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Serco has topped the leaderboard after Bank of America Merrill Lynch hinted Serco could soon win some large Government contracts. Andrew Ripper, an analyst at the broker, noted that the Department of Work & Pensions is due to announce the winners of tenders for the Work Programme aimed at increasing employment at end March or April for start in July 2011. Serco has been short-listed for seven regions and there will be two to three providers per region.
Mr Ripper said:
There are a large number of bidders and it is hard to predict what incremental revenue is likely to be, but we believe that incremental revenue from the tender should exceed £100m over time, subject to gaining at least two packages.”
As well as contract wins, Serco should benefit from the White Paper on opening up public services to competition and record international bids, Mr Ripper added.
As a result, the broker upgraded the shares to “buy” from “neutral” and Serco advanced 27 to 618½p.
