going concern to be a key audit matter. OUR APPLICATION OF MATERIALITY We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. MATERIALITY The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be $442,000 (2019: $644,000), which is 5% (2019: 5%) of profit before tax. We believe that profit before tax provides us with an appropriate basis for determining misstatements of importance to the users of the financial statements. We determined materiality for the Parent Company to be $588,000 (2019: $695,000), which is 1% (2019: 1%) of total equity. The Parent Company is nontrading and principal activity that of a holding company; therefore we consider it appropriate to adopt equity as basis for materiality as this is considered the key performance metric of users of accounts. During the course of our audit, we reassessed initial materiality for the Group based on the final results position. This resulted in final materiality being assessed at $331,000, which is a decrease of $111,000. No change was noted for Parent Company materiality. 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 75% (2019: 75%) of our planning materiality, namely $331,000 (2019: $483,000). We have set performance materiality at this percentage due to various considerations including the past history of misstatements, our ability to assess the likelihood of misstatements, the effectiveness of the internal control environment and other factors affecting the entity and its financial reporting. REPORTING THRESHOLD An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $22,000 (2019: $32,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. Our reporting threshold was updated after reassessing materiality to $17,000, being 5% of our final materiality. 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 financial statements and our Auditor’s Report thereon. The Directors are responsible for the other information within the Annual Report. Our opinion on the financial 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. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such We deliver. Regardless. | 53 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT CONTINUED material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. 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 financial year for which the financial statements are prepared is consistent with the financial statements, and • the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements. 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 identified 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 financial are not in agreement with the accounting records and returns, or • certain disclosures of Directors’ remuneration specified 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 40, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial 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 FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis of these financial statements. EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, 54 | RA International | Annual Report 2020 for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management. • • • • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are those that relate to the reporting framework (IFRS, Companies Act 2006, AIM Listing Rules) and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations in relation to health and safety, employee matters and anti-bribery and corruption practices. We understood how the Group is complying with those frameworks by making enquiries of management, those responsible for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through our review of Board minutes, papers provided to the Audit Committee and correspondence received from regulatory bodies and noted that there was no contradictory evidence. Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures included a review of Board minutes to identify any non-compliance with laws and regulations, a review of the reporting to the Audit Committee on compliance with regulations, enquiries of legal counsel and management as well as utilisation of data analytical tools to review for potential non-compliance with laws and regulations with a focus on manual journals and transactions which have heightened risk by nature. Further details of the procedures performed, and our observations are included in the key audit matters section of this report. We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting with management, including within various parts of the business, to understand where they considered there was susceptibility to fraud. We also considered performance targets and the potential for management to manage earnings or influence the perceptions of analysts. Where this risk was considered to be higher, we performed audit procedures to address each identified fraud risk. Areas identified the greatest potential for fraud included revenue recognition and in common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. Based on this understanding we designed audit procedures to identity non-compliance with such laws and regulations. Our procedures involved enquiries of management (including CEO, COO, CFO, Non-Executive Directors and internal legal counsel), review of the Group’s policies and procedures related to risk management, review of Board minutes, inspection of correspondence, if any, with the relevant licensing or regulatory authorities, and review of significant contracts. Further details of the procedures performed, and our observations are included in the key audit matters section of this report. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://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: 30 March 2021 We deliver. Regardless. | 55 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Revenue Cost of sales Gross profit Administrative expenses Underlying operating profit Non-underlying items Operating profit Investment revenue Finance costs Profit before tax Tax expense Profit and total comprehensive income for the year Basic and diluted earnings per share (cents) Notes 2020 USD’000 7 9 9 9 11 12 64,441 (45,647) 18,794 (8,429) 10,365 (3,046) 7,319 278 (970) 6,627 (61) 6,566 3.8 2019 USD’000 Restated 69,064 (47,174) 21,890 (8,204) 13,686 (46) 13,640 294 (675) 13,259 (384) 12,875 7.4 * The Company has modified the presentation of the Consolidated Statement of Comprehensive Income to reclassify holding company expenses as administrative expenses. See note 5. 56 | RA International | Annual Report 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Assets Non-current assets Property, plant, and equipment Goodwill Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Equity Share capital Share premium Merger reserve Treasury shares Share based payment reserve Retained earnings Total equity Non-current liabilities Loan notes Lease liabilities Employees’ end of service benefits Current liabilities Lease liabilities Trade and other payables Total liabilities Total equity and liabilities Notes 2020 USD’000 2019 USD’000 16 17 18 19 20 21 22 23 24 25 24 26 50,886 138 51,024 9,142 12,666 17,632 39,440 90,464 24,300 18,254 (17,803) (1,363) 177 48,509 72,074 6,471 3,720 517 10,708 318 7,364 7,682 18,390 90,464 28,516 138 28,654 6,178 24,520 21,393 52,091 80,745 24,300 18,254 (17,803) — 47 44,685 69,483 — 2,397 391 2,788 437 8,037 8,474 11,262 80,745 The financial statements were approved by the Board of Directors on 30 March 2021 and signed on its behalf by: Soraya Narfeldt CEO Andrew Bolter CFO The attached notes 1 to 31 form part of the consolidated financial statements. We deliver. Regardless. | 57 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Share capital USD’000 Share premium USD’000 Merger reserve USD’000 Treasury shares USD’000 As at 1 January 2019 24,300 18,254 (17,803) Total comprehensive income for the period Share based payments (note 13) Dividends declared and paid (note 14) — — — — — — — — — As at 31 December 2019 24,300 18,254 (17,803) Total comprehensive income for the period Share based payments (note 13) Dividends declared and paid (note 14) Purchase of treasury shares (note 22) Issuance of treasury shares (note 22) — — — — — — — — — — — — — — — — — — — — — — — (2,600) 1,237 Share based payment reserve USD’000 16 — 31 — 47 — 130 — — — Retained earnings USD’000 Total USD’000 34,013 58,780 12,875 12,875 — 31 (2,203) (2,203) 44,685 69,483 6,566 6,566 — 130 (2,674) (2,674) — (2,600) (68) 1,169 As at 31 December 2020 24,300 18,254 (17,803) (1,363) 177 48,509 72,074 58 | RA International | Annual Report 2020 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Operating activities Operating profit Adjustments for non-cash and other items: Depreciation on property, plant, and equipment Loss on disposal of property, plant, and equipment Unrealised differences on translation of foreign balances Provision for employees’ end of service benefits Share based payments Working capital adjustments: Inventories Trade and other receivables Trade and other payables Cash flows generated from operations Tax paid Employees’ end of service benefits paid Net cash flows from operating activities Investing activities Investment revenue received Purchase of property, plant, and equipment Proceeds from disposal of property, plant, and equipment Acquisition of subsidiary (net of cash acquired) Net cash flows used in investing activities Financing activities Proceeds from borrowings Repayment of lease liabilities Finance costs paid Dividends paid Purchase of treasury shares Net cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents as at start of the period Effect of foreign exchange on cash and cash equivalents Cash and cash equivalents as at end of the period Notes 2020 USD’000 2019 USD’000 7,319 13,640 16 16 25 13 11 25 16 16 23 24 14 22 20 20 3,731 93 5 209 1,299 12,656 (2,964) 12,240 (616) 21,316 (117) (83) 21,116 278 (24,450) 24 — 2,577 46 (165) 174 31 16,303 (1,607) (8,306) 2,559 8,949 (144) (133) 8,672 294 (12,358) 170 (106) (24,148) (12,000) 6,084 (564) (970) (2,674) (2,600) (724) (3,756) 21,393 (5) 17,632 — (370) (675) (2,203) — (3,248) (6,576) 27,804 165 21,393 We deliver. Regardless. | 59 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 1 CORPORATE INFORMATION The principal activity of RA International Group plc (“RAI” or the “Company”) and its subsidiaries (together the “Group”) is providing services in demanding and remote areas. These services include construction, integrated facilities management, and supply chain services. RAI was incorporated on 13 March 2018 as a public company in England and Wales under registration number 11252957. The address of its registered office is One Fleet Place, London, EC4M 7WS. 2 BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. They have been prepared under the historical cost basis and have been presented in United States Dollars (USD). All values are rounded to the nearest thousand (USD’000), except where otherwise indicated. Going concern In assessing the basis of preparation of the financial statements the Board has undertaken a rigorous assessment of going concern, considering financial forecasts covering a period to 30 June 2022 and utilising scenario analysis to test the adequacy of the Group’s liquidity. These include multiple scenarios which specifically forecast the continued impact of COVID-19 on the Group’s trading, principally the impact of delays relating to the timing of new project awards and commencement date of new projects. Under all scenarios, the Group has concluded that it has sufficient cash reserves to fund trading, continued capital investment and payment of proposed dividends through the going concern period. The Group has access to a USD 2m overdraft facility, which is not expected to be utilised at any point throughout the going concern period, and there are no capital repayments associated with the loan notes issued during the year. The Group has performed a comprehensive analysis with respect to the potential operational and financial risks associated with COVID-19. The primary impact of COVID-19 on the Group is that new contract awards and the commencement of new projects continue to be delayed as a result of the Group’s clients being unable to travel to project sites. Based on discussions with customers, the Board expects that many of these pending awards will be formally made in the second half of 2021 and that execution of substantial project work will commence towards the end of 2021 or early 2022. The Board has approved financial forecasts that take into account the above referenced scenario as well as potential downside sensitivities which include the delay of all new significant contract awards until 2022. Under all of these scenarios the Group continues to be cash positive and further mitigations, such as delaying capex spend, have been identified to preserve cash if required to provide additional headroom and remain cash positive if there was a worsening of conditions beyond the downside scenarios considered. Any scenario whereby trading performance is worse than those modelled is considered to be remote given the level of committed contracted work in place. The Board has also assessed the Group’s ability to overcome the operating challenges associated with continuing to service clients throughout the term of the pandemic and has concluded that the Group will be able to continue to meet its contractual commitments. The Board has come to this conclusion given that the Group has been able to meet its contractual requirements throughout the COVID-19 pandemic period. Additionally, the Group’s primary activity is undertaking projects in locations where a crisis situation is either ongoing or there is a reasonable expectation that a crisis will occur during the term of the project. As a result, the Group has existing plans in place to address the operating challenges associated with restrictions on both the movement of people and goods. It also has existing infrastructure, procedures, and insurance in place to address the safety and security of its staff and assets. Under all scenarios, the Group has sufficient cash reserves to be able to operate for the foreseeable future. On that basis, the Board is therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. 60 | RA International | Annual Report 2020 3 BASIS OF CONSOLIDATION The financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: • power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee), • exposure, or rights, to variable returns from its involvement with the investee, and • the ability to use its power over the investee to affect its returns. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • • • the contractual arrangement with the other vote holders of the investee, rights arising from other contractual arrangements, and the Group’s voting rights and potential voting rights. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Company loses control over the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of a subsidiary to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest, and other components of equity while any resultant gain or loss is recognised in the profit or loss. Any investment retained is recognised at fair value. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the fair value on the acquisition date. The net identifiable assets acquired, and liabilities assumed are recorded at their respective fair values on the acquisition date. Acquisition- related costs are expensed as incurred and included in acquisition costs. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. We deliver. Regardless. | 61 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4 SIGNIFICANT ACCOUNTING POLICIES Revenue recognition Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has concluded that it is acting as a principal in all its revenue arrangements. Sale of goods (supply chain services) Revenue from the sale of goods and the related logistics services is recognised when control of ownership of the goods have passed to the buyer, usually on delivery of the goods. Construction Typically, revenue from construction contracts is recognised at a point in time when performance obligations have been met. Generally, this is the same time at which client acceptance has been received. Dependant on the nature of the contracts, in some cases revenue is recognised over time using the percentage of completion method on the basis that the performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date. Contract revenue corresponds to the initial amount of revenue agreed in the contract and any variations in contract work, claims and incentive payments are recognised only to the extent that it is highly probable that they will result in revenue, and they are capable of being reliably measured. Services (integrated facilities management) Revenue from providing services is recognised over time, applying the time elapsed method for accommodation and similar services to measure progress towards complete satisfaction of the service, as the customers simultaneously receive and consume the benefits provided by the Group. Cost of sales Cost of sales represent costs directly incurred or related to the revenue generating activities of the Group, including staff costs, materials and depreciation. Contract balances Trade receivables A receivable represents the Group’s right to an amount of consideration that is unconditional, meaning only the passage of time is required before payment of the consideration is due. Accrued revenue Accrued revenue represents the right to consideration in exchange for goods or services transferred to a customer in connection with fulfilling contractual performance obligations. If the Group performs by transferring goods or services to a customer before invoicing, accrued revenue is recognised in an amount equal to the earned consideration that is conditional on invoicing. Once an invoice has been accepted by the customer accrued revenue is reclassified as a trade receivable. Customer advances If a customer pays consideration before the Group transfers goods or services to the customer, a customer advance is recognised when the payment is received by the Group. Customer advances are recognised as revenue when the Group meets its obligations to the customer. Borrowing costs Borrowing costs directly attributable to the construction of an asset are capitalised as part of the cost of the asset. Capitalisation commences when the Group incurs costs for the asset, incurs borrowing costs and undertakes activities that are necessary to prepare the asset for its intended use or sale. Capitalisation ceases when the asset is ready for use or sale. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that are incurred in connection with the borrowing of funds. 62 | RA International | Annual Report 2020 Tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. 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. At the end of the useful life, assets are deemed to have no residual value. Contract specific assets are depreciated over the lesser of the length of the project, or the useful life of the asset. The useful life of general property, plant and equipment is as follows: Buildings Machinery, motor vehicles, furniture and equipment Leasehold improvements Lesser of 5 to 20 years and term of land lease 2 to 10 years Lesser of 10 years and term of land lease The carrying values of property, plant, and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down, with the write down recorded in profit or loss to their recoverable amount, being the greater of their fair value less costs to sell and their value in use. Expenditure incurred to replace a component of an item of property, plant, and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant, and equipment. All other expenditure is recognised in profit or loss as the expense is incurred. An item of property, plant, and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised. Assets’ residual values, useful lives, and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate. Goodwill Goodwill is stated as cost less accumulated impairment losses. Cost is calculated as the total consideration transferred less net assets acquired. Inventories Inventories are stated at the lower of cost and net realisable value. Costs include those expenses incurred in bringing each product to its present location and condition. Cost is calculated using the weighted average method. Net realisable value is based on estimated selling price less any further costs expected to be incurred in disposal. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and balances with banks, which are readily convertible to known amounts of cash and have a maturity of three months or less from the date of acquisition. This definition is also used for the consolidated cash flow statement. We deliver. Regardless. | 63 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4 SIGNIFICANT ACCOUNTING POLICIES CONTINUED Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. An asset’s recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used maximising the use of observable inputs. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded entities or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecasts generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of profit or loss. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Financial instruments i) Financial assets Initial recognition and measurement The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Subsequent measurement Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified, or impaired. Other receivables are subsequently measured at amortised cost. 64 | RA International | Annual Report 2020 Derecognition of financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset has expired. Impairment of financial assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. When arriving at the ECL we consider historical credit loss experience including any adjustments for forward-looking factors specific to the debtors and the economic environment. A financial asset is deemed to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Income from financial assets Investment revenue relates to interest income accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. ii) Financial liabilities Initial recognition and measurement Financial liabilities are initially recognised at fair value and subsequently classified at fair value through profit or loss, loans and borrowings, or payables. Loans and borrowings and payables are recognised net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loan notes. Subsequent measurement The measurement of financial liabilities depends on their classification as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as held at fair value through profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. We deliver. Regardless. | 65 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4 SIGNIFICANT ACCOUNTING POLICIES CONTINUED Loans and payables This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit or loss. Leases Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liability. The cost of right-of-use assets includes the amount of lease liabilities recognised and initial direct costs incurred. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payment made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a change in the lease payments. Short-term leases and leases on low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term. Employees’ end of service benefits The Group provides end of service benefits to its employees in accordance with local labour laws. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment. The Group accounts for these benefits as a defined contribution plan under IAS 19. Treasury shares Treasury shares are held as a deduction from equity and are held at cost price. 66 | RA International | Annual Report 2020 Share based payments Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details of which are provided in note 13. That cost is recognised in employee benefits expense, included in administrative expenses, together with a corresponding increase in equity (share based payment reserve), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share. Contingencies Contingent liabilities are not recognised in the financial statements, they are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable. Foreign currencies The Group’s financial statements are presented in USD, which is the functional currency of all Group companies. Items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange prevailing at the reporting date. All differences are taken to profit or loss. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Foreign currency share capital (including any related share premium or additional paid-in capital) is translated using the exchange rates as at the dates of the initial transaction. The value is not remeasured. We deliver. Regardless. | 67 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 5 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES New and amended standards and interpretations Amendments and interpretations that apply for the first time in 2020 do not have a significant impact on the financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. Presentation of Statement of Consolidated Income The Company has modified the presentation of the Consolidated Statement of Comprehensive Income to reclassify holding company expenses as administrative expenses, so as to increase the similarity of presentation to sector comparators. The Company believes this provides a more meaningful basis for users of the financial statements. Prior period results have been restated accordingly, resulting in administrative expenses as previously disclosed in the prior period income statement increasing from USD 7,156,000 to USD 8,204,000 with no change to operating profit as a result of these reclassifications. Prior period underlying operating profit has decreased from USD 14,734,000 to USD 13,686,000 as a result of this reclassification. Current year holding company expenses amount to USD 1,140,000 and are included in administrative expenses. 6 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect the reported amount of assets and liabilities, revenue, expenses, disclosure of contingent liabilities, and the resultant provisions and fair values. Such estimates are necessarily based on assumptions about several factors and actual results may differ from reported amounts. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. a) Judgements Use of Alternative Performance Measures IAS1 requires material items to be disclosed separately in a way that enables users to assess the quality of a company’s profitability. In practice, these are commonly referred to as ‘exceptional’ items, but this is not a concept defined by IFRS and therefore there is a level of judgement involved in arriving at an Alternative Performance Measure (APM) which excludes such exceptional items. The Group refers to these as non-underlying items and considers items suitable for separate presentation that are outside normal operations and are material to the results of the Group either by virtue of size or nature. See note 9 for further details on specific balances which are classified as non-underlying items. b) Estimates and assumptions Percentage of completion The Group uses the output percentage-of-completion method when accounting for contract revenue on its long-term construction contracts. Use of the percentage-of-completion method requires the Group to estimate the progress of contracts based on surveys of work performed. The Group has determined this basis of revenue recognition is the best available measure on such contracts and where possible seeks customer verification of percentage-of-completion calculations as at financial reporting dates. The accuracy of percentage-of-completion estimates has a material impact on the amount of revenue and related profit recognised. As at 31 December 2020, USD 1,083,000 of accrued revenue had been calculated using the percentage-of-completion method (2019: USD 2,806,000), of which USD 398,000 is supported by customer verifications (2019: USD 884,000). Revisions to profit or loss arising from changes in estimates are accounted for in the period when the changes occur. IFRS 16 – interest rate In some jurisdictions where the Group holds long-term leases, the incremental borrowing rate is not readily determinable. As a result, the incremental borrowing rate is estimated with reference to risk adjusted rates in other jurisdictions where a market rate is determinable, and the Group’s cost of funding. 68 | RA International | Annual Report 2020 7 SEGMENTAL INFORMATION For management purposes, the Group is organised into one segment based on its products and services, which is the provision of services in demanding and remote areas. Accordingly, the Group only has one reportable segment. The Group’s Chief Operating Decision Maker (CODM) monitors the operating results of the business as a single unit for the purpose of making decisions about resource allocation and assessing performance. The CODM is considered to be the Board of Directors. Operating segments Revenue, operating results, assets, and liabilities presented in the financial statements relate to the provision of services in demanding and remote areas. Revenue by service channel: Integrated facilities management Construction Supply chain services Revenue by recognition timing: Revenue recognised over time Revenue recognised at a point in time 2020 USD’000 2019 USD’000 31,265 19,085 14,091 64,441 28,600 27,634 12,830 69,064 2020 USD’000 2019 USD’000 40,118 24,323 64,441 38,450 30,614 69,064 Geographic segment The Group primarily operates in Africa and as such the CODM considers Africa and Other locations to be the only geographic segments of the Group. The below geography split is based on the location of project implementation. Revenue by geographic area of project implementation: Africa Other Non-current assets by geographic area: Africa Other Revenue split by customer Customer A Customer E Customer F Customer D Customer G Customer B Customer C Other 2020 USD’000 2019 USD’000 61,161 3,280 64,441 68,735 329 69,064 2020 USD’000 2019 USD’000 47,687 3,337 51,024 27,527 1,127 28,654 2020 % 2019 % 24 10 10 9 9 7 4 27 100 30 3 2 6 9 13 11 26 100 We deliver. Regardless. | 69 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 8 GROUP INFORMATION The Company operates through its subsidiaries, listed below, which are legally or beneficially, directly or indirectly owned and controlled by the Company. The extent of the Company’s beneficial ownership and the principal activities of the subsidiaries are as follows: Name of the entity RA Africa Holdings Limited Country of incorporation British Virgin Islands 100% Beneficial ownership Registered address RA Asia Holdings Limited British Virgin Islands 100% RASB Holdings Limited British Virgin Islands 100% RA International Limited Cameroon 100% RA International RCA Central African Republic 100% RA International Chad Chad RA International DRC SARL Democratic Republic of Congo RA Property ApS Denmark RA International Guyana Inc. Guyana Raints Kenya Limited Kenya RA International Limited Malawi Raints Mali Mali RA International Limitada Mozambique Royal Food Solutions S.A Mozambique RA International Niger Niger 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 70 | RA International | Annual Report 2020 3rd floor, J&C Building, PO Box 362, Road Town, Torola Virgin Islands (British) VG110 3th floor, J&C Building, PO Box 362, Road Town, Torola Virgin Islands (British) VG110 3th floor, J&C Building, PO Box 362, Road Town, Torola Virgin Islands (British) VG110 537 Rue Njo-Njo, Bonaprisi, PO Box 1245, Douala, Cameroon Avenue des Martyrs, Bangui, Central African Republic N'djamena, Chad Kinshasa, Sis No106, Boulevard Du 30 Juin, Dans La Commune De La Gombe EN RD, Congo Tuborg Boulevard 12, 4 DK- 2900 Helerup, Denmark 210 New Market Street, Georgetown, Guyana 770 Faith Ave, Runda Estate, Nairobi City (North), Nairobi, Kenya Hanover House, Hanover Avenue, Independence Drive, Blantyre, Malawi Bamako-Niarela Immeuble Sodies Appartement C/7, Mali Distrito KAMPFUMO, Bairro Sommarchield, Rua. Jose Graverinha, no 198, R/C, Maputo, Mozambique Distrito Urbano 1, Bairro Central, Rua do Sol, 23 Maputo, Mozambique Niamey, Quartier Cite Piudriere, Avenue du Damergou, CI-48, Niger Beneficial ownership Registered address Name of the entity RA Contracting and Facility Management LLC Country of incorporation Qatar RA International* Somalia RA International FZCO South Sudan Reconstruction and Assistance Company Ltd Sudan RA International Limited Tanzania RA International FZCO UAE RA International General Trading LLC RA SB Ltd. RA International Global Operations Limited UAE UAE UK RA International Limited Uganda REMSCO Uganda (SMC) Limited Uganda 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Berkshire General Insurance Limited United States of America 100% * RA International in Somalia is not an incorporated legal entity. 63 Aniza, Doustor St. 905, Salam International, Qatar Mogadishu, Somalia Plot no. 705, Block 3-K South, , Airport Road, Hai Matar South Sudan 115 First Quarter Graif west- Khartoum, Kharthoum, Republic of Sudan 369 Toure Drive, Oysterbay, PO Box 62, Dar Es Salaam, Tanzania Office Number S101221O39, Jebel Ali Free Zone, Dubai, United Arab Emirates Building 41, 3B Street, Al Quoz Industrial Area 1, PO Box 115774, Dubai, United Arab Emirates RAK International Corporate Centre, Ras Al Khaimah, United Arab Emirates 1 Fleet Place, London, EC4M 7WS, United Kingdom 4th Floor, Acacia Mall, Plot 14-18, Cooper Road, Kololo, Kampala, Uganda 4th Floor, Acacia Mall, Plot 14-18, Cooper Road, Kololo, Kampala, Uganda 1 Church Street, 5th Floor, Burlington, Chittenden, Vermont, 05401, United States of America We deliver. Regardless. | 71 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 9 PROFIT FOR THE PERIOD Profit for the period is stated after charging: Staff costs Materials Depreciation Holding company expenses Staff costs relate to wages and salaries plus directly attributable expenses. Non-underlying items Acquisition costs COVID-19 costs Restructuring costs Other share based payments (note 13) 2020 USD’000 2019 USD’000 19,845 17,571 3,731 1,140 21,775 20,671 2,577 1,048 2020 USD’000 2019 USD’000 175 1,433 269 1,169 3,046 46 — — — 46 Acquisition costs Costs incurred by the Group related to potential corporate acquisitions are expensed as incurred. Acquisition costs mainly comprise professional fees and travel costs. The acquisition of new companies is not considered to be part of the Group’s normal operations, and therefore management has chosen to disclose these costs separately on the basis as that outlined above. COVID-19 costs These costs were incurred due to the COVID-19 pandemic and almost entirely comprise of incremental staff costs. These incremental staff costs primarily relate to staff salaries paid to employees unable to work due to local lockdowns or international travel restrictions preventing their access to worksites (USD 853,000) and discretionary payments made to employees working throughout the pandemic (USD 388,000). All payments made were non-contracted and at the discretion of executive management. Incremental project costs associated with PPE consumption and COVID-19 testing are also included in this balance (USD 192,000). General inefficiencies experienced as a result of COVID-19 have not been included given the high level of judgement inherent in undertaking this exercise and as a result, continue to be included within cost of sales. Restructuring costs In 2020, the Group closed two offices in the United Arab Emirates and consolidated all country staff into a larger corporate office (Head Office). In addition, the Group relocated staff from other geographical locations to Head Office. The Group anticipates the increased centralisation of its project management, support, and administrative functions to both improve executional capabilities through increased communication, and result in cost savings as the Group continues to grow. This restructuring exercise was completed in 2020 and is considered to be non-recurring. Auditor compensation 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 Additional fee for the prior year audit of the Group annual accounts Total audit fees Non-audit related services Total non-audit fees 72 | RA International | Annual Report 2020 2020 USD’000 2019 USD’000 — 138 72 45 255 — — 25 115 60 — 200 54 54 10 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 Share based payments 2020 7 6 1,645 1,658 2019 7 6 1,763 1,776 2020 USD’000 2019 USD’000 18,200 95 1,299 19,594 17,466 77 31 17,574 The remuneration of the Directors and other key management personnel of the Group are detailed in note 30. 11 TAX The tax charge on the profit for the year is as follows: Current tax: UK corporation tax on profit for the year Non-UK corporation tax Adjustment for prior years Tax charge for the year 2020 USD’000 2019 USD’000 — 61 — 61 — 240 144 384 Factors affecting the tax charge The tax assessed for the year varies from the standard rate of corporation tax in the UK. The difference is explained below: Profit before tax Expected tax charge based on the standard average rate of corporation tax in the UK of 19% (2019: 19%) Effects of: Deferred tax asset not recognised Exemptions and foreign tax rate difference Adjustment for prior years Tax charge for the year 2020 USD’000 2019 USD’000 6,627 1,259 13,259 2,519 102 (1,300) — 61 86 (2,365) 144 384 The main UK corporation tax rate reduced from 20% to the current rate of 19% on 1 April 2017. The Finance Act 2016 includes legislation to reduce the tax rate further to 17% from 1 April 2020. This became law when The Finance Act 2016 received Royal Assent on 15 September 2016. Following the budget resolution on 17 March 2020, the main UK corporation tax will remain at 19% from 1 April 2020 (cancelling the enacted cut to 17%) therefore a rate of 19% as been applied. The Group benefits from tax exemptions granted to its customers who are predominantly governments and large intragovernmental organisations, as well as zero corporate tax rates in certain countries of operation. The CODM is not aware of any factors that indicate the tax rates in these countries will materially change in future periods or that tax exemptions granted will no longer be available to the Group. We deliver. Regardless. | 73 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 12 EARNINGS PER SHARE The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Profit for the period (USD’000) Basic weighted average number of ordinary shares Effect of employee share options Diluted weighted average number of shares Basic earnings per share (cents) Diluted earnings per share (cents) 13 SHARE BASED PAYMENT EXPENSE The Group recognised the following expenses related to equity-settled payment transactions: Performance share plan Employee retention share plan Other share based payments 2020 2019 6,566 12,875 172,451,137 173,575,741 1,407,232 — 173,858,369 173,575,741 3.8 3.8 7.4 7.4 2020 USD’000 2019 USD’000 31 99 1,169 1,299 31 — — 31 Performance Share Plan On Admission, 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. Employee Retention Share Plan In October 2020, the Company introduced an Employee Retention Share Plan (“ERSP”) and granted share options to a number of senior employees. Awards vest annually subject to continuous employment. There are no TSR linked vesting conditions associated with these options. At 31 December, the following unexercised share options to acquire ordinary shares under the PSP and ERSP were outstanding: Year of grant 2018 2020 Share plan Vesting date Exercise price GBP Number of options 2020 Number of options 2019 PSP ERSP ERSP ERSP 29 June 2021 1 May 2021 1 May 2022 1 May 2023 0.10 0.10 0.10 0.10 2,065,216 2,826,085 — — — 3,811,540 2,826,085 291,054 582,108 873,162 74 | RA International | Annual Report 2020 Outstanding at 1 January Granted during the year Forfeited during the year Outstanding at 31 December Number of options 2020 2,826,085 1,843,047 (857,592) 3,811,540 Weighted average exercise price 2020 GBP Number of options 2019 0.10 2,826,085 — 0.10 0.10 — 0.10 2,826,085 Weighted average exercise price 2019 GBP 0.10 — — 0.10 Options issued under the PSP were valued using the Monte Carlo Simulation model using the following inputs: Weighted average share price Expected volatility Risk free rate 56p (USD 0.74) 10.10% 1.24% This method is considered to be the most appropriate for valuing options granted under schemes where there are changes in performance conditions by which the options are measured, such as for TSR based awards. The fair value of the options at the grant date was USD 96,000 and a charge of USD 31,000 (2019: USD 31,000) was recognised in administrative expenses for the fiscal year ended 2020. Options issued under the ERSP were valued using the Black Scholes model using the following inputs: Weighted average share price Expected volatility Risk free rate 49p (USD 0.64) 49.70% 0.00% The fair value of the options at the grant date was USD 722,000. A charge of USD 35,000 (2019: nil) was recognised in cost of sales and USD 64,000 (2019: nil) was recognised in administrative expenses for the fiscal year ended 2020. The expected volatility input utilised represents the historic volatility of the share price of the Company since Admission. Other share based payments On 19 October 2020, the Company agreed to issue a total of 1,840,449 restricted Ordinary Shares (the “Restricted Shares”) to senior members of staff, including certain persons discharging managerial responsibilities. The Restricted Shares are subject to a six month lock-in from the date of issue, during which they cannot be sold or transferred. Ordinary Shares issued pursuant to the award of the Restricted Shares were satisfied from the pool of Ordinary Shares held in Treasury. The fair value of the shares on the grant date was GBP 0.49 (USD 0.64) per share. A charge of USD 1,169,000 (2019: nil) was recognised as a non-underlying item given the non-reoccurring nature of this transaction and since the discretionary awards are not part of the formal share based payment performance plan of the Company Warrants On Admission, in exchange for brokerage services provided to the Company during its IPO, the Company issued a warrant instrument granting its primary broker the right to subscribe for 671,514 ordinary shares of the Company. The warrants are exercisable for five years from the date of Admission at a subscription price of GBP 0.728 (USD 0.923) per ordinary share. They are non-transferrable and are subject to typical anti-dilution rights to adjust on a proportional basis for share consolidations, share splits and stock dividends. The Company used the Black-Scholes model to value the warrants at the grant date. The fair value of the warrants is nil. 14 DIVIDENDS During the period, a dividend of 1.25 pence (USD 0.02) per share (173,575,741 shares) totalling GBP 2,170,000 (USD 2,674,000) was declared and paid (2019: 1 pence (USD 0.01) per share (173,575,741 shares) totalling GBP 1,736,000 (USD 2,203,000)). We deliver. Regardless. | 75 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 15 ALTERNATIVE PERFORMANCE MEASURES APMs used by the Group are defined below along with a reconciliation from each APM to its IFRS equivalent, and an explanation of the purpose and usefulness of each APM. APMs are non-IFRS measures. In general, APMs are presented externally to meet investors’ requirements for further clarity and transparency of the Group’s financial performance. APMs are also used internally by management to evaluate business performance and for budgeting and forecasting purposes. Profit Tax expense Profit before tax Finance costs Investment income Operating profit Non-underlying items Underlying operating profit Share based payment expense Depreciation Underlying EBITDA 2020 USD’000 2019 USD’000 6,566 61 6,627 970 (278) 7,319 3,046 10,365 130 3,731 14,226 12,875 384 13,259 675 (294) 13,640 46 13,686 31 2,577 16,294 Underlying Operating Profit (“UOP”) The Group uses UOP as an alternative measure to Operating Profit to allow comparison of the profitability of its operations across financial periods. UOP is calculated as Operating Profit adjusted for costs which are considered to be unrelated to the Group’s underlying trading performance. Underlying Operating Margin is calculated as UOP divided by revenue. Underlying EBITDA Management defines Underlying EBITDA as Operating Profit adjusted for depreciation, share based payments, and costs which are considered to be unrelated to the Group’s underlying trading performance. Underlying EBITDA facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures, tax positions and the age and booked depreciation on assets. The Group has introduced this APM in the current year for the reasons stated above. Underlying EPS Underlying EPS reflects underlying operating profit after deducting net finance costs and taxation, divided by the weighted average number of ordinary shares outstanding during the period. This alternative measure of EPS enables shareholder return from the underlying business operations to be better evaluated across periods. Reported EPS, basic Impact of non-underlying items Underlying EPS, basic Reported EPS, diluted Impact of non-underlying items Underlying EPS, diluted 2020 cents 2019 cents 3.8 1.8 5.6 3.8 1.7 5.5 7.4 — 7.4 7.4 — 7.4 Net Cash Net cash represents cash less overdraft balances, term loans and notes outstanding. This is a commonly used metric, helpful to stakeholders when analysing the business. 76 | RA International | Annual Report 2020 16 PROPERTY, PLANT, AND EQUIPMENT Cost: At 1 January 2020 Additions Disposals At 31 December 2020 Depreciation: At 1 January 2020 Charge for the year Relating to disposals At 31 December 2020 Net carrying amount: At 31 December 2020 Cost: At 1 January 2019 Additions Disposals At 31 December 2019 Depreciation: At 1 January 2019 Charge for the year Relating to disposals At 31 December 2019 Net carrying amount: At 31 December 2019 Right-of-use assets - land and buildings USD’000 Machinery, motor vehicles, furniture and equipment USD’000 Land and buildings USD’000 Leasehold improvements USD’000 Total USD’000 3,375 1,768 — 5,143 940 675 — 1,615 16,605 22,372 (4) 14,892 1,206 (601) 38,973 15,497 1,475 961 (4) 2,432 4,290 2,030 (566) 5,754 471 872 (151) 1,192 122 65 (69) 118 35,343 26,218 (756) 60,805 6,827 3,731 (639) 9,919 3,528 36,541 9,743 1,074 50,886 Right-of-use assets - land and buildings USD’000 Machinery, motor vehicles, furniture and equipment USD’000 Land and buildings USD’000 Leasehold improvements USD’000 Total USD’000 2,814 561 — 9,605 7,288 (288) 10,515 5,090 (713) 3,375 16,605 14,892 585 355 — 940 888 606 (19) 1,475 3,233 1,549 (492) 4,290 451 20 — 471 55 67 — 122 23,385 12,959 (1,001) 35,343 4,761 2,577 (511) 6,827 2,435 15,130 10,602 349 28,516 During the year, capitalised interest of USD 136,000 was included in Land and Buildings (2019: nil), representing 100% of borrowing costs. Information related to lease liabilities is available in note 24. The table below indicates the rents resulting from lease contracts which are not capitalised and are therefore expensed in the year. Short-term leases 2020 USD’000 2019 USD’000 1,112 1,599 Short-term leases include amounts paid for vehicles and heavy equipment rental, as well as short-term property leases. We deliver. Regardless. | 77 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 17 GOODWILL As at 1 January Acquisitions As at 31 December 18 INVENTORIES Materials and consumables Goods-in-transit There was no write down to NRV made in relation to inventory as at 31 December 2020 (2019: nil). 19 TRADE AND OTHER RECEIVABLES Trade receivables Accrued revenue Deposits Prepayments Other receivables 2020 USD’000 2019 USD’000 138 — 138 — 138 138 2020 USD’000 2019 USD’000 8,166 976 9,142 4,839 1,339 6,178 2020 USD’000 2019 USD’000 7,319 2,410 116 1,021 1,800 10,820 10,916 221 1,381 1,182 12,666 24,520 Invoices are generally raised on a monthly basis, upon completion, or part completion of performance obligations as agreed with the customer on a contract-by-contract basis. During the year 100% of accrued revenue was subsequently billed and transferred to trade receivables from the opening unbilled balance in the period (2019: 100%). As at 31 December the transaction price allocated to remaining performance obligations was USD 187,000,000 (2019: USD 141,000,000). This represents revenue expected to be recognised in subsequent periods arising on existing contractual arrangements. The Group has not taken the practical expedient in IFRS 15.121 not to disclose information about performance obligations that have original expected durations of one year or less and therefore no consideration from contracts with customers is excluded from these amounts. All revenue is expected to be recognised within the next 5 years. As at 31 December the ageing of trade receivables was as follows: Not past due Overdue by less than 30 days Overdue by between 30 and 60 days Overdue by more than 60 days 2020 USD’000 2019 USD’000 5,184 938 653 544 7,319 7,396 1,058 1,383 983 10,820 Trade receivables are non-interest bearing and generally have payment terms of 30 days. No ECL was recorded as at 31 December 2020 (2019: nil) and all receivables are expected, on the basis of past experience, to be fully recoverable. 78 | RA International | Annual Report 2020 20 CASH AND CASH EQUIVALENTS Cash and cash equivalents in the consolidated statement of financial position comprised of cash at bank of USD 17,632,000 (2019: USD 21,393,000). 21 SHARE CAPITAL Authorised, issued and fully paid 173,575,741 shares (2019: 173,575,741 shares) of GBP 0.10 (2019: GBP 0.10) each 2020 USD’000 2019 USD’000 24,300 24,300 22 TREASURY SHARES As at 1 January Acquired in the period Issued in the period (note 13) As at 31 December 23 LOAN NOTES The table below summarises the loan notes: As at 1 January Additions As at 31 December 2020 Number 2020 USD’000 2019 Number 2019 USD’000 — 3,868,000 (1,840,449) 2,027,551 — 2,600 (1,237) 1,363 — — — — — — — — 2020 USD’000 2019 USD’000 — 6,471 6,471 — — — During the year loan notes were issued to retail investors. These notes carry an annual fixed interest rate of 7.00% (2019: nil) for GBP denominated notes and 7.50% (2019: nil) for USD denominated notes. The term of the note issuance is 24 months with principal to be repaid as a bullet payment upon maturity. Interest is paid on a quarterly basis, semi-annual basis, or at maturity, at the option of the investor. At 31 December 2020, USD 387,000 (2019: nil) was included in Other Receivables relating to loan notes committed but where cash was not yet received This cash was received shortly after year end. Current Non-current 2020 USD’000 2019 USD’000 — 6,471 — — We deliver. Regardless. | 79 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 24 LEASE LIABILITIES Movements in the provision recognised in the consolidated statement of financial position are as follows: As at 1 January Additions Interest Payments As at 31 December Current Non-current 2020 USD’000 2019 USD’000 2,834 1,768 533 (1,097) 4,038 318 3,720 2,643 561 493 (863) 2,834 437 2,397 Interest of USD 533,000 (2019: USD 493,000) relating to the above lease liabilities has been included in Finance Costs for the year. As at 31 December the maturity profile of lease liabilities was as follows: 3 months or less 3 to 12 months 1 to 5 years Over 5 years 2020 USD’000 2019 USD’000 92 226 2,000 1,720 4,038 332 105 795 1,602 2,834 The Group had total cash outflows relating to leases of USD 2,209,000 in 2020 (2019: USD 2,462,000). This is the total of short-term lease payments from note 16 and payments from note 24. 25 EMPLOYEES’ END OF SERVICE BENEFITS Movements in the provision recognised in the consolidated statement of financial position are as follows: As at 1 January Provided during the year End of service benefits paid As at 31 December 26 TRADE AND OTHER PAYABLES Accounts payable Accrued expenses Accrued tax expense Customer advances 2020 USD’000 2019 USD’000 391 209 (83) 517 350 174 (133) 391 2020 USD’000 2019 USD’000 5,163 1,931 182 88 7,364 5,342 1,705 150 840 8,037 All customer advances recorded at 31 December 2019 were subsequently recognised as revenue in 2020 and all customer advances held at 31 December 2020 were subsequently recognised as revenue in 2021. 80 | RA International | Annual Report 2020 27 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES Non-current liabilities Loan notes Lease liabilities Current liabilities Loan notes Lease liabilities Non-current liabilities Loan notes Lease liabilities Current liabilities Loan notes Lease liabilities 1 January 2020 USD’000 Cash flows USD’000 New leases USD’000 Other USD’000 31 December 2020 USD’000 — 6,084 2,397 — 437 — — (1,097) — 1,642 — 126 2,834 4,987 1,768 387 (319) 6,471 3,720 — 852 920 — 318 10,509 1 January 2019 USD’000 Cash flows USD’000 New leases USD’000 Other USD’000 31 December 2019 USD’000 — 2,532 — 111 2,643 — — — (863) (863) — 301 — 260 561 — (436) — 929 493 — 2,397 — 437 2,834 The ‘Other’ column includes the effect of reclassification of non-current portion of leases to current due to the passage of time, the effect of contracted loan note amounts not yet received, and the effect of accrued interest not yet paid. 28 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group was not exposed to any significant interest rate risk on its interest-bearing liabilities. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities when revenue or expenses are denominated in a different currency from the Group’s functional currency, as well as cash and cash equivalents held in foreign currency accounts. At 31 December 2020, the Group held foreign cash and cash equivalents of GBP 2,270,000 (USD 3,099,000). Additionally, the Group held GBP denominated loans of GBP 982,000 (USD 1,341,000). UK pound sterling is primarily held by the Group to settle payment obligations denominated in GBP. As at 31 December 2019, the Group held GBP 2,040,000 (USD 2,689,000) and had nil GBP denominated loans. The Group’s exposure to foreign currency variances for all other currencies is not material. Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group is exposed to credit risk on its bank balances and receivables. The Group seeks to limit its credit risk with respect to banks by only dealing with reputable banks as determined by the CODM and with respect to customers by only dealing with creditworthy customers and continuously monitoring outstanding receivables. The Company’s five largest customers account for 54% of outstanding accounts receivable at 31 December 2020 (2019: 73%). We deliver. Regardless. | 81 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 28 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED Receivables split by customer Customer D Customer E Customer B Customer F Customer A Customer C Other 2020 % 2019 % 16 15 14 12 7 3 33 2 — 12 9 31 29 17 100 100 No material credit risk is deemed to exist due to the nature of the Group’s customers, who are predominantly governments and large intragovernmental organisations. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group limits its liquidity risk by ensuring bank facilities are available. The Group’s terms of sale generally require amounts to be paid within 30 days of the date of sale. Trade payables are settled depending on the supplier credit terms, which are generally 30 days from the date of delivery of goods or services. As at 31 December the maturity profile of trade payables and loan notes was as follows: As at 31 December 2020 Loan notes Trade payable As at 31 December 2019 Loan notes Trade payable Less than 3 months USD’000 3 to 12 Months USD’000 3 to 12 Months USD’000 12 to 24 Months USD’000 — 5,163 5,163 — — — — — — 6,471 — 6,471 Less than 3 months USD’000 3 to 12 Months USD’000 3 to 12 Months USD’000 12 to 24 Months USD’000 — 5,333 5,333 — 9 9 — — — — — — Total USD’000 6,471 5,163 11,634 Total USD’000 — 5,342 5,342 Liabilities falling due within 12 months are recognised as current on the consolidated statement of financial position. Liabilities falling due after 12 months are recognised as non-current. The unutilised bank overdraft facilities at 31 December 2020 amounted to USD 2,000,000 (2019: USD 2,000,000) and carry interest of 1M LIBOR +3.50% per annum (2019: 1M LIBOR +3.50%). The Group manages its liquidity risk by maintaining significant cash reserves. The Group’s cash and cash equivalents balance is substantially all held in institutions holding a Moody’s long-term deposit rating of A1 or above. 82 | RA International | Annual Report 2020 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 2020. Capital comprises share capital, share premium, merger reserve, treasury shares, share based payment reserve and retained earnings and is measured at USD 72,074,000 as at 31 December 2020 (2019: USD 69,483,000). 29 RELATED PARTY DISCLOSURES Related parties represent shareholders, Directors and key management personnel of the Group, and entities controlled, jointly controlled, or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management. There were no transactions with related parties during the year (2019: nil). No outstanding balances with related parties are included in the consolidated statement of financial position at 31 December 2020 (2019: nil). 30 COMPENSATION Compensation of key management personnel The remuneration of key management during the year was as follows: Short-term benefits Stock-based compensation 2020 USD’000 2019 USD’000 1,734 1,200 2,934 1,628 31 1,659 The key management personnel comprise of 6 (2019: 6) individuals. Included in key management personnel are 3 (2019: 3) Directors. Compensation of Directors The remuneration of Directors during the year was as follows: Short-term benefits Stock-based compensation Highest paid Director The remuneration of the highest paid Director during the year was as follows: Short-term benefits Stock-based compensation 2020 USD’000 2019 USD’000 1,312 340 1,652 1,291 14 1,305 2020 USD’000 2019 USD’000 276 340 616 423 — 423 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 No other standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are expected to have a material impact on the Group. We deliver. Regardless. | 83 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCOMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 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 Treasury shares Share based payment reserve Retained earnings Total equity Current liabilities Trade and other payables Total equity and liabilities Notes 2020 USD’000 2019 USD’000 50,047 50,047 4 5 6 7 8,009 933 8,942 58,989 24,300 18,254 9,897 (1,363) 177 7,578 58,843 146 58,989 12,675 645 13,320 63,367 24,300 18,254 9,897 — 47 10,788 63,286 81 63,367 The Company has taken the exemption conferred by section 408 of the Companies Act 2006 not to publish the profit and loss of the Parent Company within these accounts. The result for the Company for the year was a loss of USD 536,000 (2019: profit of USD 14,552,000). The financial statements of the Company (registration number 11252957) were approved by the Board of Directors on 30 March 2021 and signed on its behalf by: Soraya Narfeldt CEO Andrew Bolter CFO The attached notes 1 to 8 form part of the Financial Statements. 84 | RA International | Annual Report 2020 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 As at 1 January 2019 Total comprehensive income for the period Share based payments Dividends declared and paid Share capital USD’000 24,300 Share premium USD’000 18,254 Merger reserve USD’000 9,897 — — — — — — — — — As at 31 December 2019 24,300 18,254 9,897 Total comprehensive income for the period Share based payments Dividends declared and paid Purchase of treasury shares (note 6) Issuance of treasury shares (note 6) — — — — — — — — — — — — — — — Share based payment reserve USD’000 Treasury shares USD’000 — — — — — — — — (2,600) 1,237 16 — 31 — 47 — 130 — — — Retained earnings USD’000 Total USD’000 (1,561) 50,906 14,552 14,552 — 31 (2,203) (2,203) 10,788 63,286 (536) — (536) 130 (2,674) (2,674) — — (2,600) 1,237 As at 31 December 2020 24,300 18,254 9,897 (1,363) 177 7,578 58,843 We deliver. Regardless. | 85 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 1 BASIS OF PREPARATION The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and the Companies Act 2006), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS101) under the historical cost basis and have been presented in USD, being the functional currency of the Company. The Company has applied a number of exemptions available under FRS 101. Specifically, the requirement(s) of: (a) paragraphs 91-99 of IFRS 13 Fair Value Measurement, (b) paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of paragraph 79(a)(iv) of IAS 1, (c) paragraphs 10(d), 10(f), and 134-136 of IAS 1 Presentation of Financial Statements, (d) IAS 7 Statement of Cash Flows, (e) 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, (f) 17 of IAS 24 Related Party Disclosures and IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member, and (g) paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets. 2 SIGNIFICANT ACCOUNTING POLICIES Except noted below, all accounting policies applied to the Company are consistent with that of the Group. Investments Investments held by the company are stated at cost less provision for diminution in value. 3 EMPLOYEE EXPENSES The average number of employees employed during the period was: Directors The aggregate remuneration of the above employees was: Wages and salaries Social security costs 4 TRADE AND OTHER RECEIVABLES Prepayments Due from subsidiary VAT recoverable 2020 7 2019 7 2020 USD’000 2019 USD’000 410 46 456 400 45 445 2020 USD’000 2019 USD’000 83 7,878 48 27 12,636 12 8,009 12,675 Amounts due from subsidiary represent amounts due from RA International FZCO, an immediate subsidiary, and are non- interest bearing and payable on demand. 86 | RA International | Annual Report 2020 5 SHARE CAPITAL Authorised, issued, and fully paid: Ordinary shares of GBP 0.10 each 6 TREASURY SHARES As at 1 January Acquired in the period Issued in the period As at 31 December 7 TRADE AND OTHER PAYABLES Trade payables Accruals 2020 Number 2020 USD’000 2019 Number 2019 USD’000 173,575,741 24,300 173,575,741 24,300 2020 Number 2020 USD’000 2019 Number 2019 USD’000 — 3,868,000 (1,840,499) 2,027,501 — 2,600 (1,237) 1,363 — — — — — — — — 2020 USD’000 2019 USD’000 44 102 146 19 62 81 8 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. We deliver. Regardless. | 87 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSHAREHOLDER INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2020 CORPORATE INFORMATION 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 8 June 2021 ADVISERS: Nominated adviser and broker Canaccord Genuity Limited 88 Wood Street London EC2V 7QR Solicitors to the Company Dentons UK and Middle East LLP One Fleet Place London EC4M 7WS Auditors Ernst & Young LLP 144 Morrison St Edinburgh EH3 8EX Investor and media relations Bamburgh Capital Limited 50 Brown Street Manchester M2 2JT Registrars To 30 April 2021: Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ From 1 May 2021: Equiniti Limited Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA Company Secretary To 30 April 2021: AMBA Secretaries Limited 400 Thames Valley Park Drive Reading RG6 1PT From 1 May 2021: Elemental Company Secretary Limited 27 Old Gloucester Street London WC1N 3AX 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 reports. For investor queries please email: investors@raints.com 88 | RA International | Annual Report 2020 Designed and Printed by Perivan Contents Highlights Chair’s statement STRATEGIC REPORT RA International at a glance Business model Our markets Our strategy Stakeholders and Section 172 statement Key performance indicators Operating review Financial review Risk management CORPORATE GOVERNANCE Board of Directors Executive Management Team Chair’s corporate governance statement Review of the Board’s effectiveness Directors’ report Directors’ responsibility statement Remuneration Committee report Audit Committee report FINANCIAL REPORT Independent Auditor’s report Consolidated statement of comprehensive income Consolidated statement of financial position 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 1 2 4 8 10 12 14 16 18 21 25 30 32 33 37 38 40 41 44 48 56 57 58 59 60 84 85 86 88 Annual Report 2020 R A I N T E R N A T I O N A L A N N U A L R E P O R T 2 0 2 0 WWW.RAINTS.COM We deliver. Regardless. 

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