1. UK Professional & Business Services Industry Landscape

The Professional & Business Services sector encapsulates a diverse set of high-skilled and tradable services. Moreover, the UK Professional & Business Services sector accounted for “big four” accountancy firms, the “magic circle” of several international law firms, and large firms providing a diverse range of services. Meanwhile, there is a high concentration of Small and Medium Enterprises (SME) PBS enterprises within the UK. The sector consists of high-skilled professions from the law and accountancy division, with other business services, such as the outsourcing industry, providing business support and public services in the UK and overseas.

The industry is responsible for the bulk of employment as it represents almost 13% of the workforce in the UK.  The UK labor market gained momentum post relaxation of most coronavirus restrictions as the number of job vacancies in the UK rose above 1 million for the three months to August 2021, according to official data released last month. However, professional services firms in the UK have shown worries regarding the “white-collar” labor shortages as businesses fight it out for top talent amid the economic recovery from the coronavirus crisis.

Key Trends in the Professional & Business Services Sector

Risk Exposures to the Professional & Business Services Sector

• Lack of Advancement in Technology: The Companies operating in the industry may lose out to its competitors in case they fail to bring innovation in the development of new products.
• Credit Risk: The industry is exposed to credit risk arising from the financial loss of customers and liquidity risk arising from fluctuating interest and exchange rates.
• Workforce Shortage: The shortage of skilled staff may hinder the growth of the industry.

SWOT Analysis

Benchmark Index Performance

Based on the last one-year performance, the FTSE All-Share Support Services index has outperformed the FTSE 100 and FTSE 250. The FTSE All-Share Support Services index generated a return of about 40.39%; however, the FTSE 100 generated a return of around 22.65%, and FTSE 250 generated a return of around 29.04%

Figure 1: One Year Benchmark Index Performance

(Source: Refinitiv; Analysis done by Kalkine Group)

Professional & Business Services Sector Outlook

According to the most recent data released by IHS Markit/CIPS, the UK services sector had shown a PMI reading of 55.4 during September 2021, while it had recorded a six-month low of 55.0 during August 2021. The sector had increased prices at a record pace during September 2021 as they battled against surging cost pressures and a drop in new orders due to supply & staff shortages. Furthermore, the outlook for investment seemed not so encouraging for the UK services industry. The Companies across the sector would reduce spending on land & buildings, and on vehicles, plant & machinery over the next twelve months. Nevertheless, the spending on IT infrastructure is expected to increase.

2. Investment analysis and stocks under discussion (RMV, DATA, STAF)

After gaining insights into the Professional & Business Services sector, we would look at the business model of three Professional & Business Services players listed on the London Stock Exchange.

A. Rightmove PLC (LON: RMV)

(Recommendation: Buy, Potential Upside: 19.95%, Market Capitalization: GBP 5.96 billion)

Rightmove is an FTSE 100 listed company that runs rightmove.co.uk, the UK's largest online real estate portal and property website.

RMV will pay an interim dividend of 3 pence per share on 29 October 2021, while the ex-dividend date was 30 September 2021.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the MACD line remained above the signal line, indicating an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 19.95% over the closing price of GBX 698.80 (as of 19 October 2021).

B. GlobalData PLC (LON: DATA)

(Recommendation: Speculative Buy, Potential Upside: 11.86%, Market Capitalization: GBP 1.64 billion)

GlobalData PLC (LON: DATA) is an FTSE AIM 100 index listed market data intelligence provider to the world’s renowned industries. The Company has been serving clients, which include companies across various industries, financial institutions, government organisations and professional service firms.

The Company had paid an interim dividend of GBX 6.10 per share on 01 October 2021 (Ex-Dividend Date: 02 September 2021)

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the 14-days RSI of ~4.83 indicates an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 11.86% over the closing price of GBX 1,390.00 (as on 19 October 2021).

C. Staffline Group PLC (LON: STAF)

(Recommendation: Speculative Buy, Potential Upside: 11.57%, Market Capitalization: GBP 120.02 million)

Staffline Group PLC (LON: STAF) is an FTSE AIM All-Share listed company focused on Business Training and Employment Agencies.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the 20-days EMA of GBX 70.30 indicates an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 11.57% over the closing price of GBX 72.40 (as on 19 October 2021).

*All forecasted data and peer information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*The "Buy/Speculative Buy” recommendation is also valid for the current price as covered in the report as on 20 October 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

---

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.