Newcastle-based Northern Recruitment has issued disappointing numbers for the year to June and issued a rather downbeat prognosis on short-term trading.

Pre-tax profits at NRG, whose business splits roughly 50-50 between the public and private sectors, fell from £2m to £1.2m last year, on reduced sales of £19.9m (2007: £22.3m), ‘close to’ the result predicted at the time of a profit warning in May.

The profits retreat reflected a 4.3% decline in gross profits from the supply of temporary staff – rather than recover, temporary revenues have only weakened – as well as a flat gross profit performance from the core permanent business. In addition, NRG suffered a £700,000 profits fall within its NRG Connect business, which experienced ‘a dearth of high-volume contracts’, and which has since been rebranded as NRGRPO with a wider recruitment services remit.

Although the group’s cash pile reduced from £5.3m to £3.9m, a cash outflow of £1.4m, this was after dividend payments of £1.3m and share buybacks of £800,000, together totalling £2.1m and demonstrating the company’s creditable commitment to shareholder returns.

While NRG remains profitable and trades on a very low forward multiple of 5.5 and a price-to-sales ratio of just 0.26 (based on forecast sales, profits and earnings of £21.6m, £1.5m and 6.3p respectively), we prefer other sector players and feel the shares should be avoided in the near term.

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Northern Recruitment	LSE	£5.94m	37.50p	0.00p
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