We examine the Support Services sector, which contains a surprisingly large variety of companies.
Our regular look at the sectors of the stock market turns towards the Support Services sector today, and it's a really mixed bag. But first, what actually is it?
Well, to some extent, it covers companies that aren't primary producers or sellers of any specific category of goods or services, but which provide intermediates for those that do. It's also a bit of a rag-bag for companies that don't fit into any of the other sectors, but which have to be listed somewhere, so in some ways it can be considered the "All the rest" sector.
As such, it's a large sector, with 58 companies currently included on the FTSE main list alone. With so many, we really can't cover it in just one go, so we're splitting it into two. The table below covers the 30 largest Support Services companies on the FTSE, and we'll take a brief look at just a few of them to give us some idea of the kinds of companies included. We'll cover the smaller companies next time.
|Experian (LSE: EXPN)||FTSE-100||6,382||2,515||Mar 2009|
|Capita Group (LSE: CPI)||FTSE-100||5,150||2,687||Dec 2009|
|Wolseley (LSE: WOS)||FTSE-100||4,820||14,441||Jul 2009|
|G4S (LSE: GFS)||FTSE-100||3,848||7,009||Dec 2009|
|Aggreko (LSE: AGK)||FTSE-100||3,453||1,024||Dec 2009|
|Serco Group (LSE: SRP)||FTSE-100||3,207||3,970||Dec 2009|
|Bunzl (LSE: BNZL)||FTSE-100||2,526||4,649||Dec 2009|
|Rentokil Initial (LSE: RTO)||FTSE-100||2,514||2,530||Dec 2009|
|Intertek Group (LSE: ITRK)||FTSE-100||2,379||1,237||Dec 2009|
|Travis Perkins (LSE: TPK)||FTSE-250||1,903||2,931||Dec 2009|
|Hays (LSE: HAS)||FTSE-250||1,611||2,448||Jun 2009|
|Carillion (LSE: CLLN)||FTSE-250||1,411||4,504||Dec 2009|
|Michael Page International (LSE: MPI)||FTSE-250||1,396||716||Dec 2009|
|Babcock International (LSE: BAB)||FTSE-250||1,368||1,902||Mar 2009|
|Homeserve (LSE: HSV)||FTSE-250||1,319||517||Mar 2009|
|Regus (LSE: RGU)||FTSE-250||1,127||1,055||Dec 2009|
|Electrocomponents (LSE: ECM)||FTSE-250||1,007||975||Mar 2009|
|De La Rue (LSE: DLAR)||FTSE-250||924||502||Mar 2009|
|Premier Farnell (LSE: PFL)||FTSE-250||875||795||Jan 2010|
|Mitie Group (LSE: MTO)||FTSE-250||835||1,522||Mar 2009|
|SIG (LSE: SHI)||FTSE-250||811||2,744||Dec 2009|
|Atkins WS (LSE: ATK)||FTSE-250||740||1,487||Mar 2009|
|Davis Service Group (LSE: DVSG)||FTSE-250||735||971||Dec 2009|
|Ashtead Group (LSE: AHT)||FTSE-250||628||974||Apr 2009|
|Galiform (LSE: GFRM)||FTSE-250||516||770||Dec 2009|
|Xchanging (LSE: XCH)||FTSE-250||510||750||Dec 2009|
|Filtrona (LSE: FLTR)||FTSE-250||483||444||Dec 2009|
|RPS Group (LSE: RPS)||FTSE-250||476||444||Dec 2009|
|SThree (LSE: STHR)||FTSE-250||463||519||Nov 2009|
|Shanks Group (LSE: SKS)||FTSE-250||411||697||Mar 2009|
The turnover for each company is taken from its last reported year-end, with the year shown.
The table is headed by Experian, a company known to most of us as a provider of personal credit ratings. But credit services account for less than half of its business, and the company also provides various marketing and management services.
Moving down the list we find Capita Group, which provides a host of professional services including pensions, insurance, HR, and various other management services.
And then we change tack completely with Wolseley, a supplier of building and construction materials -- like Travis Perkins further down the list. Being in a much lower margin business, Wolseley needs to turn over far more each year to make its profits, as we see.
Aggreko is in the business of renting power and temperature control equipment, Bunzl mainly provides distribution and outsourcing services, largely to the food and cleaning industries, and Rentokil Initial supplies our washrooms and kills pests.
Want more variety? Intertek provides safety services to a number of industries, both via the use of its own testing labs and through offering consultancy services, Hays offers specialist recruitment, Regus rents out offices, and De La Rue prints banknotes and other high-security documents.
Hard to analyse
With such a mixed bag, the Support Services sector isn't really one that investors are able to specialise in as a whole, and for the most part comparisons across the sector are pretty much useless -- unlike, say, banks or oil producers, comparing margins, P/Es, dividends etc is usually meaningless.
For investment analysis, you really need to pick out sub-sectors of companies in similar business, like those building and construction material suppliers mentioned above, for example. But even then, many of the companies in the sector really need to be seen as individual standalone companies, with few or no direct comparisons.
It is, of course, also impossible to classify the sector as a whole as being cheap, overpriced, growing, in a slump, etc. Individual company research really is the order of the day here, even more so than usual.
Personally, I find myself rarely being interested in the larger companies in this sector -- there tend to be few real growth candidates, not much in the way of big dividends, and quite a few cyclical companies.
Next time we'll look at the smaller end of the Support Services sector, which often proves to be a good hunting ground for small cap growth investors.
Previous Sector Analyses