RAF Chinook helicopter on training mission
Revenue is now expected to be ‘not less than £4 million’, well below the £11.5 million the market was hoping for / Image source: Adobe
  • Strong backdrop for future demand
  • But contracts shift to the right
  • Co-founder Clark to take career break

Defence sector-focused engineering consultancy RC Fornax (RCFX:AIM) has committed the cardinal sin in investors’ eyes by delivering a damaging revenue warning just months after joining the stockmarket via an IPO (initial public offering) priced at 32.5p per share.

Issuing a revenue or profit warning in the first year of being a listed company is a big no-no, since it damages a management team’s credibility with the market. Shares in RC Fornax more than halved to 24.5p on news results for the year ending 31 August 2025 are now expected to be ‘significantly’ below market expectations amid contract delays and a failure to convert hot leads into revenue-generating deals.

WHAT DROVE THE WARNING?

Founded in 2021 by RAF veterans Paul Reeves and Daniel Clark and admitted to AIM in February with an £18.2 million debut tag, RC Fornax warned full-year 2025 revenue is now expected to be ‘not less than £4 million’.

That is well below the £11.5 million the market was hoping for and reflects some temporary uncertainty created by the UK Government’s recent Strategic Defence Review (SDR).

The guidance downgrade also implies a significant decline from the £6.5 million of revenue RC Fornax delivered in full-year 2024 and irked investors who bought into the stock following the IPO on the basis it was a ‘rapid growth’ solutions provider in the defence sector.

Despite a strong backdrop for future demand for the company’s services, with prime minister Keir Starmer indicating the UK will move to ‘war-fighting readiness’, a number of RC Fornax’s existing and prospective customers have delayed or reduced short-term spending and development activity in recent months, crimping demand for the small cap’s services.

‘The board now expects that this situation will not unwind immediately and that the impact may be sustained for the next few months while existing and potential customers assess their needs and budgets in light of the findings of the SDR,’ warned RC Fornax.

Another factor behind the alert is the sales team overseen by chief operating officer and co-founder Daniel Clark has not been able to convert ‘a strong pipeline of leads’ into revenue-generating contracts at the rate expected by the board.

As a result, Clark will step down as chief operating officer and take a career break and RC Fornax has recruited an experienced sales director and carried out a significant organisational restructuring to ‘provide better alignment between the sales team and its engineering and project delivery capabilities’.

WHAT DID THE CEO SAY?

A major shareholder alongside fellow veteran Clark, CEO Paul Reeves commented: ‘Whilst I am naturally disappointed in the company’s post IPO performance affecting full-year 2025, 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.’

Reeves continued: ‘I remain encouraged by our longer-term outlook, having witnessed first-hand 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.’

The company insisted that recent strategic hires, operational improvements, and renewed customer momentum ‘provide the foundation for future growth that is supported by strong underlying market drivers’ and said it has sufficient cash balances to meet anticipated working capital requirements.

Russ Mould, investment director at AJ Bell, commented: ‘One of 2025’s rare UK IPOs, RC Fornax has been put in the sin bin after saying full-year results will be “significantly” below market expectations. What makes this situation even worse is that RC Fornax operates in the one sector that’s got big tailwinds: defence. Investors are annoyed, to put it mildly, with the share price halving on the news.

‘RC Fornax has blamed the recent Strategic Defence Review for causing existing and potential clients to delay contract decisions. It continues to see long-term potential for growth, but the pressure is now on to steady the ship and be first in line to bag contracts once clients start spending again.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Tom Sieber) own shares in AJ Bell.

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Issue Date: 17 Jun 2025