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UK – Networkers International benefits from international expansion

12 April 2012

Networkers International (NWKI:LSE), the British IT and telecoms staffing specialist, reported on Thursday that revenue in 2011 rose by +24.2% to £190 million, compared to £153 million in 2010. This was primarily driven by international expansion and a focus on specialist areas within the company’s core sectors while most of the revenue was derived from the firm’s European business. But despite the strong balance sheet, the Group said it would remain mindful of the fragile economic climate as market sentiment remains volatile.

Final results for the year ended 31 December 2011 show that net fee income, or gross profit, rose +24.7% to £30.31 million against £24.31 million in 2010. 70% of net fee income is now generated from clients based outside of the UK.

Gross profit margins have marginally improved by +0.1% to 16.0%. This was mainly driven by a greater share of net fee income being attributed to international and cross border business which yields higher average margins than domestic recruitment.

Contract net fee income has increased by +21.3% year-on-year while permanent placements grew by +15.3%, representing 17.6% of net fee income.

The firm also reported that profit from operations increased and totalled £6.49 million in 2011, compared to £4.62 million in the previous year.

Profit after tax rose to £4.24 million, compared to £2.66 million in the previous year.

Net debt has increased to £9.1 million in 2011 from £5.94 million in 2010. The debt consists entirely of drawdown on invoice discounting to fund the £37 million annual increase in revenues.

The telecoms business performed well during the year and has been responsible for the majority of the Group's growth, with net fee income increasing by +46%. The firm said that this sector will have solid long-term growth prospects although growth rates could slow over the short term when compared to 2011. The telecoms business represents 59% of total net fee income and 44% of revenue.

The IT business benefited from higher demand for the relevant skill sets but, overall, this business has shown only modest growth in the period. However, the specialist technology markets of Trading Systems and Digital Media have performed well, as has the international and cross border IT offerings, which has increased net fee income by +16%. The IT business generates 33% of net fee income and 54% of the Group's revenue.

The firm’s emerging energy & engineering business has seen net fee income rise by +22% year-on-year, and now represents approximately 5% of the Group's total.

In the year, headcount increased to 367 with 40% of employees now located in overseas offices.

Commenting on today's results, Spencer Manuel, CEO at the firm, said that “2011 has been a year of record profits for the Group with pre-tax profits up 54% to £6.6 million. We have made excellent progress in our strategy of international expansion, particularly in expanding our IT and Energy offerings into our international offices that had previously only focussed on telecoms recruitment.”

“The Group has made an encouraging start to 2012.  Following the very strong growth in trading and contractor numbers throughout 2011, as the current year progresses our comparative numbers will become stronger which may have a bearing on our rate of growth when compared to the rate achieved in 2011.”

“Whilst we are mindful of the fragile economic environment in some regions of world, with our strong balance sheet, experienced management team and geographical diversification, we are able to continue to invest wisely in markets and geographies that present growth opportunities within our core markets of Telecom, Specialist IT and Energy & Engineering.”

Networkers International Plc is a specialist staffing firm, operating in three segments: information technology, telecommunications and ‘other’ segments.

In early trading this morning, the company’s share price remained unchanged at £39.00, up +5.41% from a year ago but -8.56% below its 52-week high of £42.65 set on 27 January 2012. This values the company at £34.82 million. 

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