AAI.L Regulatory News (AAI)

Atlas Development & Support Services Limited / Ticker: ADSS / Index: AIM / Sector: Support Services

17 July 2015

Atlas Development & Support Services Limited

('Atlas Development' or the 'Company')

Trading Update

Atlas Development (AIM, NSE: ADSS), the Kenyan headquartered, African focussed support services and logistics company, provides a trading update for the six month period to 30 June 2015 and announces an expansion in strategy.

Overview:

· Projected revenue for H1 2015 in line with expectations with turnover of US$11.0m. H1 pre-tax losses anticipated of approximately US$2.5m

· Pressures on revenues and margin from oil & gas industry customers mean projected revenues for H2 2015 expected to be significantly below expectations, resulting in an anticipated loss before tax for the 12 months to 31 December 2015

· Substantial cost rationalisation programme on-going - cash position of US$6.1 million as of 30 June 2015

· Significant progress is being made refocussing the business towards non-oil & gas related services, with contract awards in geothermal and civil engineering

· Good progress made in the generation of new business leads with the potential project pipeline - across multiple sectors - now in excess of US$500 million for work in 2016 and 2017

· To supplement and strengthen local presence and to support business development and growth, the Company is currently reviewing a select group of Kenyan candidates for a non-executive role

Carl Esprey, Chief Executive Officer of Atlas Development, said: "Our management focus has always been to build a cross-sector support services business in East Africa, to capitalise on the huge corporate and government investment initiatives across the region. The impact of the decline in oil prices has increased the urgency of that task. Ambitious businesses of this nature are not built overnight. We are making substantial progress and are hopeful that 2016 will be a year of growth in new areas for the Company."

Trading in H1 2015

Results for the period to 30 June 2015 are expected to be released on or around 15 September 2015; turnover of US$11.0m and pre-tax losses of US$2.5m are expected. Cash at bank was US$6.1 million as of 30 June 2015.

With regards to operations, contract conversions have been achieved in the geothermal, civil engineering, oil & gas and mining spaces including a US$1m contract in Ethiopia which further builds Atlas Development's regional profile.

However, during the period it became clear that the downturn in the oil sector was not going to be as short-lived as had been expected, with decisions on tenders and allocation of new contracts being delayed or cancelled. As a result the Company has initiated important cost rationalisation programmes to correctly position the business until such time as projects re-emerge in the established support services sectors, spending in the oil sector returns or projects in alternative sectors come on-stream. In particular, the employee headcount has been reduced significantly and savings have been identified in areas of discretionary spending. The Company has incurred non-recurring restructuring costs of approximately US$1.0 million in H1 2015 and additionally anticipates approximately US$1.8 million in H2 2015. The reduction in employee headcount particularly in Kenya is primarily due to the lower volumes of oil and gas exploration work being conducted in north west Kenya, the Company's principal area of operations. Results for the period will also be impacted by foreign exchange losses resulting from the depreciation of the Kenyan shilling against the US dollar.

The Company continued to make good progress with tender awards, although fewer invitations to tender have been issued and the value of those which have been issued reflect reduced project values and thereby reduce the scope for margins.

Trading in H2 2015

With 65 percent of Atlas Development's revenue originating from the oil & gas sector, operations have been materially affected by the downturn in exploration and development activities resulting from the fall in the oil price. Existing and potential clients are making substantial reductions in their exploration spending and the Company's trading results will reflect these cuts. Consequently, management are reducing their expectations for trading in H2 2015 and anticipate the Company making a loss for the 12 month period to 31 December 2015. The Company expects cash at bank at the year end to be in the region of US$2.0-2.5 million.

Business Development and Strategy Expansion

The Company's business development focus during the period has been to diversify its offering, target new sectors of operation and reduce the impact of the negative oil price environment and associated cut-backs. Good progress has been made in the generation of new business leads with the potential project pipeline now at in excess of US$500 million for work to be carried out in 2016 and 2017. One of the principal goals of the cost cutting programme has to been to retain sufficient capacity to meet the requirements of the pipeline of contracts. The Company anticipates being able to update shareholders in Q4 2015.

Outlook

East Africa continues to offer significant opportunities for a professional and scalable support services business. The region is in the process of undergoing rapid development, with numerous large scale infrastructure, geothermal, power and other substantial development projects being executed.

The Company is taking significant corporate initiatives to build its reputation, profile and scalability. The Kenyanisation of the business and the cross listing of the Company's share capital on the Nairobi Securities Exchange's GEMS market has been highly beneficial and a crucial step in distinguishing Atlas Development from its competitors; international companies implementing projects in Kenya need to have a local partner, a status for which Atlas qualifies by virtue of its local listing in Kenya. Additionally, new Kenyan budget initiatives have been launched under the slogan "Buy Kenyan, Build Kenyan"; another factor that will benefit the Company going forward. To supplement and strengthen its local business presence and support, the Company is currently reviewing a select group of potential non-executive director candidates to take up positions on the Board.

** ENDS **

For further information please visit www.atlassupport.com or contact:

Notes to Editors

Atlas Development is a support services and logistics company with operations spanning Kenya, Mozambique, Tanzania, Ethiopia, Djibouti and Western Sahara.

Its three core divisions are delineated as follows:

· Atlas Technical: civil engineering, workforce accommodation and construction

· Atlas Services: medical and facilities management

· Atlas Logistics: fuel solutions, storage and transportation

Through these three core divisions, Atlas Development provides turn-key support for a range of major energy and natural resource exploration and development companies operating across East Africa. The market opportunity for a company such as Atlas Development is highly attractive, and the Board believe there is considerable opportunity to leverage the Company's established position to further expand its operational footprint across sub-Saharan Africa and diversify its service offering to provide additional long-term visible revenue streams.