NORTHERN Recruitment Group (NRG) yesterday posted a 22 per cent increase in revenues but said progress this financial year was being held back by the under-performance of its NRG Connect division.

The North-East firm said NRG Connect, which manages high- volume national recruitment projects for public sector clients, had not won any major new contracts.

In the year to June 30, the division recorded a 40 per cent reduction in turnover. It accounted for only 11 per cent of total gross profit, compared to 20 per cent the previous year. Chairman Leo Finn said NRG Connect had operated at low levels.

"In the absence of major new project wins, this will constrain the company's progress in the first half, though the strong demand we are experiencing across our other major business streams gives me confidence in our prospects over the year as a whole," he said.

Newcastle-based NRG yesterday said total group revenues had increased by more than a fifth to £22.3m in the 12 months to June, while gross profit increased by 7.5 per cent to £7.6m.

However, Mr Finn said overall the company had made a "positive start" to the year.

"The market remains buoyant in all our core business areas, and our pipeline of bids and tenders is exceptionally strong," he said.

NRG operates several businesses, including NRG Executive, which helped to find the chief executive and 15 board members for Business Link North-East.

The company also runs NRG Call Centre Solutions - which supplies contact centre staff - and NRG City, which meets demand for support staff and has offices in Newcastle, Middlesbrough and York.

Chief executive Lorna Moran, who founded NRG 30 years ago, said demand in nearly all its business areas had remained "very strong" throughout the year.

"The business is well balanced between the public and private sectors, and achieving an improved mix between permanent recruitment and temporary placements.

"With the market remaining buoyant, and a strong new business pipeline."