Serco Group, an operator of prison services, has the key to the door in more senses than one. This year marks the 21st anniversary of the support services conglomerate joining the stock market — and for long-term investors there has been plenty to celebrate. With dividends reinvested, £1,000 invested in Serco at float would now be worth £100,310 — comfortably ahead of the £6,710 returned by the FTSE 100 over the same period.

But 2009 has been a banner year in other respects. Serco won promotion to the FTSE 100 for the first time at the end of last year and, unlike other newcomers, shows no sign of falling out. More important, the company has pulled in a record £4.5 billion of new work since January — from the £140 million contract to run the London Cycle Scheme to a deal to provide mobile hospitals for the US Navy.

Yesterday’s second-half trading update delivered more of the same. The company has signed £1 billion of business since July and is firmly on track to meet full-year forecasts — which implies earnings growth of about 25 per cent.

So where from here? It has plenty of scope to grow bigger overseas (international businesses account for around one-third of sales), especially in the US, where last year’s acquisition of SI, the information technology company, has so far proved a success and which accounts for the bulk of recent contract wins. It is also proving effective at extending its presence in new niches, such as pathology services. Having formed a joint venture to run the pathology labs of Guy’s and St Thomas’ hospitals in London, it is now preferred bidder for Bedford Hospital’s NHS Trust — and is well placed to pick up more. More broadly, unprecedented pressure on governments to make savings through public sector outsourcing should play to its strengths. Further out, longer-term trends in transport (it has implemented mass transit systems such as the Dubai Metro), traffic management, prison populations and employment (it runs the Flexible New Deal initiative to get the long-term jobless back to work) also augur well. But the bind is that those virtues are largely reflected in the shares. Serco has historically proved a poorer performer during times of economic recovery and there is a danger the shares will be left behind in favour of more cyclical plays. Recent share disposals by its chairman and finance director also give pause for thought.

At 526½p, or 16 times 2010 earnings, short-term investors should look to follow suit.

Amec

Yesterday’s trading upate from Amec might be regarded as something of an irrelevance.

For in only three weeks’s time, the FTSE 100 oil services group will emerge with an announcement of far greater significance: details of its strategic direction over the next five years — including Amec’s intentions for its £700 million cash pile. Given that its predecessor was such a success, the three-year plan devised by Samir Brikho, chief executive, that more than doubled the company’s operating margins, has meant that the sense of anticipation is high.

But that did not stop Amec sliding 5 per cent yesterday. A company whose shares are trading at nearly 20 times forecast earnings typically requires a fillip to hold them in place, and this was not forthcoming. Instead, Amec disclosed that its order book has fallen modestly since the half-year stage — by £200 million to £3 billion. However, the company reassured that it has a good pipeline of work in natural resources, its biggest division, which is geared to capital spending by the oil majors. Meanwhile, although there is some deferral of spending by electricity generators and industrial customers, it has picked up a bigger proportion of higher-margin contracts in its power and process division.

Looking ahead, Amec reckons capital spending in oil and gas is likely to be flat next year, which suggests that it will have to make good on its plans to get bigger in faster-growing territories, such as the Middle East, South America and Australasia, if the shares are to advance. Amec’s top team are highly incentivised to succeed, so the potentially invigorating effect of next month’s presentation should not be underestimated.

Until then, at 822½p, stand aside.

Synergy Healthcare

Just over a year on, Synergy Healthcare is showing no ill effects from last autumn’s profit warning — the first in its eight years as a public company.

Yesterday’s half-year results from the mid-cap provider of hospital decontamination services revealed revenues up 7 per cent, pre-tax profits ahead 20 per cent and the dividend up 17 per cent. Operating margins and net debt (a reflection of improved cash generation) are also heading in the right direction.

Last year’s warning looks to have done it good. Not least in bringing a tighter focus to a company that had grown rapidly through acquisitions — as shown by yesterday’s disclosure that it is withdrawing from £20 million of non-core services in the UK.

The greater excitement comes from the Far East, where Synergy, attracted by tighter infection control regulations in China, opened a new facility last month. With 22 million surgical procedures undertaken in China every year — against 1 million in Britain — and Synergy the only commercial operator, the scope for growth is huge. The company also has an advantage in that the entry barriers are considerable: managing the collection, sterilisation and reassembly of surgical devices is logistically complex and not readily entrusted to newcomers and the required licences for radiation treatment are difficult to obtain.

At 619p, or 14 times next year’s earnings, buy on weakness.

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