Specialist technology staffing company Parity Group (PTY: LSE) provided a trading update last week and announced that a framework contract for the placement of staff it has with the Scottish government is not being renewed.

The company added that 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.

Parity added that the impact on its financial performance will be principally at the revenue level. It added that 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.

As a result, Parity does not expect a material impact on profits and continues to expect to meet current market expectations for profit performance in the current financial year.

The company said that 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, the company estimates that its revenues for the year as a whole are likely to be around 10% lower than current market expectations.

According to Parity, in the longer term “the end of this contract will improve the group’s net margin performance, albeit from a lower level of revenue, consistent with the longer term direction of travel for Parity.”

Parity will provide further detail of its future strategic direction when it announces its preliminary results on 16 April 2019.

Revenue for the six months ending 30 June 2018 of £43.2 million, an increase of 0.7% compared with £42.9 million during the same period last year.

Following its trading update on Friday, shares at Parity fell 12% on the day to close at £7.70. Based on its current share price the company has a market value of £7.90 million.