IT recruiter the Parity Group is to embark on a strategy of “substantial” cost cutting, according to a trading update.

The update says: “Revenues and profits in the fixed-price projects area of Solutions have declined significantly resulting in a first half operating loss for the Group of about £1m, including currently anticipated costs on an over-running project. The board expects a small operating loss for the group in the second half.

“There will be exceptional costs in the first half of 2010 including additional property provisions and significant one-off reorganisation costs, and some further reorganisation already planned for the second half. These exceptional costs are likely to total some £1.5m for this year.

“There are likely to be further property costs over the next two years as a consequence of the administration of Parity Training, which was sold early last year. The remaining debtor payment from the deal might also not be received.

“We expect no other cash exposure from this discontinued business.

“A substantial reduction of the cost base is essential to remaining competitive at the current size. This has already started and the board intends to have completed many of the cost reductions within three months, although some committed costs will reduce over the next 18 months. Action is being taken to find tenants for all unoccupied property.

“There is much work to be done by the new management team in the second half of the year to get the business in shape for future profitable growth; but we see plenty of positive opportunities once this has been achieved.”

Further details of the group’s new strategy will be provided in an interim results statement at the end of August.