RC Fornax (LSE:RCFX) — Post IPO Investor Presentation

0:01 Good morning, ladies and gentlemen, and welcome to the RC FORNAX PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet company platform.

0:30 Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from RC FORNAX PLC. Paul, good morning, sir. Good morning. Okay. Great. Thanks for thanks for joining us. So I'm Paul Reeves, founder and CEO of RC FORNAX. I'm joined by Rob Shepherd, CFO, as recently as November last year. And we're gonna walk through a bit of an overview of of the company, what we do, and then and get into some some of the details as we as we step through and a proper introduction to where the business comes from. I don't think we need to go over any disclaimers right now, so we'll just kick kick right off. So RC FORNAX, we're a an engineering consultancy that operate within defense.

1:22 So wholly UK based right now, wholly defense based. We really specialize in forming teams of expert engineers to deliver engineering outcomes to tier one defense companies. So the things we're talking about is, well, you've got, you know, the next fighter jet, the next ship, submarine, what whatever it might be, these large complex platforms within defense that the tier ones will be responsible for delivering to mod and other territories as well. We we effectively get involved with delivering small parts of the design aspects to those platforms. So that's the the type of work we're talking about. We've we've been around since August 2020, so we're we're in our fifth year now. Time flies.

2:09 But we were recently admitted to to the a market very recently last month. So we've been profitable and cash generative since we since we started, the the summary on screen there, with our most recent results at 6,500,000 revenue with circa 800 k profit. In terms of the the the big ticket, where we are and where we're going, right now, we position ourselves as that enabler for the for the tier one defense companies, helping improve their project efficiency, augmenting their capabilities with by standing up the engineering capabilities we have. And for where we're going, it's the next stage to to growth really over and above that is going to be around pulling together some of the great SMEs that exist in defense and offering more compelling design and manufacture solutions in for that differentiated solution into MOD.

3:05 Some of the metrics along the right hand side there, yes, we've had a great growth rate since we since we've been last testament to our solution and how it's actually been adopted by the the client base, which is currently up to 10, as you see there, between the the frameworks we're on, the the direct relationships we have with with buyers. We've developed a a great associate community of 3,000 engineers that are predominantly systems engineers, hardware engineers, and software engineers, and all the the niches that exist in those in those key areas. And we've we've we've established a a a great margin base as well, which we're we're looking to continue as we deliver the engineering outcomes our customers want. But the key one on here is the on time delivery.

3:53 So we we stand up, you know, contracts that are around these engineering outcomes, and it's really important that we we demonstrate we can do what we say we'll do. And a 99% on time delivery of all deliverables that we've established in our contracts is a is a really impressive metric and one that we're super proud of. So in terms of where the business comes from, who we are, as you can see, myself and and Rob are here today. But the the business was founded by myself and and Dan Clark, as I say, back in August 2020. We've got a really similar background. So we spent twelve years in the air force working as ground electronics engineers, lots of hands on with some of the different products that your your tier ones produce and deliver into into the forces.

4:46 And then when we when we left our career in the military, we started working with with those tier ones. So we covered a a whole range and delivering high value projects where there was a really common thread, which was, you know, we felt we could really work to improve the efficiency in project delivery, and and that's what we set out to do. That's where the the core of RC FORNAX comes from. You you mirror that in with we were working as contract workers while we were engaging those tier ones, and there was a the whole the the tidal wave that was affecting the contractor workforce of I r thirty five, which is, you know, a piece of tax legislation really, impacting how businesses engaged contract workers. So those two things really came together to form the where the business came from and what it wanted to do, which was brings us to the the next slide, essentially.

5:38 Sorry. Fat thumbs there. So that that is why we're formed. So as it says there, we're formed to define and execute engineering design projects of the statement of work. And so some of the ways in which we do that because we offer a whole range of services, everything from time materials based contracts with better teams to full out loading and full full outsourcing and and offload. But but this really sits in the space right between your traditional consultancies and your recruitment solutions. So we we try to offer the benefits of both without the without the drawbacks. So if you if you consider those solutions, if you you've got your engineering manager in a tier one defense company trying to deliver a a project, and they say, you know, we need some help, we need some resource, and they would go down a recruitment solution that would look to, you know, put some profiles in front of them that they would be able to down select and and get that support, get the support they need.

6:44 That can be quite a long process, and it comes with a a lot of drawbacks. So, you know, you're taking a technical requirement and having to translate it to nontechnical people. You're, you're having to take the the time out of your day job to actually review all of those profiles and go through that process. It it's not uncommon for it to take six to nine months, and sometimes not get the solution that you that you need at all. If you think about the other way they can actually get support, be it through actually parachuting in specific consultants or or through the the offload work packages, then they'd look to traditional consultancies. Of the problems with that is the consultancies with benches of engineers, you're competing for the same talent as your client, which is is not great in terms of driving up cost of skill sets as well as just getting the getting the support that you need.

7:36 But also, really, you're getting solutions that are based on utilization metrics. So you might engage a consultancy that has all of the capabilities you think you need, but whether they're available to you at the time you need them is a whole of the story. But you you by far, your biggest drawback is with the solutions that exist out there is where things change, and they always do on, on defense projects. That's where it really starts to affect you from a, cost and schedule perspective on projects where you will you you'll say something's changed and you've gotta go through the whole change control process and work and stop and you you need to actually reagree the the prices of solutions. What what we do is very different in the approach.

8:23 So because we've got this associate pool, we're we're rapidly forming teams that are very flexible. We can scale up and down very easily. We also typically stand up an overarching twelve month contract, which would be a, you know, state of the work covering that long period and defining very specific increments of three months of work. So what are those specific tasks that feed in? What are gonna be the specific outcomes over the next three months? And where things change, we can change them and feed them directly into the next increment without all those penalties that come with traditional change control processes. So we're very flexible in our approach, and this brings a tremendous amount of benefit to to our clients. In talking there, I'll have touched on some of those bullets along the bottom in terms of how we stand out and and the benefits.

9:11 The quality really comes from not only we experts from a project management point of view, but the the quality of the solution is in the people. And because we're engaging our associate community who are trusted consultants that have, you know, worked in the industry for years on multiple platforms time and time again, These are the really the highest end of the scrap chain. So we're not we're not really talking about deploying teams of, you know, graduates or junior mid level engineers. We're talking about the the best of the best. And and therefore, we're able to to get things moving efficiently and and and and as we're we're delivering in our team. Speed is a huge thing for us. So if you think back to what I said about with, you know, engaging a recruitment solution, that engineering manager on the ground that needs the support, they can't wait six to nine months. Their problems change by the time they

10:03 get that solution. They can't necessarily stop and define all their requirements for a consultancy to get that firm price solution. We can stand up a team and actually get going under a statement of work with the first increment. You typically, team size eight to 10 within four weeks, and that's getting all the clearances done in place, standing the team up, getting the increment ready to actually deploy all the IT systems and whatnot that are required. So we solve today's problems today, not not tomorrow. So it's about the solution you need when you need it.

10:34 But by far, the by far, the most important thing that when we're engaging our clients is, you know, we know them. We understand them. Our background is as I described, you know, we're a veteran founded SME. We have worked in these organizations. We know their processes. We know what they're trying to deliver. We know how they work. You know, we're not a recruiting solution that's just developed a a project harm to our business and having a go at delivering. That's our expertise. And I I mentioned flexibility, but another key thing there is how we support our clients through that journey of change where there's this whole industry shift away from labor based engagements to outcome based services, and we really hold our client's hand through that journey and help them go, well, how do you find packages of work? How do you get that in place? How do you actually have these business to business interfaces to make sure these things are delivered and run smoothly so you've not got, you know, just another layer of administrate administration and and burden on your existing employees?

11:36 It's about rapid support and actually helping them improve, not just adding another layer of complexity. Summarizing some of the the benefits of of already being over there. So I I I won't touch on them again, but just just to, you know, reiterate, we're from the same place as our clients. You know, we do have that, workforce of 3,000 engineers that we're able to deploy very rapidly who were, you know, the the best of the best when it comes to delivering engineering and defense. We are rapid. We have effective I r 35 process, which means that we make sure we do accurate determinations for the associates that we engage and give our clients comfort that we're actually on top of that piece of legislation.

12:24 And, yes, we support them through through the journey of change. In terms of the the journey we've taken since setting the business up in August 2020 to now, really, the the key things there are we didn't make any sales for the first, for the first year. We spent that time actually developing our processes, getting the accreditations we required before we started walking through the the doors of your tier one defense companies and saying, here's how we think we can help you. So what that's really done for us is we're we're we're built on very solid foundations. And also because we're a process driven organization, it really helps the scalability. So as we're bringing new team members on, which we're doing exactly now and ramping up our core team very quickly, it it it's much easier because we took the time to do that upfront.

13:14 But we we started landing with the the some of the the the clients we work with four out of the top 10 defense companies in in The UK. And, really, that took the form of, let's start with a small contract, and let's start on one site working on one particular project. And then we've demonstrated that we can actually be effective. And then our solutions have actually grown. So the clients we serve are all the same ones that we we worked within year one, but we've grown year on year with all of those clients. And we're really seeing a lot of appetite to work with us now from from many more. So we're looking to really broaden out our client base now. We as I say, we've grown year on year with those, and as we've been doing that, we've been developing capability. So where are the needs? How do we pivot the workforce to actually service today and tomorrow's problems and set ourselves up for the future? And some of the key certifications and memberships you see across the bottom there, have really helped us in terms of this is how you can engage as a preferred supplier with a tier one defense company.

14:17 And it demonstrates that with our ISO 9,001 that we have, certain quality standards and processes that we work to, which provides comfort to clients. We've just got registered, which means we have a centralized risk profile that our clients can access and really helps with onboarding and becoming one of the preferred suppliers with the with a number of tier one defense companies. And we've got memberships that make UK defense an ADS. So we routinely we routinely attend events that are laid on by those organizations and attend such as yesterday. There was another SME committee there, and it helps us engage with our fellow SMEs in this domain so that we're able to continue to foster relationships for that future endeavor we discussed there. From a financial journey, we've we've gone from 1,600,000 revenue to 4.3 to most recently 6.5.

15:11 And the thing that that does tend to stand out here is we we've got this declining margin over the last three years. And initially, that can look quite alarming, but it it actually makes a lot of sense. So when we when we started the company, it was very rigid of we deliver these outcome based solutions and, you know, full offload of risk sharing generates high margins than simply time materials based work where you're parachuting in consultants to simply augment your client organization. But we recognize that there's a place for that because not all of the clients are just ready to say, we've got these defined work packages. We can just throw this at you and and go and deliver me x, y, or zed. And as we did that, that that work that commands that lower margin, it served as a trust builder and a door opener.

15:58 So how can we demonstrate that we put the right people in the right slots? How can we demonstrate that we have this capability before we start to take on more outcome based work? And that's that's seen the dip in margin over the last three years. But by bringing them back to outcome based services and also by beginning to use permanent consultants as well, we've got a clear route to getting that back towards 40%. And I'll give my voice a brief rest and and let you just pick up on any other points you want to thereof. Yeah. Thanks, Paul. As Paul mentioned, I joined the company in November, so I can take no credit for these excellent numbers. Just a couple of observations I've got is if you look at the the excellent top line growth, the company has been cash positive all the way through. You see a lot of small companies that will grow the top line at the expense of investments or reduction in cash, so that's not been the case here. So that gives us a good and robust base to start from. Secondly, companies made use of historically factor based financing, factoring facilities.

17:03 So that's where the loan drawdown repayments come from. That's not gonna be the case going forward with well funded and working capital in a positive position. And lastly, dividends. Historically, the founders have made use of dividends to supplement their £12,000 a year salaries. Now we've become public. They've migrated onto more conventional contracts. And obviously, in due course, we'll look at what excess cash we have and what we can how we then develop a dividend policy. But in the near term, we've got plenty of opportunities to invest in them, so that's gonna be the focus for the near term. Thank you. Great. Thanks, Rob. So now we've talked a little bit about the the journey and and where we've come from. And now and I'll discuss the solutions and how we've actually brought that together and offered that by virtue of a couple of case studies.

17:50 So what this really tells you is the range of services we're able to provide. Now the the key is everything's bespoke and flexible. So a client might not necessarily fit into one of these neat buckets, and that's okay. But here are the the the broad outlines of of what we do. So starting on the the left hand side, that is effectively recruitment. Team augmentation is effort based. He's just somebody that can support you with a particular need. That's, as I say, that trust builder, that door opener, that's not the essence of what our business was set up to do or deliver, but it can really help when they're setting out on that journey of change and don't have those work packages defined. The next thing along there when you get to outcome based services still under the team augmentation banner, what we're talking about here is individual engineers being deployed to execute a specific statement of work.

18:43 So where they do have these defined work packages, where we do know the outcomes, However, it's very light touch from a project management perspective, but we're gonna start billing you based on payment milestones and not just the hours

18:54 we've done. And we're gonna start to actually share the delivery risks, so we'll be responsible for making sure that that deliverable gets done when we say it will be done. And that aligns to the the client's program schedules as well. As we start to take that further and dial that up, we get into the embedded team space. And this is a really, really useful, Peaceforce, you know, defense clients that we've seen right now what this does is create a whole dotted line,

19:21 a new part to the the the client's organization, and gives them a whole new capability to stand up very, very quickly. And what they get with this model is this clear business to business interface where they're able to go and feed into to the increments. So think engineering manager in client organization. They can go to the RC FORNAX desk and say, we we need these things. Things have changed. This is what we need to to see over the next three months. They the RC project manager or engineering leader, depending on the project, will feed that into the into the increment, update the statement of work, obtain that sign off, all happens in parallel to the work actually taking place, understands is the team formation still right, and continues to performance manage and drive that team to the outcomes.

20:08 All you're really doing with the the aligned part there is rather than on a specific project or a specific capability, you're aligning to your client's actual programs, and that that's really for for larger teams. And then you get to full outsourcing offload. So we have defined work. We don't want you to come to our site. We want you to sit on your site and and do these things and give us those outputs, and, and we do that as well. In terms of how we form, our teams, to to execute the work, We have something, unique to us, which we call our associate community, which is integral to to everything that we do. So as I mentioned, those traditional consultancies that will have a bench of engineers, which is, you know yes. They're they're cheaper than utilizing contract workers. However, you're gonna have a whole range of people sat around doing not a lot quite a lot of the time, and you're not able to deploy the precise skills and experience fit that you, that your clients need because they may well be engaged on on another program.

21:12 So that forces hiring decisions. With, with this associate community, what we're able to do is just be really flexible. So, firstly, we we do a number of things with, this part of the workforce that they would typically be engaged by an intermediary. And by doing these things, it means that we stand out to them, and they want to come and work with us. So we we've developed this reputation as a by contractors, for contractors organization. And as we were developing that reputation, we want to support you whether it's from an I r 35 perspective, whether it's just, you know, that helping genuine contract workers continue to work as genuine contract workers. We want to support you from and give you more visibility for, you know, your next three pieces of work for the next two years as opposed to thinking three or six months ahead. We want to help you connect with your peers where you're normally engaged by an intermediary and fired into an organization that you're you're not really a part of, but we wanna actually give you a a a collection of people and access to be able to go and connect with those peers, share your experiences, actually develop your knowledge. What are the latest courses of systems engineer that you might need?

22:19 Let's have some some conversations with people that are doing well in in other areas. What exciting projects are out there that I might like to get involved with? It's about providing access to those sorts of conversations. We have an engineering management system that they can reach back into. So they can they can call us up at any time and say, you know, I'm laying out the circuitry on a PCB, and I need to know what best practice is. And they can have those conversations, so they don't necessarily need to go and do it all as self development and upskilling and and under their own under their own steam. The big one is really supporting them from the I r 35 perspective. So do correct determinations. That doesn't just mean outside I r 35. It means the right determination. Gather the evidence for them to support them. So if HMRC ever looked back at any of their contracts, have you got the determination right? How can you demonstrate that?

23:09 So it's it's really about that this robust community that we have in place that that means that if a recruiter picks up a phone to one of one of these associates, they're you know, and we pick up the phone at the same time. Typically, they choose us, and we've got countless examples of that. So we have a real leg up here on being able to attract and retain talent. The one thing I just didn't mention there, sorry, is the, performance based payments, which is actually really critical because, this is about, yes, we've got very experienced people actually executing work here. But if they've been doing it for twenty years, sometimes you need that bit of reinvigoration, that motivation. How do you drive these teams? And so, actually, by making part of that, well, yes, we need client to feed back into well, actually, do you have the soft skills as well? Are you actually able to engage as a a limited company contractor and associate with RC FORNAX to deliver your services in a way that the client accepts?

24:06 Are you actually able to drive yourself to to go and say, well, that deliverable that's due in March, I'm gonna make sure it's done in February because I'm gonna make sure I'm driving a 100% as opposed to coasting on 70%? And, actually, having this performance based payment element to contract really works in in this area and helps motivate. So I've got a couple of case studies here in in showing how that comes together. So all the things I've talked about with how our business works with the uniqueness and how we stand up the teams, hopefully, this will start to make sense now.

24:41 We the the first piece of work here was our our first piece with a a large defense prime that we took on in November 21. And as I say, we were quite rigid in how we approached sales at that time. We do outcome based services. So this was a firm priced piece of outsourcing done away from the client site, and it was a actually done in two contract phases to get to that 500,000 revenue figure. And this was a piece of work on the next generation fighter at conceptual stage to understand it was to produce a feasibility study of looking at database technologies, so how you can process data from sensors and do something with that in real time while you're up in the air.

25:28 And then not only investigate the technologies that will meet that requirement, but also produce a technical road map, show how we can integrate that to the platform for the future.

25:37 So the first bit of this that really highlights how our how our organization stood out in the market is, we formed the team very quickly to actually execute this piece of work that were from different backgrounds to what they might otherwise engage. So if you go to your, you know, let's say, database consultancy one that operates within defense,

25:59 Well, who's available to actually work this over the next six months? Whereas what we did is we said, well, we wanna look for some new ideas. We wanna really focus on not necessarily the industry because we're at conceptual stage, but who has the background and who's the guru in this this domain when we're talking about database technologies. So our team was formed of people from different backgrounds that they would have otherwise engaged. And that's it sounds quite simple, but it's actually a huge benefit to the clients because they just wouldn't normally have access to that sort of talent. The the second part here is when we got going and really understood very quickly about the technology side of things and and where this solution was going, we recognized that we needed to focus more on a bit of rapid prototyping and testing the solution. And that meant that we had the wrong team in place because, well, we had somebody that very much understood the the technologies and how do you actually develop that into a solution that can be put on a defense platform. Well, we needed a bit more industry experience then.

26:56 And so, we we changed the team formation mid contract. Our client didn't need to, you know, consider that. Obviously, we presented it to him and sought sought agreement to that, but it's not something that they would have typically done. They would have kept rolling with the same team and, yes, we burned some cash. That's that's not us. It's about the efficiency piece. Who's the who's the right team at the right time? So by changing this team, we were able to focus on that solution, produce the feasibility study, and produce the technical road map ahead of schedule and under budget. As it says, they're four weeks ahead of schedule and 10% under budget. That laid the foundation with this defense prime for us to grow year on year. And last year, I believe it was around two to two and a half million pounds of revenues.

27:43 So that shows the level of growth that we've seen. And we're really focused with them now on embedded teams thinking back to that service framework I I outlined before. The the second case study here is is very different. And so with a different defense prime, and this was one of those typical right. We really like what you're telling us and and how you can help us, RC FORNAX, but we're not really ready. We don't have those defined work packages. But we do need to get going now. We can't wait for you to help us do that. So what we what we did here was, okay. Give us your requirements. So they they set off and said, we just need some people to support us. And they gave, they gave us requirements for six resources, which were focused around principal electrical design and mechanical design.

28:30 And, this was to to to do a lot of schematic work on proving out a subsystem on an able platform. And they gave this requirement to us and three other companies of was a one of those more traditional consultancies. Two were some really large scale,

28:51 which which I I won't name for the for the purpose of this, probably for obvious reasons. But but very quickly, within a week, we'd reached into our associate community. We found his look. We've got 13 guys here that we could stand up to, you know, very quickly that would meet this requirement because this was a time materials based piece of work. It was here are the profiles. You make your assessment. We had to wait for the the the competition to to catch up here because, you know, two weeks later, when they had certain the client had some options from the competition as well, they were able to make an assessment and place four of those six with us. That was our team.

29:31 And the great thing about this is because of that positive engagement, that that that experience of working very quickly and collaboratively, the next requirement where it was a team of four systems engineers came directly to us as opposed to being put out as a competition again. And that really speaks volumes to how well we support that engagement. But we didn't stop there. It wasn't just about, well, let's put people in and forget about that. Because as I say, that's not our business. It was about actually how do we now walk you through that journey of change and change the contract type here. And so our head of engineering and our head of bids and projects spent times consulting weekly with the with the the engineering leads on the the client side and help them produce the the statement of work with the first increment.

30:19 And then we were able to change the contract type that we offered to the actual workers because now you're gonna be delivering into RC FORNAX and not into the client organization. We were able to to establish that business to business context. We've got routine supplier reviews where we review all we actually performing against the state of work, and that's what matters as opposed to are the people any good, do you like them, and do they fit in your organization? Completely different way of looking at the work. And this, again, has laid a great foundation where we get very good feedback to say, can we support you in different areas? And by doing this, that's two occasions where we've demonstrated our model works, how we actually support you works, and that and that we've grown again, continue to grow within these client organizations. So away from the, the the solution, hopefully, that's that's wrapped up a bit of what we do.

31:12 What's the opportunity? I don't think it's, you know, a massive surprise to anybody that defense is a growing market all over the world. There's lots of news articles right now around, you know, we need to increase the spending on defense as a percentage of GDP. And that that goes for for all the the NATO countries as well as they seek to increase spending to meet commitments, not only now, but to increase those commitments going forward. And as I also mentioned before, where you've

31:45 got this shift away from labor based engagements to outcome based services, it means that not only have you got a really large market opportunity with a with a growing sector, but you've also excuse me. But you you also have this this new opportunity in terms of people moving away from one model and towards the model that we're set up to actually service. So I've in place there a couple of competitors and that the the level that they're operating at in terms of revenues, their twenty twenty three revenues there that you can see on screen for both PA and Wharton, which is 709,000,000 and 1,300,000,000 respectively. And when you look at our growth journey today, thinking back to the, you know, our most recent figures of 6.5, it shows just how much room to grow we have. We still, you know, really only got a little piece of the market, and there's lots of room to grow there.

32:37 But also thinking a bit wider than that,

32:39 where this business is going and how in the future we look to internationalize this. Really, that our route to doing that is through leveraging these multinational development projects now because, yes, development is ever it it costs more year on year to actually the next platform is always more expensive than the last because it's ever more complex. The design takes longer. It needs more people to do it. The parts are more expensive. And as that as that cycle grows and increases and as the the the spend increases, actually, they need to think of new ways to actually share that. And these multinational development projects are becoming more and more common. We have things like Orcus, the things like GCAP. These are these are programs that have, you know, effort from Italy, Japan, UK for for GCAP, for AUKUS, obviously, US, Australia, and The UK.

33:32 And it's by doing work in The UK on these multinational development efforts that we're gonna use that lever to actually help us as we look to internationalize, but by virtue of having that experience already on those programs. Would you like to add anything to that, Rob, before I move on? Or I covered that. No. And I think also, as you mentioned, not only the projects, but a number of our customers are clearly international players. Right? And so that also gives an opportunity to take if they like the sort of objectives based model that we're deploying in The UK. There's no reason why that can't be taken into other markets in Europe and further afield. It's really that's what's the secret sauce, so to speak, of the business, is moving away from that time and materials based to objectives outcomes, and that's really the in the DNA of the business. It's where it started.

34:20 That gives us a great opportunity going forward. Yeah. One of the things I'm I'm quite often faced with are questions around, well, you know, why you you you we can just start another consultancy and get some contract workers and do this. But, actually, defense is such a a tough nut to crack. It's very hard for a a new company to establish itself. It's very hard for SMEs to actually contract in this industry. It's you know, when you think about bids, they're slow, they're time consuming, they're resource demanding. And so, you know, the things that we've done to actually establish ourselves with that, gaining the appropriate accreditations, making sure we're on the right framework so we can actually submit compelling bids where to actually win new pieces of work, making sure that we we are preferred suppliers with with your tier one defense companies and how we actually develop capability.

35:15 So we've we've done a lot over our short journey already to help position ourselves for the future and for future success. Speaking of the future, so so the the things that we're we're about to go ahead and do in the coming years, here's just just a a couple of those to to touch on. So we're currently very focused on expanding our team. We're going from our core team right now. It's currently 16 strong as of today. It's changing regular, so I have to think about that. But but by the end of twenty five, that's gonna be forty forty full time employed. But aside from just building out our core team, and they're within the functional areas of sales, project management, engineering, we're also looking to engage engineers in a full time basis to supplement the associate model we have. So it's it's not that we're moving away from that. We should recognize some of the benefits and having those on the books capabilities if you like. We're gonna start to operate an eighty twenty split. So 80 is the associate pool, 20 being a permanent f t in the engineering team because that also gives us leverage to be able to do certain amounts of r and d as we look to start to exploit technologies, which I'll talk more about in a moment.

36:30 We're gonna be starting to target some new industries. So defense is always gonna be at my heart specifically, and it will always be a key focus for us. But there's lots of cross over in in what we do and the the types of work that we do. So thinking specifically around I I mentioned there automotive renewables. Well, automotive, lots of effort right now, specifically from a software perspective. We're all about autonomous driving aids and well, autonomous vehicles is a is a big thing for the for that's now in development for the for the future. So let's utilize the skill sets we already have to be able to to reach out into these new markets and generate new revenue streams like our competition do. I mentioned before around new territories and leveraging those those programs, but but we we do have aspirations to internationalize this business. Very much a work in progress, it's it's time away, but it is on the it is on the road map.

37:25 Something that's a bit more in the here and now is this what what we've affectionately named project FASG, which is FORNAX automated statement of work generator. This is as I mentioned, a lot of our clients, they're not really ready. They don't have these defined work packages. It it is a barrier to entry, and quite often, it it drives their thinking back to, I need people. We're really trying to get away from that. And and what we're what we're developing here is a tool that will do, two things. Initially, the the first part of this tool is gonna be create me a statement of work that's contractible by having a defined input that already exists. That defined input is a project schedule. So, every client that we service will have a project schedule for every project that they're delivering. They will have all the tasks one through however many there are.

38:15 They will have the skill sets or at times individual people attached to them. They will have inter interdependencies captured. And we're our tool will use the power of AI to analyze that data and produce this contractable statement of work, which is what tasks are unallocated, how do we roll that in together, what are the skill set requirements, when are the due dates on those tasks, what are the interdependencies. It it will produce that contractual statement of work that's ready so that, actually, you remove that barrier. Later on, we'll take that stage further by pulling from our associate database to actually say, well, this is the team requirement to actually execute that statement of work, and here's the, here's the here's the team that you need as well with some addictive costs. So we wanna fully automate that process to get into a point of sale really quickly.

39:04 In terms of how we're gonna go and win 2025, the the to to achieve the the forecast that we have, we need to grow our associate team to a 100 a 100 billable engineers booking to project in one form or another irrespective of the service. We're well underway with that and very much on track. And it's we also want to do that by expanding with the the clients that we have. And, again, it's that focus on larger teams, focus on embedded teams, as well as offload, but primarily an embedded teams model. How do we actually reach into more projects on more sites? Well, using that reputational aspect, using the proof of delivery, how do we actually grow within the existing client base? And that's what our sales team are now working. Making sure that we convert the opportunities that we have will be a big part of the the the revenue for the year.

39:52 So that focus on sales again as we build out our core team, making sure that we have the skills in the business to actually do effective sales and and manage that. And, actually, thinking about reducing the concentration risk to the business as well, new client wins. So, yes, I mentioned we're with four of the top 10. There's lots of opportunity there. But thinking about things like, you know, the different domains, how you split out the skill sets that you have to actually be able to service different different domains there and also geographically diverse as well. And actually start to think about client wins with with those things in the mix as well to to to derisk us as a business and to to onboard more work. We have a number of a number of conversations ongoing right now. In fact, a couple of agreements coming in place that, again, obviously, I can't share about here. But, but we're we're making really good strides towards that goal to to bring on new clients.

40:47 Just a little bit more about these, these things for the future. I know I I talked to quite a lot about the, statement of work generator, just a moment ago. But thinking to to the next step in terms of the SME integration, I think this is a a real gap right now in the market where you have all of the large primes who have essentially are becoming just integrators themselves, subcontracting so much work, and nobody's doing this at an SME level. So all of these companies that are really saying, we find it very hard to contract in in the world of defense and lots of companies that are coming and going that have tremendous capabilities. We wanna integrate those solutions to actually go to the MOD and say, well, the next the next capability requirement you have, the next procurement you're looking for, we're starting to look at those very carefully to say, where can we influence that? Where can we offer it a differentiated solution by pulling in five, ten other companies and saying, you know, we'll actually integrate that at more local level to give you the power, the innovation, and agility that comes with engaging SMEs.

41:55 That's where that's our next stepping stone to become on our on our journey of growth. Okay. So just summarizing some of that. We you'll you'll know from what I was just saying around the the AI powered tool for standard work generator, we are focusing on technologies creating our own IP where we've been a service based company. We're starting to develop technologies, the AI project is is the first one of those. So so, again, continuing to develop our own IP, grab gather that knowledge as we hire as well, continue to grow the business by by virtue of the the things I've been through today with growing out with the different within the existing clients and onboarding with new clients as well, and starting to take that stepping stone towards the the SME integration strategy as well.

42:48 That's I I think, you know, for anybody that needs to go through the the the backup slides or the appendixes, I believe the slide pack will be accessible or sent out. It's certainly on the website anyway if anybody wants to visit rcfornax.co.uk. But but that's the end of the main presentation. If we wanna move to q and a? Perfect. Absolutely. Paul, Rob, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboard.

43:37 Paul, Rob, as you can see there, we have received a number of questions throughout your presentation this morning, and thank you to all of those on the call for taking the time to submit their questions. But, guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that'd be great. Thank you. Okay. I'll start off with I've got one here. With 10 existing major clients, what strategies are in place to both expand within current accounts and win new high value contracts? Yeah. So we we wanna continue with what we've been doing with the tactical wins. So our sales team engaging at a local level engineering managers on projects with what you're paying right now. That's where a lot of our workers traditionally come from. And so it's it's about going and having more conversations with more engineering leads and procurement professionals and program leads in different parts of the engine of of the of their businesses.

44:33 But at the same time, it's about, actually, how do we utilize the frameworks we're already on and start to agree more high level frameworks so that we can engage on a more strategic level and get greater visibility of work. So that that is something that we're that we're doing right now. The we brought onboard a new head of bids and projects, and they've spent the last few months really looking at, okay, all of the opportunities that come in via the frameworks that we're that we're on that we've not really been exploiting today. What do we want to go for? So they're now doing that proper filtering, looking through what do we want to bid on, what suits us as a business, what do we think we've got a good chance of winning. Because, obviously, we don't have a history of data to to rely on to say, well, you know, we've got, like, a 70% win rate when we go for this type of opportunity.

45:22 So we're building that understanding, but we're at the very least now, we're starting to submit bids against the framework opportunities, which provides us a a more stable and and amount of visibility for contracts both now and in the future because you'd know the type of spend that goes through those frameworks. You know the level of opportunity and how it flows through. It's quite consistent as opposed to having conversations with engineering managers. It can be quite inconsistent. So that's the that's the view we're taking there is is is look at the frameworks, target the frameworks, as well as continue the the tactical wins. Hopefully, that that answers that question. Feel free to follow-up if if not. Just to add a while while you're reading the next one, Paul, just to emphasize that historical figures through 08/31/2024 were delivered basically without a sales team. 6,230,000 were without a sales team. The new two two new sales guys have joined subsequently and also bits of project managers. So that's really what's gonna drive the expansion, as Paul mentioned.

46:23 Sorry, Paul. Yeah. Do you know a great example of that is one key framework we're on that we've done, I think, you know, about a 100 k of last year's revenue on. This year, we'd we'd submitted my most recent figures, and we'd submitted around $1.21300000 pounds worth of bids on that framework. We've won approximately half of it. So we're actually doing really well on the on the frameworks side of things already. I think that's gonna be really successful for us. But the next question, we've seen a number of service companies struggle with profitability on contracts. How do you ensure that you have sufficient contingency to maintain profitability? How do contracts vary when the specifications suddenly changed? So in terms of profitability, this is the the I believe the companies you're referring to, the ones that are focused on time materials based where margins are really small.

47:17 As you get into risk sharing and actually delivering outcomes, you're you there's opportunity for increases in margin, and that's what that's what we target. So so that's where our opportunity for profitability comes from, and and it's it's by focusing in that area, which is how we'll maintain our profitability and grow it. In terms of how do the contracts vary, this is this is how we benefit clients. Right? So if you think about if you've got a firm price piece of work that you've put out for a company x, and all of a sudden, you've just developed a technical discovery as you're going through your preliminary design on the new armored fighting vehicle, and you say that changes what I've just subcontracted to company x.

48:02 And you've gotta go through that change control process. Well, with those, you don't do that. You can vary your contracts really easily because you what you've got is a a cost that we've we've put in place for that a year, and you can dynamically adjust your deliverables as your as your needs change. That's that's the whole benefit of of that model with your three month increment cycles. Hopefully, that answers that one. While I've been through the listing prospectus, I did not notice how much capital has been invested into the business to date. Yeah. Okay. So I guess the the the IPO gave us effectively 5,100,000 into the business. A rough breakdown of that is 2,200,000 going into the development of the AI project, the sell tool, 1,600,000 around the new facility. I didn't mention that all in the brief. Sorry about that. We've got a fit out underway of a new HQ in Bristol, which is gonna be located very close to a number of existing and potential new clients as well as headquarters for Moab, Abbey Wood.

49:14 We've we've also got the remaining spend on growing the team out, basically. So the the the headcount increase I I talked about of, you know, 16 to 40 was 14, or we're making progress to to 40 is where the spend will go there. So facilities, people, technology development is is what we're spending that money on. There's a noticeable shortage of skilled personnel, electrical engineers in this country. Is this a potential problem to support your associate community as RC FORNAX expands? Yeah. Good question. So there's lots and lots of talk around skill shortages. What's really interesting is your tier one defense companies, how they're addressing this is really looking at the front end of the chain. So apprenticeships, graduate programs, how do you get people, you know, stem, how do you get people interested in engineering as a profession and actually start to build your your pipeline of talent coming through at those early days? And then how do you integrate within your organization, give them access to projects so they can develop their skills over time so they become gurus at what they're doing? We're focused on the other side of the chain, which is the people who have been through that process and and worked a number of projects and potentially with a number of companies that have said, I'm very experienced at what I'm doing now. I've decided to take the step to go into the world of contracting.

50:30 They're the people that we're grabbing right now. We will, over time, start to look at the other ends of that script chain as well. But when you consider that that's the part of the the talent market that we're engaging, combined with the fact that a lot of them have been left in the cold with respect to wire 35 and not many people are managing this very well right now. We've actually not seen any issues at all engaging the square we're required to execute projects. And we've got a very healthy associate pool that we can pull up to continue to support that growth going forwards. So we don't currently have any issues with servicing the needs that we were forecasting certainly for the next three years. But we're we're working in the background that strategy such as FORNAX Academy and whatnot that will help us for the future as well. I I brought mentioned a couple of competitors that were in the addressable market slide, and those two have around 4,005 consultants respectively.

51:26 And when I mentioned for this year, we're targeting getting up to a 100. We're still talking about really small numbers in the scheme of what's available. So we're very, very confident on on, on actually meeting the skills challenge. Can you comment on the international expansion, what markets you're targeting, how you plan to navigate regulatory and operation challenges? Yeah. I mean, the the key thing that always jumps in my mind when we say international is ITAR because it's been a bear in my life for, on a number of projects. But it's just a highlight that there are a number of those regulatory challenges, as you look to to move overseas. I would say we're at the early yes. It's an aspiration in terms of the internationalization, but we're at the early stages of that. So we remain flexible in our approach as we do with all things in terms of how to how to go about that. But it is really about taking the experience we're on the The UK based developments and taking that into the territories that are already shared partners in those developments and looking to engage in conversations to start supporting them perhaps initially remotely and then looking to build those satellite outposts in those territories and starting to build capability quite organically initially.

52:38 Regulatory challenges that come with that, we we obviously need to make assessments as per territory we look at. We'll be doing full assessments of all. We've got a good working knowledge, but, obviously, we'll do full scoping activities before we look to do anything. Given your history, you appear to be UK centric, which would be understandable. However, outside BAE, UK defense companies are minuscule to have relationships in roads into US defense majors. So I guess there's some of these things I probably can't talk about, but early conversations, yes. Do we do I I mean, I have direct experience of what if we're thinking about The US, for example, direct experience delivering in power products into US based defense companies.

53:23 So do have contacts. And from a sales perspective, obviously, most of these companies that we engage are international. The tier ones, most of them are international. And in fact, I think all of them that we engage in fact, our top three, I think, that are are mainly US based. So we've got a great, a great path to be to be walked there in terms of internationalizing. So, yeah, we're really confident we can make that happen by exploring the great relationships that we have and continuing to scale up our services. That's all the questions. I answered all of them. Absolutely. Paul, Rob, if I may just jump back in there. Thank you very much indeed for being so generous for your time then addressing all of those questions that came in from investors this morning. But, Paul, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that'd be great.

54:19 Yep. So, hopefully, you've enjoyed the the content that we've that we've been through. Enjoyed might be the wrong word, but, you know, this is a a so far has been a short journey for RC FORNAX. But what we're doing in defense in terms of that ambition to drive efficiency through projects is very much needed. You know? If we can put one thing across, it's that we're really passionate about changing that landscape in defense, and we're doing it one step at a time because we know it's a long road to get there. This is a, you know, a really exciting business that that we believe in. I think we're doing exactly what's needed. It's in the an industry that needs change, and and and we're trying to deliver that change. So hope hopefully, that's that's come across today.

55:05 Rob? Yeah. Just one final comment. Thank you. You know, we're technology agnostic, right, which I think is really important in the changing defense environment, whereas we've seen a number of our peers or defense suppliers have potentially suffered in the public market from a delay of a particular type of contract or on the flip side have benefited from an award of a particular type of contract. RC FORNAX flexible, agile and is able to support drone manufacturers through combat aircraft, through unmanned marine drones, through ships. And that's really important, I think, takeaway because nobody really knows exactly what technology is the right technology going forward. We all know we need to spend more.

55:51 But what is clear that any technology is gonna require support of skilled engineers and that's where where RC FORNAX comes in. Perfect. Paul, Rob, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of RC FORNAX PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.