Shares in TPXimpact Holdings PLC (AIM:TPX) fell over 23% to 24.85p after the digital transformation consultant warned of delays in the procurement of large customer programmes, which will result in group revenues falling for the full year to March.
Trading for the three months to December, its third quarter, met management expectations in terms of profitability and margins, with approximately £30 million of new business secured, taking the nine-month total to £65 million.
However, it said the first weeks of 2025 have not seen the Digital Transformation business make a return to normal trading conditions, as it had anticipated.
"Macroeconomic conditions and the post-election budgetary issues highlighted by the incoming government, despite significant appetite for digital transformation, have led to delays in the procurement of large digital transformation programmes with tender and award decisions moving by many months," TPX said.
"In addition, spending controls implemented after the October budget have had the effect of slowing the ramp-up of new business wins and the rate at which the won backlog on some central government programmes can be expended."
Chancellor Rachel Reeves also pushed back the government's comprehensive spending review, which sets out departmental budgets for the remainder of the parliamentary term, from March out to June 2025.
The company said the net effect is that it now expects revenues to decline 8-10% in the year to March 2025, though earlier reorganisation means that underlying profit margins are expected to improve 1-2%, and so group-adjusted EBITDA is expected to improve compared to the prior year.
"The new business pipeline remains strong and we anticipate normal market conditions to return in the second quarter of FY26, once the comprehensive spending review is completed," the company said.
An early assessment of its budget for the year to March 2026 is that growth will be at the lower end of previous guidance of 10-15% and that higher employer National Insurance contributions will mean margin progression is likely to be at the lower end of the 1-3% growth range.