Dillistone Group (DSG: LSE), the UK-based supplier of recruitment software to the executive search industry, provided a trading update yesterday for the year ended 31 December 2018.

The group announced that it will be exiting its London office, bringing the number of offices down to two from three. The group says the move will result in reduction in costs from 2020 onwards while maintaining current levels of client service and product development investment.

“Nevertheless, this process will inevitably lead to the group incurring restructuring costs this year, which are currently estimated to be in the region of £500,000 to £900,000”, the company stated. “An update on the cost of the restructuring and the anticipated savings will be provided later in the year”.

In line with market expectations, the group expects to announce a small operating profit, prior to acquisition related items, despite the previously announced loss of a major client and the continuing significant investment in the GatedTalent division.

The board currently expects that the group will deliver a profit before tax in 2019 which will be at least comparable with 2018 (before restructuring and acquisition related costs).

Profit is expected to grow strongly in 2020 albeit, against the backdrop of economic challenges, will be below current market expectations, according to Dillistone.

However, the group stated that it is expected to comprise a higher level of recurring rather than transaction-based revenues and therefore represent more sustainable profits, as the benefits of the restructuring and the investment in GatedTalent start to materialise.

“We’ve enjoyed a positive start to trading this year across each of our business units”, Chief Executive Jason Starr said. “The changes we are making to our operating structure allow us to continue to invest in and support our traditional markets with a far leaner cost base”.

Star continued, “the conversion of GatedTalent to a B2C (business to consumer) service with a significant recurring revenue element means that, once it reaches profitability later this year, it should become increasingly cash generative, while also supporting sales of our recruiting software platforms”.

Dillistone also reported the current year has begun well in each of its divisions, however, the board is cognisant of the economic challenges that the year may bring.

“The board remains committed to investing and supporting the group’s core products and remains excited by the potential of GatedTalent which it anticipates will move into profit in the final quarter of 2019”, according to the company.

Dillistone expects to publish its preliminary results for the year ended 31 December 2018 by 30 April 2019.

Following news of its expected restructuring costs, Dillistone Group shares closed at £48.50, down 13.39% on the day and 14.12% above the 52-week low of £42.50 set on 21 January 2019. Based on its current share price the company has a market value of £11.01 million.