Panmure Liberum has reaffirmed its buy rating on Serco Group PLC (LSE:SRP) and kept its target price at 210p, pointing to solid trading momentum and the prospect of extra cash returns.
Management has confirmed that full-year revenue and operating profit guidance remain unchanged, with performance broadly in line with expectations.
Panmure Liberum says that while the absence of a guidance upgrade may disappoint some, the business continues to perform well across its core divisions, helped by steady demand in defence, justice and immigration services.
The broker expects the recently announced disposal of Serco’s Middle East business to complete in the second half of the year, freeing up capital and allowing management to focus on higher-growth opportunities elsewhere.
The deal could also pave the way for a special dividend, given Serco’s strong balance sheet and history of returning surplus capital to shareholders.
Valuation remains attractive in Panmure Liberum’s view. The shares trade on a forward price-to-earnings multiple in the low teens, with scope for re-rating if contract wins accelerate or margins improve further.
Overall, the broker sees Serco as a dependable earnings and cash generator with potential for extra income through special dividends.
While not the most exciting growth story in the market, its steady contract pipeline and disciplined capital allocation give it continued appeal for long-term investors.
The share price was flat at 222.8p.