Despite leading shares continuing to come under pressure on global economic concerns, there are a few bright spots.
One of them is outsourcing group Serco, up 22p at 566p after a buy note from Bank of America Merrill Lynch with a 670p target. Merrill's analysts said the company's shares had fallen 7% over the last month and are trading at the bottom of their recent range. But with growth potential in the UK as the drag from government cuts decreases, along with the acquisition of Intelenet this month, as well as the prospects in Asia Pacific, Merrill is positive about the outlook. It forecasts organic growth to accelerate from 3% in the first half of 2011 to 7% in 2012 and 8% in 2013.
It cites a number of reasons why there will be a pick up in the UK:
[These include] tenders in local government which could expand the market by 20% by 2013, the emergence of new markets with the Police and Borders Agency, the next wave of justice and defence outsourcing and mid size bids in environmental and health. News on large bids for MOD army recruitment, Peterborough Council, and Lincolnshire Police are due in the second half.
