Numis upgrades Serco after "encouraging" first half

2nd Jul 2015 09:21

Serco's stock was extending gains on Wednesday after a well-received first-half trading update the day before, with Numis Securities providing a further boost by upgrading its recommendation from 'reduce' to 'hold'.Numis said Serco revelations that first-half trading had been a little better than expected, was "encouraging".The broker highlighted the company's strong contract renewal rate, with £800m of the £1bn contracts won during the period being re-bids of extensions."The operational and financial performance of the contract portfolio in 1H15 was largely in-line with management's expectations, and guidance for 2015 has been maintained," Numis said, referring to an expected trading profit of circa £90m and EBITDA of £160m."Though the turnaround will take an extended period, we think the problem contract issues have been contained, and the balance sheet has been de-risked."The broker kept a 130p target price on the stock, which was up a further 0.6% at 126.4p on Thursday morning.