Northern Recruitment Group reported a pre-tax profit tumble of more than 50pc yesterday, as the sector fought to weather the economic storm.
The Newcastle-based group said figures for the six months to December 31 2001 were as it expected, due to a weaker market for traditional permanent recruitment and a reflection of market trends in the temporary sector.
However, it pointed out that it is planning to invest in a bid to grow and is already contributing to an Inland Revenue contract win for which it has not yet seen the cash benefits.
It also blamed "significant investment" in the business, the extra costs associated with its contact centre and moving to new offices in Edinburgh.
NRG chief executive and former North- East Businesswoman of the Year Lorna Moran said: "We said at the end of last year and also at our AGM that the first-half results would be down, but we are confident that we will meet expectations for the full year."
Pre-tax profits for the period dropped by more than 50pc from £566,000 last year to £225,000.
Turnover also fell to £9.7m as the company ploughed money into a new NRG city branch and invested cash in its Glasgow, Edinburgh, Newcastle and Leeds offices.
Peter Cooper, senior analyst with Newcastle stockbrokers Wise Speke, said: "It's fair to say that every company in the recruitment sector is having a difficult time and that is a reflection of the economy.
"General levels of recruitment are poor in the North-East and in Scotland, which is where the bulk of NRG's work comes from. It's glum, but the sector is suffering and I think there are early signs of light in the sky."
Shareholders will receive an interim dividend of 72p per share while cash flow was strongly positive with net cash rising from £1.5m last year to £2.3m this period.