(Reuters) - British defence and security company QinetiQ on Monday warned of delays in short-term contracts being awarded in the U.S. and UK, where new policies are being implemented after recent changes in government.

Shares in the company, which develops and tests systems used across the defence, space, government and other sectors, fell as much as 20% and are on track for their worst day on record after QinetiQ said the delays would affect its revenues.

The company forecast organic revenue growth of just about 2% for the year ending March 31, with underlying margins of roughly 10%. That compares with growth of 14% and 16% respectively in the previous fiscal year. 

For fiscal 2026, growth is expected to improve slightly to about 3-5% and 11-12%, QinetiQ said. 

In the U.S., President Donald Trump has created a new Department of Government Efficiency to look at extensive cuts to federal bureaucracy and "maximize governmental efficiency and productivity", under tech billionaire Elon Musk's oversight.

U.S. contracts are recorded by QinetiQ in its Global Solutions unit, which accounts for roughly a quarter of overall revenues at the company. It is also restructuring its U.S. business, expecting to take a charge of 140 million pounds ($181.3 million) at year-end.

QinetiQ's EMEA services and UK defence unit make up nearly half of all revenues. That business is performing strongly as it largely has longer-duration contracts, the company said.

However, UK Intelligence, which makes up for the rest of revenues, has experienced delays in contracts of shorter duration.

British finance minister Rachel Reeves, part of the Labour government that took office last July, said earlier this month she would speed up defence procurement, but the industry is waiting for more clarity on government spending priorities in a review expected this Spring.

Britain last month announced an increase in military spending in response to Trump's call for Europe to do more to protect itself amid rising geopolitical tensions.

($1 = 0.7721 pounds)