Networkers International

Global technology recruiter Networkers, whose backers include Jon Moulton and Nigel Wray, is coping creditably with weak overall recruitment markets whilst slashing debt.

Active across Africa, Latin America, Europe and Asia among other diverse destinations, Networkers suffered a 25.4% drop in pre-tax profits to £2.2m for the half to June, as net fee income (NFI) waned 9.7% to £11.48m. ‘For the first time as either a private or a public company, we failed to show growth,’ admitted CEO Spencer Manuel. However, he believes the performance actually represented ‘our best achievement ever’, given recessionary pressures: ‘to be profitable, and for those profits to only come off 25%, was an excellent result’.

Bank borrowings – the bulk of which were incurred through the 2006 acquisition of MSB – were significantly reduced sub-£3m, from £17m a year earlier, on healthy cash generation and the cashing in on a Middle East joint venture.

Despite tough UK trading, gross margin expansion to 16.6% (2008: 15.3%) reflected Manuel’s focus on higher value recruitment and emerging markets, where there is less competition and a shortage of skills. Significantly, international business now accounts for 55% (2008: 41%) of group NFI and the globally diverse, core contracting division, is helping to mitigate poor performance in the permanent business, which is weighted towards the UK.

Whilst the short-term going could be tough, Networkers' long-term growth prospects remain attractive, notably in emerging markets. Hence, having just opened an additional office in China, another three overseas office openings are planned for the second half.

Recommended by Growth Company Investor at 21p in 2008, Networkers, now selling for roughly six times forecast full year earnings, has that oversold look. Patient investors prepared to sit tight should be in the money over the long haul.