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Highlights
- The latest CBI survey has revealed that the service sector in the United Kingdom witnessed a rapid growth in costs leading to higher average selling prices.
- Due to the cost pressure and rising inflation, firms from the business & professional services segment are expected to raise the costs in the next three months.
According to the latest survey by the Confederation of British Industry (CBI), the service sector in the United Kingdom witnessed a rapid growth in costs leading to higher average selling prices in the last quarter.
As per the survey, most of the companies operating in the consumer services and business & professional services segment were optimistic about the growth prospects and wanted to invest and create more job opportunities. However, rising inflation and cost pressure is badly impacting the profitability of several businesses.
The CBI survey that was conducted between 28 January and 15 February 2022, with the result based on responses from 140 service sector companies, stated that volume growth dropped in the consumer service segment, while it nearly stalled in business & professional services. Due to the cost pressure and rising inflation, firms from the business & professional services segment are expected to raise the costs in the next three months to overcome the squeezed bottom line.
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The rising average selling price in the business & professional services subsector might prove profitable for companies operating in the segment. Let us look at FTSE-listed stocks that operate in this particular segment.
Rentokil Initial Plc (LON: RTO)
The UK-based business service group offers pest control services in North America, the United Kingdom, and other countries. It also offers hygiene and property care services to its clients.
In December 2021, the company announced a USD 6.7 billion acquisition of Terminix Global Holdings, Inc. The new acquisition will help the company become a market leader in the US with an attractive financial profile.
Rentokil Initial Plc’s last close was at GBX 523.20 on 02 March 2022, with a market cap of £9,605.3 million.
Mitie Group Plc (LON: MTO)
FTSE 250 listed company provides outsourcing services like security and cleaning services monitoring solutions to its clients in the UK and other countries. The company’s business performed strongly in the three months ended 31 December 2021. Its total revenue was up by 51% to £1,008 million during the period.
Also, the company reported new contract wins and renewal of existing contracts with a combined worth of £550 million. As a result of good performance, the company has revised its full-year guidance ending 31 March 2022. It now anticipates revenue between £3.8-£3.9 billion, while operating profit of £160-£165 million.
Mitie Group Plc’s last close was at GBX 54.30 on 02 March 2022, with a market cap of £784.20 million.
Serco Group Plc (LON: SRP)
The company offers public services in the United Kingdom and European countries. During the Covid-19 pandemic, the company offers support services to the government in the UK and other countries.
For the year ended 31 December 2021, the company reported a 14% rise in revenue to £4,424.6 million, with an operating profit of £216.2 million. Also, the order intake was strong in 2021, with £5.5 billion of orders win during the period.
Serco Group Plc’s last close was at GBX 138 on 02 March 2022, with a market cap of £1,619.9 million.
Note: The above content constitutes a very preliminary observation or view based on industry trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
