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RA International's rush of contracts reflects growing presence in remote location infrastructure

The adage is that in a gold rush it’s better to make shovels than dig, perhaps in the modern world camps and infrastructure are the way to go.

Supply chain contracts are increasingly important to RA

In a very unsettled world, RA International PLC’s (LON:RAI) skill set is greatly in demand.

Indeed, the group has been racking up contracts at an impressive rate since it listed on AIM in June a year ago.

This week, the company announced it is to supply modified shipping containers as offices and accommodation for a humanitarian organisation in East Africa.

WATCH: RA International reports on 'encouraging' year as it secures new $9mln contract

That was the sixth contract it has won since March with a combined value of more than US$45mln.

RA specialises in everything to do with sustaining life in remote locations.

Originally, the business focused on building camps for peacekeeping troops and such like, but it has now expanded into broader construction, maintenance, operations, infrastructure and logistics.

“Roads, runways, accommodation – it’s like building a small town,” says finance director Andrew Bolter about many of the company’s projects, though supply chains and maintenance are becoming increasingly important.

Africa, especially Somalia, is where it traditionally operates, but the group is spreading out and currently working in ten countries including in Europe.

Range of services

For example, the group recently completed a major military base in Oman for the British Government, but it is also working on a refurbishment of the US embassy in Copenhagen where it is a sub-contractor to American group FDC.

This year too saw a US$9.5mln award with UNSOS (UN Somalia) to provide first-line vehicle maintenance services throughout Somalia, an agreement with IAP Worldwide Services for global supplies and a US$10.7mln construction project for a large humanitarian client in Central Africa.

The financial size of the contracts has increased in tandem with this broader geographic and product reach and the average length of the contract is now almost four and half years.

Being able to bid for bigger contracts was one of the reasons the company listed on AIM, says Bolter.

Previously a private Dubai-based company, the London quote has enabled greater recognition and awareness of RA while also giving access to capital to bid for larger deals.

NGOs, governments, oil and miners

Customers derive from three sources predominately: United Nations and other NGOs; the UK and US governments; and mining and oil and gas companies.

RA does everything itself utilising a directly employed workforce of some 2,000 staff.

Bolter adds says that the workforce encompasses 40 nationalities and by keeping it in-house RA has better control over the contracts.

He says that whereas previously a customer might have awarded three separate contracts for construction, integrated facilities and the supply chain, RA is now of a size where it can bid for all three in one package.

Order conversion

House broker Cenkos says the order backlog is now well over US$150mln and it expects revenues this year to rise 10% to US$60.2mln, which is 40% orders/sales conversion.

That ratio is lower than seen in the past so presumably the broker’s forecasts might prove to be conservative.

Pre-tax profits this year to December are predicted by Cenkos to rise to US$13.9 mln, which puts the shares on a modest rating of about eight times its earnings forecast.

RA is paying a maiden dividend of 1p (1.3c) this year and is expected to increase this to 1.35p (1.7c) in 2020.

There was also cash of US$27.8mln (£22mln) at the last year-end, which compares to a market cap of £88.5mln at 51p.

Founders and senior executives Soraya (CEO) and Lars Narfeldt (COO) still own almost 80% of the shares.

More contracts

Cenkos sees more contracts coming RA’s way especially as its pipeline remains ‘substantial’ with two potentially 'transformational' bids submitted for the current year.

Bolter also points out that at present RA accounts for less than 1% of the UN peacekeeping budget, with contracts such as rations supplies to peacekeeping troops offering a huge potential step up in scale for the group.

Add in the work for the UK and US governments and the burgeoning energy market offshore Africa, where huge oil discoveries have been made recently and where the potential for RA barely seems to be acknowledged by the market currently.

The adage is that in a gold rush it’s better to make shovels than dig, perhaps in the modern world camps and infrastructure are the way to go.

If so, RA looks to be in a very good place.

Quick facts: RA International

Price: 37 GBX

Market: AIM
Market Cap: £64.22 m

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