After a summer high of 45p, the Networkers International share price has slowly slid back to 32p, taking the shares to a level they last visited this time last year. That values the business at just under £30 million – or less than ten times expected earnings for the current year. But this telecoms and technology recruitment specialist deserves better. Its latest figures show strong growth in both profits and earnings per share. More than a quarter of revenues come through international contract placements, with a focus on fast-growing emerging markets. And there is scope to get more out of last year’s acquisition, MSB.

Networkers came to the market 18 months ago with a placing at 26p. Its core business is in supplying contractors to the telecoms and technology industries. Networkers’ main differentiator was, and remains, its international network. The main international offices are in South Africa, China and the US. There are joint ventures in Saudi Arabia, Dubai, Iran, Pakistan and Algeria. International contract placements accounted for 28 per cent of net fee income in the first half to the end of June.

Those figures included the first contribution from MSB, bought late last year. MSB was a more broadly based operation than Networkers, though telecoms and technology recruitment was a key part of the business. The deal transformed the size of the group. The latest interim figures showed a 174 per cent rise in fee income, to £12 million. Networkers has taken a lot of overhead costs out of MSB but there are more savings to come through. The deal has lifted permanent recruitment work to about a fifth of the total, giving Networkers a more balanced look.

The £15 million MSB deal was financed with cash – which has left Networkers with just over £20 million of borrowings. That should fall in the second half by between £1 million and £2 million. Networkers has traditionally been highly cash-generative. There should be no repeat of the hefty reorganisation costs incurred in the first half.

If Networkers can get MSB’s margins up to around its own level and push MSB’s non-telecoms activities through its international offices, there is a lot of extra profit to extract from the combined business. As it is, the group’s markets were described as ‘robust’ at the half-way stage and the company was winning new clients, both here and abroad. The sales force is being expanded and Networkers wants to increase its global footprint. This is a business that is going places – literally.

House broker Seymour Pierce reckons earnings could rise to 3.9p per share in 2008, putting the shares on a price to earnings ration of just 8.2 one year out. One to pick up and lock away.

Networkers International	AIM	£7.84m	8.50p	0.00p
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Other company articles:
Networkers looks abroad			16/09/2008
Networkers: growth through global connections			02/06/2008
Networkers’ bullish statement			14/12/2007
Networkers chairman buys a further 500,000 shares			26/10/2007
Networkers a steal on single digit multiple			12/10/2007