Replacement: Government Contract & Trading Update

RC Fornax secures major UK government contract but remains loss-making with tight cash.

What the company is saying

RC Fornax announces selection for a £4.0 million UK government contract through the Public Sector Resourcing framework, pending completion of procurement and a formal purchase order. The company highlights entering FY27 with approximately £8.4 million in secured, anticipated, and selected revenue, combining the new contract, £2.4 million from FY26 orders, and £2.0 million from expected renewals. Management frames this as strong revenue visibility and operational momentum, citing a rise in monthly invoicing from £180,000 to £600,000. The release acknowledges an expected adjusted EBITDA loss of £1.6 million for FY26, up from a £1.1 million loss in FY25, and cash at £0.85 million as of 31 August 2026. The board stresses capital discipline, a £500,000 annual cost reduction, and a shift to a more defined three-division structure. Rob Shepherd has left as Finance Director, replaced by Adam Cole (ACCA) as interim CFO, working 2.5 days per week. The company attributes performance shortfalls to UK defence sector uncertainty and positions itself for scalable, capital-efficient growth, especially in its SME Procure platform.

What the data suggests

The company projects FY26 revenue of £5.2 million, up from £4.1 million in FY25, but expects adjusted EBITDA losses to widen to £1.6 million from £1.1 million. Cash remains flat at £0.85 million versus £0.86 million a year earlier, indicating no improvement in liquidity despite revenue growth. The £8.4 million FY27 revenue visibility includes £4.0 million from the new government contract (not yet fully secured), £2.4 million from existing orders, and £2.0 million from anticipated renewals, so a material portion is not contractually guaranteed. Monthly invoicing has increased more than threefold, but this has not translated into profitability. The company has executed a £500,000 annual cost reduction, but this has not offset the rising losses. The board is considering a standby debt facility to support working capital, reflecting ongoing funding needs. The divisional reorganisation and SME Procure investment are at an early stage, with no segmental financials or commercial traction disclosed. The company cites contract delays and UK defence policy uncertainty as reasons for performance being below market expectations.

Analysis

The announcement adopts a positive tone, highlighting a new £4.0 million government contract and strong revenue visibility for FY27 (£8.4 million). However, much of this revenue is forward-looking: the contract is subject to completion of procurement and a formal purchase order, and a significant portion of FY27 revenue is 'anticipated' or 'planned' rather than secured. The company expects an adjusted EBITDA loss of £1.6 million for FY26, widening from the prior year, and cash balances remain flat, indicating that operational growth is not yet translating into profitability or improved liquidity. The Board's statements about a more defined business model and scalable opportunities are aspirational, with no immediate evidence of impact. The need to consider a standby debt facility and ongoing investment in SME Procure signal capital intensity without near-term earnings benefit. While operational metrics like invoicing have improved, the gap between narrative and realised financial progress is material.

Risk flags

• ●The £4.0 million government contract is not yet secured; it is contingent on completion of procurement and receipt of a formal purchase order, so there is a risk that projected revenue does not materialise as expected.
• ●A significant portion of FY27 revenue visibility is based on anticipated or planned renewals rather than binding contracts, exposing the company to execution and customer-dependency risk.
• ●Adjusted EBITDA losses are widening despite revenue growth, with FY26 loss expected at £1.6 million versus £1.1 million in FY25, raising concerns about the company's ability to achieve profitability.
• ●Cash remains low at £0.85 million, and the company is considering a standby debt facility to support working capital, highlighting ongoing liquidity risk and potential future funding needs.
• ●The abrupt departure of the Finance Director and appointment of an interim CFO working only part-time may disrupt financial oversight and continuity during a period of operational change.

Bottom line

RC Fornax has announced selection for a £4.0 million UK government contract, boosting headline revenue visibility for FY27 to £8.4 million, but the contract is not yet binding and a substantial portion of future revenue is not contractually secured. The company continues to post widening adjusted EBITDA losses (£1.6 million expected for FY26) and maintains a flat cash position (£0.85 million), indicating that operational growth has not translated into improved profitability or liquidity. The board's focus on capital discipline and cost reduction has yet to deliver financial turnaround, and the need to consider new debt facilities signals ongoing funding pressure. Leadership changes in the finance function add further uncertainty at a critical juncture. Investors should watch for confirmation of the government contract, evidence of improved margins, and tangible commercial progress in the SME Procure division. The most important takeaway is that while top-line momentum is improving, the path to sustainable profitability and cash generation remains unproven and subject to execution risk.

Announcement summary

(AIM:RCFX) RC Fornax PLC has confirmed its selection for a new contract with an initial value of £4.0 million through the Public Sector Resourcing (PSR) framework with a new UK Government client, subject to completion of the client’s standard procurement process and receipt of the formal purchase order. The company enters the financial year ending 31 August 2027 (FY27) with approximately £8.4 million of secured, anticipated, and selected revenue, providing strong revenue visibility for the year. Revenue for the financial year ended 31 August 2026 (FY26) is expected to be approximately £5.2 million, compared to £4.1 million in FY25, with an anticipated adjusted EBITDA loss of £1.6 million (FY25: £1.1 million). Cash as at 31 August 2026 was £0.85 million (31 August 2025: £0.86 million). The Board is considering a standby debt facility to support working capital due to the pace of growth. A cost reduction programme saving £500,000 per year has been successfully executed and is not expected to impact customer-facing capabilities. Rob Shepherd, Finance Director, has left his role with immediate effect, and Adam Cole, ACCA, has been appointed as interim Chief Financial Officer in a non-board role, dedicating two and a half days a week to the company. The Board has reviewed the company’s strategic direction and is now focusing on a more linear and defined business model with three divisions: Output-based Engineering Services (the core business), People – Recruitment and Specialist Talent, and SME Procure (the company’s proprietary AI procurement platform). The £4.0 million contract award comprises part of the £8.4 million FY27 revenue visibility, which also includes approximately £2.4 million of revenue to be recognised in FY27 from orders secured during FY26 and approximately £2.0 million of anticipated revenue from planned contract renewals. Monthly invoicing has increased from approximately £180,000 per month to approximately £600,000 per month. The company does not currently anticipate the need to raise additional equity but is evaluating a standby debt facility. The Board’s future investment priorities will favour scalable and capital-efficient opportunities, and any future financing will be considered against defined commercial objectives with a focus on minimising dilution for existing shareholders. The Board will continue to assess the funding structure for SME Procure, including the possibility of third-party strategic investment, partnership arrangements, or establishing SME Procure as a separately financed division if appropriate. Paul Reeves, Chief Executive Officer, stated that the award gives the company confidence for the next financial year and emphasised the focus on disciplined execution, cash generation, and capital discipline.

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