At the start of March, broker UBS said that the outlook at Serco is encouraging as some short-term headwinds in the UK should be offset by a longer-term pipeline and good international performance. UBS said 2010 results were broadly in-line with market expectations, with growth and cash flow particularly encouraging. 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)," according to UBS.

The recent broker backing for Serco shows a surprisingly objective view of the company's prospects, as unlike many other reviews it shows that the impact of Government spending cuts on the outsourcing group is less severe than at first thought. On this basis, and coupled with the rebound off the share price range floor, Galvan Research views Serco shares as a buy.

Although near term price action for Serco has been relatively volatile, the overall pattern here is of a 540p to 640p range which appears currently well entrenched. The view is that while there is no break back below April's 540p zone lows, the upside for Serco should be towards the post December resistance zone through 600p.

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