I had the opportunity to have a coffee with Spencer Manuel last week – he’s the chief executive of a small recruitment and staffing group called Networkers International. Although it’s a relatively illiquid stock, I believe that this company really will be one worth watching over the next twelve months. The business has an interesting international strategy and it is operating in what I regard as a significant growth market.
The company only came to Aim last year – listing in May. However, the business has a solid track record since the business was founded in 2000. In fact, the company has managed to turn in a profit every year since its inception. That’s good going.
The company has been relatively quite since it floated, apart from announcing the acquisition of IT recruitment group MSB International. This business was an ideal fit with Networkers’ core business in finding specialist telecoms staff. The cost of the acquisition was £15m and it is being funded by debt.
Networkers’ core telecoms recruitment business is truly international – indeed it gets 90% of its business from abroad. The company’s Chinese operation is a good example of this…
The group employed two Chinese nationals in London for 18 months in order for them to learn the company’s business practices. They were then dispatched to Beijing where they now run the company’s office there. Telecoms recruitment in emerging markets is big business – a real growth area, and Networkers’ presence in South Africa, Pakistan and elsewhere should hold them in good stead.
The company also has some well-known and impressive backers. As I said earlier, the stock is relatively illiquid, with management owning 51.5% of the equity, well-known and respected investors Nigel Wray and Nick Leslau hold 24%. The only other significant stake that is known in the market is 3.5% held by Jon Moulton. Networkers’ staff holds a further 5.2% of the equity.
The company is tabling its first set of results next months and I believe that the market will start to take note following this announcement. Seymour Pierce reckons that the company could post earnings per share of 2.4p in the year to December 2006, rising to 3p in 2007. At last night’s closing price of 38.5p, this would leave the shares trading on a December 2006 prospective price-earnings multiple of 16 times, falling to 12.8 times in the current year. This does not appear demanding to me for a company with such a solid track record and solid growth potential.
Should the company hit Seymour’s earnings forecasts in its results release next month then I believe interest around the stock will start to increase. In a trading update on 16 February the company said that trading had been strong and that cost savings following the acquisition of MSB had been identified. It appears likely that the company will also be acquisitive in the years ahead.
I like this company’s strategy, it has a good management team and the presence of Wray and Leslau as major backers is a definite plus, even though they don’t back the right horse every time. I look forward to reading the results next month. This stock should definitely be on your watch list
Regards,
Melissa Carroll
for The Penny Sleuth
