REG - RC Fornax plc - UNAUDITED HALF YEAR RESULTS
17/04/2025 07:00
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RNS Number : 3692F RC Fornax plc 17 April 2025
17 April 2025
RC FORNAX PLC
("RC Fornax", the "Company" or the "Group")
UNAUDITED HALF YEAR RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025
Performance in line with expectations
Positive outlook for second half of 2025
RC Fornax (AIM:RCFX), the UK-based consultancy delivering high-impact
engineering solutions to the defence sector's most critical platforms -
accredited, in-demand, and built to scale - today announces its unaudited half
year results for the six months ended 28 February 2025 ("HY25", "Half Year" or
the "Period").
Summary
· Revenue of £3.8 million in line with the Board's expectations,
representing growth of 8% compared to the half year ended 29 February 2024 and
30% compared to the half year ended 31 August 2024.
· Gross profit of £1.3 million, up 17% compared to the half year ended
29 February 2024.
· Gross margin increased to 33% from 30% in the half year ended 29
February 2024 and 25% for the Full Year 2024.
· Profit before tax of £0.6 million, up 8% compared to the half year
ended 29 February 2024.
· Successful admission to the AIM Market of the London Stock Exchange
("AIM") on 5 February 2025, raising over £5 million in new funds from several
high-quality institutional investors.
Outlook
· Strong demand for defence engineering services due to increased
investment in the defence industry due to the macro backdrop. Based on the UK
Government's commitment to increase defence spending to 2.5% of GDP by 2027
and the current Office for Budget Responsibility's forecast GDP, this equates
to an increase in spending of some £13.4 billion.
· New contracts worth £2.3 million have been booked as anticipated
revenue for the financial year ending 31 August 2025 ("FY2025"). The current
pipeline underpins the Board's confidence in meeting current market
expectations for FY2025.
· RC Fornax's new headquarters in Bristol opened on 16 April 2025 and
is designed to meet the requirements for a Facility Security Clearance ("FSC")
from the Ministry of Defence.
· Hiring of new colleagues is continuing as planned with significant
interest in the Company and its strategy. Current FTEs stand at 17 versus 8 at
the start of the Period with key hires focused on business development,
technology and innovation.
· The project to automate statement of work (renamed "Smartscope")
continues at pace, with a minimum viable product ("MVP") expected to be ready
for client testing in the third quarter,
· Client base continues to grow with a new framework agreement being
signed with a Tier 1 defence company and a continued effort by the Company to
grow the number of SMEs utilising its services.
Paul Reeves, Chief Executive of RC Fornax, commented:
"I'm extremely proud of how RC Fornax and our team have performed during this
pivotal period. Amid a significant phase of transition, we have not only
delivered on our targets but have also successfully completed our IPO-a
defining milestone in the Company's history. Our focus is now firmly on
accelerating growth and delivering long-term value for all stakeholders.
"The recent opening of our Bristol office, alongside key hires, puts us in a
strong position to take advantage of the UK Government's renewed commitment to
defence spending. This increased investment is a welcome step for national
security and the armed forces, and one that aligns closely with RC Fornax's
mission.
"In line with this, we expect increased demand for the specialist expertise of
our engineering associates. One of RC Fornax's core strengths is the
flexibility and breadth of our talent pool-our engineers are well-equipped to
support projects across all platforms and technologies, enabling us to respond
quickly and effectively wherever defence spending is directed. We intend to
deploy this flexibility to leverage the Government's efforts to simplify
procurement and support greater SME involvement in defence contracts. We
therefore expect to benefit from these initiatives in the second half of the
financial year and beyond.
"Additionally, the accelerated deployment of the Smartscope MVP is a positive
development and we're excited to begin testing this functionality with our
clients that continue to experience difficulty in defining work packages,
significantly inhibiting their ability to outsource effectively.
"We are committed to deepening our collaboration with Government and industry
partners, as we continue to play our part in ensuring a secure and prosperous
future for the UK."
HY25 Update
Following the successful admission to trading of the Company's shares on AIM,
RC Fornax delivered results in line with expectations for HY25. Revenue of
£3.8 million (HY24: £3.6 million) was generated from contracts with six
customers, four of which are in the top 10 supplier list, by value, to the
Ministry of Defence and one of which is the UK subsidiary of an international
group. Gross profit for HY25 was £1.3 million (HY24: £1.1 million),
reflecting a margin of 33%, which has increased from 25% for the 12 months to
31 August 2024.
Notwithstanding higher administrative costs before depreciation of £0.7
million (HY24: £0.5 million) due to a higher headcount plus increased sales
and marketing activity, lower finance charges of £0.04 million (HY24: £0.09
million) led to profit before tax of £0.6 million, up 8% compared to the half
year ended 29 February 2024.
During the Period, RC Fornax worked in an array of environments within the
aerospace and defence industry, contributing to ongoing programmes within the
Land, Air and Maritime domains. One notable success was guiding a key client
to transition from traditional time and materials solutions to outcome-based
services, a model the Company is replicating across several existing and new
customers. RC Fornax expects this model to continue to positively impact
margins.
The Company's artificial intelligence statement of work generator has been
renamed SmartScope and development continues at pace, with full requirements
definition and conceptual design ongoing. The Company expects to deliver a
minimum viable product ready for client testing in July 2025.
Outlook for Full Year 2025
RC Fornax, which is supported by its pool of approximately 4,000 skilled
associates, continues to see strong demand for defence engineering services,
as the drivers for increased investment in defence have amplified during the
year, especially in relation to the ongoing conflicts in Ukraine and
the Middle East.
New contracts worth £2.3 million have been booked as anticipated revenue in
FY2025. Together with the current and expected pipeline being progressed by
the recently recruited business development, technology and innovation teams,
the Board remains confident that the Company is on track to meet market
expectations for the full year.
Furthermore, many opportunities for outperformance and future upside exist. In
line with this, the Company has signed a new framework agreement with a Tier 1
defence company and has agreed terms with another new client. Advanced
discussions also continue in an effort to support the growth in the number of
SMEs utilising RC Fornax's services which will serve to further reduce client
concentration.
Additionally, the Company's new Headquarters in Bristol, which is designed to
meet the requirements for a FSC from the Ministry of Defence, opened on 16
April 2025. This will enable RC Fornax to meet and maintain the required
protective security controls to safeguard assets classified at SECRET and
above.
Investor Presentation
Paul Reeves (Chief Executive) and Rob Shepherd (CFO) will provide a live
presentation and Q&A relating to the interim results via the SparkLive
platform on 17 April 2025 at 10:00 BST.
The webinar is open to all existing and potential shareholders - please
register in advance by visiting RC Fornax Interim Results Presentation |
SparkLive | LSEG
(https://sparklive.lseg.com/RCFORNAX/events/10a5cbb4-8610-4902-8079-ee7ce37d27a1/rc-fornax-interim-results-presentation)
. Questions may be submitted in advance by clicking "Ask a question" on the
event page.
For more information, please visit www.rcfornax.co.uk
(http://www.rcfornax.co.uk) or contact:
RC Fornax PLC +44 (0) 161 823 7137
Paul Reeves, CEO
Rob Shepherd, CFO info@rcfornax.co.uk (mailto:info@rcfornax.co.uk)
Strand Hanson Limited (Nominated Adviser) +44 (0) 20 7409 3494
Christopher Raggett
Rob Patrick
Harry Marshall
Cavendish Capital Markets Limited (Broker) +44 (0) 20 7220 0500
Carl Holmes / George Lawson - Corporate Finance
Dale Bellis / Harriet Ward - Sales and ECM
BlytheRay (Financial PR & IR) +44 (0) 20 7138 3204
Megan Ray
Tim Blythe
Notes to Editors
RC Fornax PLC is an AIM-quoted company providing outcome-based engineering
solutions to the UK defence industry. It was founded in 2021 by RAF veterans
Paul Reeves and Daniel Clark who, having also worked for a number of years as
defence contractors, are passionate about improving project efficiencies and
driving value for money in the sector.
Chief Executive's statement
I am delighted with the performance of the Company and our team during this
period, during which we met our targets while completing an IPO that marked a
seminal moment in RC Fornax's development. We are now fully focused on
building our business for the benefit of all our stakeholders.
As the financial results show, the Period was one of transition as we
progressed towards completing the IPO, including:
- Increasing the number of employees (from eight at the start of the
period to 15 at the end, now 17) strengthening our team across the board, with
a natural but significant increase in personnel costs; and
- Reducing the use of our invoice financing facility resulting in a
significant decrease in factoring charges, albeit resulting in a significant
increase in trade receivables (reported as £2.9 million at the end of the
Period) as we migrate our customers onto our own invoice payment facilities.
We expect this number to reduce significantly over the remainder of the year
and for our debtor days to come down as a result. Importantly, we are
confident of full recovery of this figure over the coming six months due to
the profile of our customers.
To maximise the benefits of the projected increase in defence spending, we
anticipate increased reliance on the expertise and dedication of our highly
skilled engineering associates. This is in line with the Government's efforts
to streamline procurement processes and encourage the increased participation
of SMEs in defence contracts. We expect to benefit from these initiatives in
the remainder of our financial year and beyond.
I and members of the RC Fornax team attended DPRTE2025
(https://www.linkedin.com/search/results/all/?keywords=%23dprte2025&origin=HASH_TAG_FROM_FEED)
in Farnborough, alongside other industry leaders, during the Period. DPRTE is
the UK's leading defence procurement and supply chain event. It was a
successful and well-attended event, and I was pleased to see the considerable
interest from current and future clients in how we provide high-impact
solutions that drive efficiency and deliver results in the defence sector.
As we move into the second half of the financial year, we look forward to
continued collaboration with the UK Government and our industry partners to
ensure a secure and prosperous future for our nation.
Key financials
For the six months ended 28 February 2025, the Company's revenue was £3.8
million (2024: £3.6 million).
The Company's gross profit in the period was £1.3 million (2024: £1.1
million). Consequently, notwithstanding increased administrative expenses of
£0.7 million (2024: £0.5 million), operating profit was broadly unchanged at
£0.6 million (2024: £0.6 million).
The cash outflow from operations of £0.8 million (2024: inflow of £0.5
million) was due primarily to the Company's transition during the Period to
direct invoicing which has led to delays in payments being received.
During the Period, the Company successfully admitted its shares to trading on
AIM alongside a simultaneous placing of new shares with institutional
investors resulting in a net inflow of cash of £3.4 million.
Prior to the IPO, the Company made payments in respect of dividends of £0.1
million (2024: £0.3 million) resulting in net funds at 28 February 2025 of
£3.0 million (31 August 2024: net funds of £0.6 million).
Outlook
RC Fornax, which is supported by its pool of approximately 4,000 skilled
associates, continues to see strong demand for defence engineering services,
as the drivers for increased investment in defence have amplified during the
year, especially in relation to the ongoing conflicts in Ukraine and
the Middle East.
New contracts worth £2.3 million have been booked as anticipated revenue in
FY2025. Together with the current and expected pipeline, the Board remains
confident that the Company is on track to meet market expectations for the
full year.
Furthermore, many opportunities for delivering ahead of expectations exist. In
line with this, the Company has signed a new framework agreement with a Tier 1
defence company and has agreed terms with another new client. Advanced
discussions also continue in an effort to support the growth in the number of
SMEs utilising RC Fornax's services which will serve to further reduce client
concentration.
Additionally, the Company's new Headquarters in Bristol, which is designed to
meet the requirements for a FSC from the Ministry of Defence, opened on 16
April 2025, enabling the Company to meet and maintain the required protective
security controls to safeguard assets classified at SECRET and above.
All in all, while I am rightly proud of the progress we have made over the
last six months, I am just as excited about the opportunities that present
themselves for the rest of the financial year and beyond.
Paul Reeves
Chief Executive Officer
17 April 2025
Consolidated income statement
for the six months ended 28 February 2025
Six months ended Six months ended
28 February 2025 29 February 2024 Unaudited
Unaudited £'000
£'000
Revenue 3,840 3,555
Cost of sales (2,568) (2,472)
Gross profit 1,272 1,084
Total administrative expenses (672) (471)
Operating profit 600 613
Finance charges (39) (93)
Profit before tax 561 520
Income tax expense (101) (93)
Profit for the period 460 426
The income tax charge for the six months ended 28 February 2025 and 29
February 2024 are based upon the estimated charges for the full years.
Earnings per share Note Pence Pence
Basic 1 3.7 n/m
Diluted 3.1 n/m
Consolidated statement of changes in equity
for the six months ended 28 February 2025
Share Share Retained earnings Total
capital Premium equity
£'000
£'000 £'000 £'000
As at 1 September 2024 - - 108 108
Profit for the period - 460 460
Issue of shares (net of costs) 140 3,273 - 3,413
Dividend - - (173) (173)
As at 28 February 2025 140 3,273 395 3,808
Consolidated statement of financial position
As at 28 February 2025
28 February 2025 29 February 2024 Unaudited
Unaudited £'000
£'000
Assets
Non-current assets
Property, plant and equipment 146 16
146 16
Current assets
Trade and other receivables 2,889 (1)
Contract assets 20 37
Cash and cash equivalents 2,997 799
5,906 835
Total assets 6,052 851
Liabilities
Current liabilities
Trade and other payables 1,929 488
Loans and borrowings 315 92
2,244 581
Total liabilities 2,244 581
Equity
Share Capital 140 -
Share Premium 3,273
Retained earnings 395 270
Total equity 3,808 270
Total equity and liabilities 6,052 851
Consolidated cash flow statement
for the six months ended 28 February 2025
Six months ended Six months ended
28 February 2025 29 February 2024 Unaudited
Unaudited £'000
£'000
Notes
Profit for the period 460 426
Adjustments for:
Finance expense 39 93
(Increase)/decrease in trade receivables (1,918) 108
(Increase)/decrease in inventory (124) -
Decrease/(increase) in other receivables - -
(Increase)/decrease in contract assets - 17
Increase in trade and other payables 1,103 60
Cash generated by operations (440) 705
Interest paid on loans and borrowings (39) (93)
Income taxes paid - -
Net cash flows from operating activities (479) 612
Cash flow from investing activities
Interest received - -
Purchases of property, plant and equipment (139) (65)
Net cash flows used in investing activities (139) (65)
Cash flow from financing activities
Dividends paid (173) (327)
Drawdown of loans and borrowings - -
Repayment of loans and borrowings (237) (70)
Drawdown of other loans - -
(Repayment)/receipt of Directors' loans - -
Repayment of lease liabilities - -
Issue of new shares (net of costs) 3,413 -
Net cash (used)/from financing 3,002 (398)
Net increase in cash and cash equivalents 2,384 214
Cash and equivalents at beginning of period 613 585
Cash and cash equivalents at end of period 2,997 799
Notes to the interim report
for the six months ended 28 February 2025
1. Basis of preparation
The financial information contained within this Interim Report has been
prepared applying the recognition and measurement requirements of UK-adopted
International Accounting Standards expected to apply at 31 August 2025. As
permitted, this Interim Report has been prepared in accordance with the AIM
Rules for Companies and is not required to comply with IAS 34 'Interim
Financial Reporting'. This Interim Report is presented in Sterling and all
values are rounded to the nearest thousand pounds (£'000) except where
otherwise indicated.
Going concern
The Company meets its day-to-day working capital requirements through own
resources. Its forecasts and projections, taking account of reasonably
possible changes in trading performance for a period of at least 12 months
from the date of signing this Interim Report, show that the Company should be
able to operate within the level of its current resources.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting in
preparing this Interim Report.
(A) Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 August 2024. Crowe UK LLP has
reported on these accounts; its report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis, or material uncertainty, without qualifying its report and (iii)
did not contain a statement under Sections 498(2) or (3) of the Companies Act
2006. In accordance with Section 434 of the Companies Act 2006, the unaudited
results do not constitute statutory financial statements of the Company. The
six months results for both years are unaudited.
(B) Statement of compliance
The accounting policies applied by the Company in this Interim Report are
consistent with its Consolidated financial statements for the year ended 31
August 2024 and are in accordance with UK-adopted International Accounting
Standards. The accounting policies have been applied consistently to all
periods presented in the Consolidated financial statements of this Interim
Report.
Critical accounting estimates and judgements
In the application of the Company's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of certain assets and liabilities.
Estimates and judgements as applied to items, including goodwill, revenue
recognition, recoverability of trade and other receivables, provisions and
taxation have not materially changed since the year end.
The Interim Report was approved by the Board for issue on 16 April 2025.
The chief operating decision maker as defined by IFRS 8 has been identified as
the Board.
1. Earnings per share
The earnings per share are calculated as follows:
Six months ended Six months ended
28 February 2025 29 February 2024 Unaudited Year ended
Unaudited £'000 31 August 2024
£'000 Audited
£'000
Number Number Number
Weighted average number of shares:
For the purpose of basic earnings per share 12,492,272 1,114 1,114
Warrants 2,513,221 - -
For the purpose of diluted earnings per share 15,005,493 1,114 1,114
Given 15,846,153 new shares were issued on completion of the Initial Public
Offering on 5 February, 2025, (1) the Weighted Average Number of shares during
the Period is not fully representative of the ongoing position and (2)
comparison with previous periods is not meaningful.
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