FINANCIALS: Parity revenues hit by non-renewal of Scottish government framework contract

Parity Group has revealed a framework contract it holds with the Scottish government will not be renewed.

In a trading update released this morning, the data and technology-focused professional services business says it will continue to generate revenue from the existing placements it has made under the framework contract for the next two financial years but will not make any new placements.

The group says the impact on its financial performance will be felt principally at revenue level, adding while this legacy type of contract has been significant in revenue terms it has provided relatively low levels of margin, the loss of which will be offset by costs savings mainly related to serving this specific contract during the period of contract run off.

Consequently, Parity says the failure to renew the contract will result in a material impact on profits and continues to expect to meet current market expectations for profit performance in the current financial year. 

The group added the exact impact on revenues from the loss of this contract is hard to quantify but with revenues in the wider group running slightly ahead of management expectations, it estimates revenues for the year as a whole are likely to be around 10% lower than current market expectations. Over the longer term the group added the end of the contract would improve net margin performance albeit from a lower level of revenue, consistent with the longer-term direction of travel for the group.

The group plans to provide further detail of its future strategic direction under new CEO Matthew Bayfield when it announces its preliminary results on 16 April 2019.

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