Broker snap: Panmure Gordon sees upside at Serco

19th Dec 2013 11:43

Panmure Gordon has kept a 'buy' rating for troubled outsourcing outfit Serco despite a disappointing trading update on Thursday, saying consensus estimates for this year are unlikely to change.Serco, which is facing a probe into allegations of overcharging for tagging criminals, said it expected free cash flow this year to be lower than in 2012, reflecting extra working capital investment and lower dividends from joint ventures. Panmure analyst Mike Allen said this was "as anticipated"."The pre-close statement from Serco shows little change from the profit warning in November. The outturn for 2013E is not expected to materially alter current consensus," Allen said.There was no new update on the UK government investigation, but this is expected soon and will be "critical both in terms of its ability to win work in 2014E and beyond as well as from a stock price re-rating perspective."Allen kept his positive stance on the stock, saying that the "current valuation may have captured most of the downside potential for 2014E and beyond".The share price was down 2.41% at 438p by 11:31, having fallen by nearly 30% over the past six months.BC