Ra Internation. Regulatory News (RAI)

1 April 2020

This announcement contains inside information

RA INTERNATIONAL GROUP PLC

("RA International" or the "Company")

COVID-19 update

RA International Group PLC (AIM: RAI), a leading provider of services to remote locations in Africa and the Middle East, announces today the impact of COVID-19 on its business and operations.

Since the COVID-19 outbreak began, RA International has been assessing the potential effects the pandemic may have on its business, and that of its clients and suppliers. Up until very recently the impact was limited to potential supply chain disruptions, which could be overcome, however with lockdowns and social distancing measures now being implemented across Africa, the Company's primary operating environment, the impact of COVID-19 is having on our operations is increasing.

RA International's first priority is the health and safety of its employees, customers, suppliers and other partners, and Management will continue to take all precautions to ensure their health and well-being during this unprecedented situation. The Board has taken a number of actions to mitigate the potential risk to the Company's employees and customers by implementing a companywide contingency plan based on WHO standards. The Board continues to closely monitor the COVID-19 situation, and intends to follow all recommended government guidelines, to ensure a healthy workforce at our locations.

As a Company specialising in working in demanding environments we are prepared for situations such as these in that we maintain months of supplies to ensure the safety and security of our staff and so as we can provide uninterrupted service to our clients in times of crisis. In many locations we generate our own power, pump and treat our own water, provide our own waste management, and provide all other life support services, including running our own medical centres for our staff. Additionally, with significant cash reserves and no debt the Company is well capitalised and has adequate liquidity to ensure it can meet its near and medium-term financial obligations. As a result, we do not anticipate any incidences where the Company will not be able to fulfill its client commitments.

While the Company remains fully operational other than being impacted by global travel restrictions, as a result of the accelerating implementation of social distancing measures over the past week some of our clients have engaged with us to explore suspending or slowing ongoing construction projects. In most cases the rationale given is to limit personnel working in and around client premises. While we continue to engage with our clients and advise them on our strict COVID-19 Health and Safety protocols with respect to continuing works, it is clear that while in many cases works will continue, they will do so at a reduced pace and with decreased efficiency. In many cases the Company will be reimbursed for incremental costs incurred as a result of client requested suspensions or other changes, but even in cases where project margins will not be significantly affected, we anticipate that a material value of revenue will shift from 2020 to 2021.

With respect to service contracts, we are liaising with a number of clients who, as with construction contracts, have requested we limit the number of staff working at their facilities. In addition, we see clients evacuating from remote facilities and requesting that we maintain a skeleton staff on hand so as to ensure infrastructure is maintained during their absence. The effect of these scope changes, even if limited to a three month period, will nevertheless have some impact on both short-term revenue and profit margins in 2020.

We have strong relationships with our clients and are having open and honest discussions as to how the requested project schedule or scope modifications will impact our staff working on these contracts, the impact of which is expected to disproportionately affect our local national staff. We are currently assessing possibilities to safeguard their incomes and some customers have agreed to share the cost of wages for staff who, through no fault of their own, are now unable to access client facilities and perform regular duties. We are also retraining staff to offer sanitisation services or other in-demand activities and pursuing new opportunities such as medical infrastructure construction, the management of isolation facilities and disinfection of larger spaces including offices and public facilities. We believe we have a responsibility to all stakeholders during this time of crisis and have confidence in the sustainability of our business model. We see this as a temporary problem and reiterate our support to all of our staff and their families in this difficult time.

The spread of COVID-19 continues to heighten and is having a significant impact on global economic activity. Until there is clarity on the duration and severity of these events, it is not possible to quantify the financial impact COVID-19 might have on the Company. We cannot estimate with a degree of certainty when contract suspensions will be lifted or when service levels will return to normal. In addition, some business development activity has slowed as a result of site visits being cancelled. Accordingly, whilst we do not believe that COVID-19 will necessarily result in the cancellation of contracted project activity, the scheduling of some projects is unclear and we anticipate that a number of projects will be delayed, and certain projects forecast to commence in H2 2020 will now take place during 2021.

Whilst there is the potential for a material effect on our FY20 financial results as a result of the current situation, we believe that when COVID-19 is contained or possibly sooner, we will return to work as normal, executing against our USD 140m order book and continuing to bid for new and exciting projects. In the meantime we will continue to advocate with our customers to allow us to execute our projects in planned timelines, taking all necessary and recommended precautions. We believe that continuing economic activity is integral to ensuring that vulnerable communities do not collapse in these unprecedented times.

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About RA International 

RA International is a leading provider of services to remote locations in Africa and the Middle East. The Company offers its services through three channels: construction, integrated facilities management and supply chain, and services three main client groups: humanitarian and aid agencies, governments and commercial customers, predominantly in the oil and gas and mining sectors. It has a strong 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. Focusing on integrity and values alongside making on-going investment in its people, locations and operations has over time created a reliable and trusted brand within its sector.