Top fund managers are betting big on these five outsourcers

Business services companies can be the quiet stars that shine in the background and make other people look good. And so it is with the five European businesses operating in the sector that the world’s top portfolio managers are backing most heavily.

Their functions range from providing the specialist staff to ensure that other companies play at the top of their game to operating customer call centres and ensuring that the UK’s prison network functions smoothly and its hospitals stay clean. Success here will mean their clients get the plaudits and they get to keep the contract.

Each of the five companies shortlisted in the business services category of the Citywire Elite Companies Emea Awards has its own particular characteristics that help explain its appeal to top-performing professional investors. It might be stellar growth, a solid turnaround story, or perhaps simply its value credentials.

The winner will be revealed at a gala event at the London Stock Exchange on 21 June. These are the five:

Source: FactSet. PE = price-earnings ratio. PE and dividend yield based on 12-month forecasts

Find out more: Citywire Elite Companies Awards

Ipsos (FR:IPS), the survey-based market research firm, has been in steady expansion mode for at least the past three decades, regularly making acquisitions, building market share and often outperforming its peers.

The company, founded in Paris in 1975, is known for its surveys, but is also a leading expert in analysing both qualitative and quantitative information and data. It has profited from its decision early on to embrace digital market research.

Elite investors have told Citywire Elite Companies that they particularly rate Ipsos’s high level of free cashflow, which has enabled it to fund its growth, including paying for acquisitions from its own pockets rather than borrowing.

Going for growth

If there is a word that epitomises Alpha Financial Markets Consulting (GB:AFM) it is probably growth. The management consultancy for the investments and insurance industry has expanded at pace since well before its listing on London’s junior AIM market in 2017.

Alpha now employs more than 900 consultants and contractors across 16 financial centres and its team has advised all top 20 of the world’s asset managers and 80% of the top 50 ranked by funds under management.

Last year’s adjusted Ebitda came in at £33.9m and is forecast to reach £51.6m for the 2025 financial year, according to analyst estimates compiled by FactSet. Alpha has particularly flourished as asset managers have had to grapple with ever-increasing levels of regulation, as well as rising costs and greater disclosure, particularly around environmental, social and governance issues. It is also a beneficiary of big-ticket mergers and acquisitions as it is a specialist in advising on integration after deals.

The group has been unafraid to pursue acquisitions of its own, notably paying $90m in cash and shares to buy the Lionpoint consultancy almost exactly two years ago. It followed this with a smaller deal earlier this month to buy the Australia-based consultant Shoreline.

Shares in the company, which is bedding in newly promoted chief executive Luc Baqué, have risen more than threefold since a Covid-induced trough in March 2020, most recently given a lift after Alpha guided that this year’s annual results would be significantly ahead of expectations.

Few turnarounds are more impressive than that at contracting specialist Serco (GB:SRP). Under former chief executive Rupert Soames, Serco went from a crisis-ridden public sector contractor mired in an overcharging scandal to the government’s go-to firm for overseeing its Covid test-and-trace programme and helping to accommodate asylum seekers as part of its highly contentious migration policy. The shares have stabilised but remain well below their peak in 2013 when Serco was at the height of its prowess.

French office support group Teleperformance (FR:TEP) has had its own share of scandals, ranging from claims of poor working conditions in Colombia to allegations it mishandled images of child sexual abuse to train staff moderators working for social media group TikTok.

The problems failed to get in the way of its €3bn bid to buy Dutch-listed rival Majorel last month, however. Chief executive Daniel Julien is promising several more deals to come in short order as it moves to consolidate its position in the digital marketplace.

Founded in Paris in 1978, Teleperformance provides a host of business support services, including running call centres, back-office processing and data analytics, and its customers include social media, financial services and hospitality businesses as well as government agencies. The group has heavily embraced artificial intelligence, including by using chatbot ChatGPT at its call centre operations to save time and reduce errors.

The scandals have taken a toll on the shares, though. Having rocketed higher over the previous decade, the stock has lost more than half its value since hitting a peak at the end of 2021.

The smallest company on the shortlist is SThree (GB:STEM), the UK-based specialist recruitment firm whose London listing values it at a bit more than £500m. SThree places experts in the so-called Stem areas of science, technology, engineering and mathematics (which in practice tends to mean finance).

SThree might be expected to suffer at the hands of an economic slowdown, as companies rein in their hiring or cut back on staff. Yet the group, which operates in 14 countries, notched up record pre-tax profits of £77m last year, driven by strong growth in placements in the tech and engineering sectors. That 78% of its net fees come from temporary or ‘contract’ placements helps to dilute its exposure as businesses tend to be keen to remain flexible during a downturn.

The strong performance continued during the three months from the beginning of December to the end of February, though growth of the order book slowed and fees for filling permanent positions dropped during the period. The shares have suffered since early March, when it was promoted to the FTSE 250 index, though it comfortably outperformed the FTSE All-Share during the previous five years.

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