Broker snap: International performance underpins Serco outlook

10th Mar 2011 13:45

UBS says that the outlook at Serco is encouraging as some short-term headwinds in the UK should be offset by a longer-term pipeline and international performance.2010 results announced last week were broadly in-line with market expectations, "with growth and cash flow particularly encouraging in our view," says the broker.The outsourcing group guided to 5.5 - 6% organic revenue growth in 2011, compared with 7.6% growth in 2010, with the UK business "mainly to blame." However, "the bid pipeline was up to £29bn and, importantly, weighted evenly across group revenues (60:40 - UK: international)."UBS notes that while the medium term confidence in the UK is encouraging, the international business showed double digit growth in 2010. "We still believe that this access to a wide range of geographies and sectors is key to the longer-term Serco growth story."The price target is upped to 670p, from 640p, and a 'buy' is retained.