RC Fornax PLC (AIM:RCFX) said that revenue for the current financial year will fall short of expectations, after defence clients delayed spending in the wake of the UK Government’s Strategic Defence Review, but remained confident in its longer-term prospects.
The London-listed engineering consultancy, which serves some of the country’s most complex defence platforms, now expects to bring in no less than £4 million in revenue for the year ending 31 August, below what it had previously guided to the market.
The downgrade follows slower-than-expected contract wins and short-term belt-tightening by customers reassessing priorities after the government’s sweeping overhaul of defence strategy.
Published on 2 June, the Strategic Defence Review set out 62 recommendations aimed at preparing the UK military for what Sir Keir Starmer has called a state of “war-fighting readiness”.
Although RC Fornax believes this shift will eventually boost demand for its services, the company said several customers have paused or scaled back activity as they digested the review’s implications.
Meanwhile, the company said that its expanded sales team had struggled to convert a strong pipeline of leads into signed deals.
Contracts previously included in this year’s revenue forecast are now expected to close in the next financial year.
As part of efforts to get back on track, RC Fornax has hired a new sales director and overhauled parts of its organisational structure.
Daniel Clark, who had taken charge of operations during the company’s initial public offering, will step down as chief operating officer and take a career break.
Despite the near-term setback, RC Fornax said recent customer engagement has picked up and that it is in talks with one of the UK’s top defence contractors over a potential partnership.
Cash and receivables stood at £2.6 million as of 31 May, which the company said would be sufficient to cover its requirements.
CEO Paul Reeves said: "Whilst I am naturally disappointed in the company's post IPO performance affecting FY25, I understand the combination of factors and reasons behind this performance and feel confident that the organisational changes that we have implemented will yield success for the future.
"I remain encouraged by our longer-term outlook, having witnessed firsthand the recently improved client engagement. In particular, the ongoing contract discussions, which, if successful, would prove materially significant and fundamentally game-changing for RC Fornax's market positioning."
Cavendish called the announcement 'disappointing' but said investors needed to understand its context and the potentially positive longer-term implications it may herald.
"The SDR has accentuated the need to increase defence spending with the accompanying industrial strategy commitment to channel greater workflows through the UK’s smaller defence subcontractors, which we believe helps to validate RC Fornax’s business model and growth proposition," the broker said in a note to clients.