It's results season again for recruiters and most of the numbers have been positive, but the big question is can it last?

When several major recruiters point to record results, it can only bode well for the state of the industry. Doom-mongers waiting for a collapse may be disappointed for some while yet.

Stronger markets have generated the confidence needed for expansion into new territory. The pessimists may say this indicates that firms are now looking to drive growth from overseas markets, feeling that the UK simply doesn't offer the same excitement.

One of the biggest successes

Financial recruiter Robert Walters was perhaps one of the biggest success stories. Profit before tax for the six months to June was a record £8.1m, up from £4.9m a year earlier. Robert Walters, chief executive, said: "All of our regions have produced excellent performances."

Asia Pacific is growing at the fastest rate. Chief executive Robert Walters told Recruiter: "We've got the benefit of scale out there, which the smaller companies don't. We were one of the first into Japan."

But Walters' UK results could not be said to be poor. Profit before interest and tax rose to £1.6m, from £879,000. Its shares have doubled in the last year, and are not far from their all-time high. The market clearly feels Walters' strategy is working.

Michael Page, too, boasted record results for the same period. First-half pre-tax profit rose to £45.1m, from £30.6m. Like Walters, it pointed to overseas growth as the main driver. However, it did admit to some problems in Australia.

Good news for shareholders

The company has generated cash. Some of this has been reinvested in new ventures, but more of it is going back to shareholders. The company bought back £39.7m of shares in the first half, and has since bought more. It clearly feels this is the best use of the cash to improve shareholder value, and that there is a limit to how many offices it can open and acquisitions it might make.

Walters feels the same. He told Recruiter: "There's no point in buying a firm in Perth (Australia) when we're already there ourselves." However, he said he would consider acquisitions in areas where the firm was not currently represented.

The biggest major negative in the sector recently was in June when Hays, the UK's biggest purely recruitment firm, said growth was slowing. Hays shares fell 8.9% on the say of the announcement, wiping £190m off its value.

But it was all relative. Hays was still moving forward. It had simply failed to sustain the momentum of the previous strong growth rate.

On 5 September, Hays reported pre-tax profit of £192.5m for the year to 30 June, up from £167.7m a year earlier. Turnover rose to £1.83bn, from £1.64bn.

Net fees rose to £538.2m, from £470.6m. In the UK, net fees in accountancy and finance were 6% ahead of last year at £158m. In construction and property, net fees rose to £101.6m, from £97m.

Solid growth in the UK

Denis Waxman, chief executive, said: "The group has once again delivered a strong set of results, producing sustained fee and profit growth. Overall net fee growth of 14% reflected excellent growth of 38% across our International divisions, and solid growth of 7% in the UK and Ireland."

He added: "The newer activities in the UK & Ireland continued to grow strongly, but growth was more moderate within the UK major specialist activities."

Analysts cut their profit forecasts, and some commented that Hays is still too UK-dependent. However, the majority expect the rate of growth to increase, even if it doesn't get back to its peak.

Imprint, owner of Morgan McKinley, reported pre-tax profit of £4.16m for the six months to 30 June, up from £1.85m a year earlier. The shares gained sharply after the results. Hamill, chief executive of Imprint, is another to indicate that he is more excited by overseas prospects. Hence Imprint's recent acquisition of Ingram in Dubai.

Headhunter firms are also enjoying boom times. OPD pointed to increased profits from all four of its brands -- Hoggett Bowers, Odgers, Portfolio and PSD.

The company's pre-tax profit for the first half rose to £5.9m, from £2.3m. Odgers, acquired in December 2005, was a key element in boosting the results.

Francesca Robinson, chief executive officer of OPD Group, said: "The group has made significant progress during the first six months of the year with each part of the business improving profitability over the comparative period for 2005. Market conditions permitting, we are confident of continued growth during the period ahead."

Newly-floated companies may well feel they've picked a good time to go public. Morson, which supplies 7,500 skilled staff to the aerospace and defence, nuclear and power industries, reported pre-tax profit of £2.27m for the six months to 30 June, up from £748,0000 a year earlier. Turnover rose 24% to £156.8m. The company's shares started trading on the Alternative Investment Market in March.

Gerry Mason, non-executive chairman, said: "Despite the distractions of the flotation, trading in this period has been strong and ahead of management expectations. In light of the first half performance, and as a result of the company's forward earnings visibility arising from its contracted revenue base, the board is confident about Morson's prospects for the full year."

Blue Arrow sets course

For Corporate Services Group, the story was not so upbeat. But the pre-tax loss of £1.15m was narrower than £4.74m a year earlier. For the first time since 2001, CSG made an operating profit in its historically weaker first half of the year. Chairman Tony Martin is confident that the strategy of segmentation into niche businesses is working.

"The positive benefits from many of the changes undertaken in the Blue Arrow high street network last year are now materialising," Martin said.

Hat Pin's results were also upbeat, and it is optimistic enough to make an acquisition. (See related articles.) 

IT recruiters fared well. Recruiter recently reported how SThree saw profits soar, and Spring Group has enjoyed a rebound into the black (see 9 August issue).

Smaller rival FDM Group reported pre-tax profit of £1.26m for the six months to 30 June, up from £408,000 a year earlier. Last year's figure included flotation expenses. At 30 June, the firm's headcount had grown to 572, from 436 at the start of the year. New clients in the period included Virgin Mobile, Xansa and British Airways.

Rod Flavell, FDM chairman, said: "The market continues to provide a broad range of opportunities to manage demanding IT projects and address the shortage of appropriately-skilled staff."

Other small companies are also enjoying reasonably prosperous times. Staffline reported pre-tax profit up 45% to £1.0m. It is sufficiently confident of cashflow to have boosted its dividend 20% to 1.8p a share. These may look like modest numbers, but they are as much as can be expected at that end of the scale.

Ian Jermin, analyst at Bridgewell, said: "Our view remains that the sector is in rude health."

He added: "An economic slowdown in the US, as opposed to a hard landing, should have minimal effect on staffing companies which, in general, do not require booming economies to sustain reasonable levels of activity."

When will the up cycle end?

Finally, for those providing recruitment-related services, it's been a tricky time. Psychometric testing firm SHL saw profit slip back to £3.3m from £3.4m. But it has attracted a takeover bid.

The sector started a major recovery in the fourth quarter of 2003, says Jermin. Some are asking when the "up cycle" will end.

Those who look hard enough will be able to find a downside to this. For the others, the glass is more than half full.