LONDON (ShareCast) - (Sharecast News) - AIM-listed RC Fornax tumbled on Tuesday as it warned that its full-year performance will be "significantly below" market expectations as defence clients delayed or reduced short-term spending in light of the government's Strategic Defence Review (SDR).
The company - a consultancy delivering engineering solutions to the defence sector - noted that 62 recommendations were made in the SDR and the government has said it will implement all of them.

It said this provides a strong backdrop for potential future demand for its services, and that since publication of the SDR, it has seen a marked increase in customer engagement.

Fornax said several previously dormant discussions with major contractors have resumed, and it is now progressing a potentially significant partnership with one of the UK's leading defence contractors.

"The board is hopeful that this opportunity will deliver material value over the medium to long term," it said.

"However, whilst management had previously assessed that its diversified tier-1 and prime customer base would be resilient ahead of publication of the SDR, it is now clear that a number of existing and prospective customers have delayed or reduced their short-term spending and development activity which has negatively impacted demand for the company's services in recent months.

"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."

In addition, the company said it recently became clear that the newly-expanded sales team has not been able to convert a strong pipeline of leads into revenue-generating contracts at the rate the board had expected. This includes the new contracts that had been booked as expected revenue for FY25, but is now expected to be generated in FY26.

As a result, Fornax expects the FY25 performance to be significantly below market expectations, with revenue of not less than £4m.

"While the board is very disappointed to not meet expectations in the company's first full reporting period following its IPO, it expects the uncertainty created by the SDR to be temporary and remains confident in the company's prospects and longer-term outlook," it said.

"Recent strategic hires, operational improvements, and renewed customer momentum provide the foundation for future growth that is supported by strong underlying market drivers."

At 0930 BST, the shares were down 49.5% at 26.00p.

Russ Mould, investment director at AJ Bell, said: "It's a cardinal sin to issue a revenue or profit warning in the first year of being a listed company as it can cause investors to distrust management. 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."

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