Newcastle-headquartered Northern Recruitment has warned that profits for the year to June will be ‘somewhat below’ forecasts.

In an update further damaging shares already in the doldrums, NRG explained that, while its core permanent revenues have remained strong, temporary revenues have weakened as the year draws to a close and will affect the annual profits outcome. With regard to the dividend, the board also stated it would take into account ‘not only the anticipated level of earnings but also the strength of the group’s balance sheet’.

Like other recruiters, NRG is out of favour with investors at present. In February, it reported a pre-tax profits retreat from £1m to £540,000 for the half to December, on turnover reduced to £9.9m (2006: £11.2m), with the profits fall principally reflecting a lack of major public sector contracts.

First-half highlights included a 12% rise in fees from the core permanent business (temporary fees decreased by 6%) and news of positive developments at TotalNRG, a new five-strong consortium of regional recruiters led by NRG that is already supplying high-quality temporary staff to government organisations including HM Prison Service and HM Revenue & Customs under a framework deal.

The half-time balance sheet remained strong, with NRG sitting on net cash of more than £4.7m. In spite of a drop in earnings to 2.1p (2006: 4p), the interim dividend was held at 2.5p.

Long established and boasting an appealing 50:50 split between public and private sector business, the fall in the NRG share price looks overdone. Nevertheless, with the outlook for the UK economy uncertain and given recent news flow, the shares are best avoided for now.

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Northern Recruitment	LSE	£5.94m	37.50p	0.00p
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