Networkers International managed to increase its profits despite a decline in revenues.
The telecoms and IT recruitment company did increase its net fee income from £24.4m to £28.1m even though its revenues dipped from £178m to £163m in 2008. That shows that margins are improving. Pre-tax profits improved from £4.63m to £5.57m.
Permanent recruitment accounts for less than 15% of net fee income. This is much more volatile than the core contract work.
The business is cash generative and net debt and financial liabilities have fallen from £18.3m to £11.2m over the year.
There was a 1.75p recovery in the Networkers share price to 10p, which values the company at £9.22m. The net asset value is £14.8m, and even if intangible assets are excluded it is £9.89m. The shares are trading on less than three times historic earnings.
International business is expected to account for more than one-half of revenues in 2009. Weaker sterling will help this. New offices have been opened in Mexico, South Africa and Malaysia. Networkers intends to sell its stake in its Saudi Arabian joint venture, which is in the balance sheet at £1.75m. That could make another dent in the borrowings.
Reducing debt will make Networkers increasingly attractive to investors who currently tend to shy away from highly indebted companies even if they are trading strongly. There is little medium-term visibility of revenues despite the contract nature of the business.
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