MARKET REPORT: Outsourcer Serco offers cause for cheer

In a depressed market that is focused on interest rate factors, outsourcer Serco shone through the gloom, pleasing investors with a reassuring trading update.

The FTSE 250-listed firm expects revenue for 2024 of around £4.8billion, down 3 per cent year-on-year but in line with guidance.

Serco expects its 2025 underlying operating profit to be around £260million and for revenue to be in line with 2024 levels despite a cut of around 7 per cent from the loss of immigration contracts in the UK and Australia.

Growth was expected to be driven by its US defence operations. 

Chief executive Mark Irwin said the financial position is strong. In response, shares rose 8.4 per cent, or 11.7p, higher to 150.4p, the top FTSE 350 gainer by far.

Overall, the London benchmarks dropped sharply in reaction to interest rate statements from the Bank of England and the US Federal Reserve.

On track: Outsourcing firm Serco expects revenue for 2024 of around £4.8bn, down 3% year-on-year but in line with guidance

The FTSE 100 fell 1.1 per cent, or 93.79 points to 8105.32, while the FTSE 250 was down 1 per cent, or 202.61 points, at 20,399.38.

After a sharp sell-off on Wall Street following the Fed interest rate news on Wednesday, investment groups with exposure to US markets took a tumble.

On the FTSE 100, Pershing Square dropped 3.8 per cent, or 146p, to 3732p, while Scottish Mortgage Investment Trust shed 1.8 per cent, or 27.2p, to 939.8p, and lender Barclays fell 2.6 per cent, or 6.8p, to 260.25p

Intermediate Capital was the biggest blue-chip faller, down 2.7 per cent, or 58p, to 2076p, shrugging aside a price target hike and repeated ‘buy’ rating from analysts at Jefferies.

After recent good gains, British Airways-owner IAG shed 0.3 per cent, or 0.8p, to 302p as the airline said it has had to make additional long-haul schedule changes due to delays at Rolls-Royce over an issue involving 1,000 engines for BA’s Boeing 787 Dreamliner.

There were just a handful of FTSE 100 gainers, led by water firms supported by the Ofwat price determination ruling. 

Severn Trent gained 0.9 per cent, or 24p, at 2574p, while United Utilities added 0.1 per cent, or 9.5p, at 1064p.

On the second line, Wood Group inched up 0.2 per cent, or 0.1p, to 65.3p as the oil services firm said it has been awarded a significant follow-on contract by OMV Petrom to upgrade a refinery in Romania, which will be the first major production facility for sustainable aviation fuel in the region.

Other contract news lifted Costain 0.5 per cent, or 0.5p, to 109.5p after the construction group landed another substantial deal as part of the HS2 rail project via its joint venture with Siemens Mobility. 

The contract is valued at around £300million.

Jaywing climbed 18.25 per cent, or 0.25p, to 1.6p after the marketing and data firm issued a positive outlook statement despite a wider first-half loss.

But Falkland Islands specialist service firm FIH Group dropped 8.3 per cent, or 20p, to 220p after it swung to an interim pre-tax loss as revenue fell 32 per cent.

Stock Watch – Intelligent Ultrasound

Intelligent Ultrasound got a boost after the medtech firm agreed to be taken over by Surgical Science Sweden.

The all-cash deal values it at 13p a share, or £45.2million, and is a 16.9 per cent premium on the previous day’s closing price. 

Surgical, a medical simulation tech specialist, plans to integrate Intelligent’s simulation business to enhance its portfolio.

Intelligent’s board recommended the deal and the stock rose 13 per cent, or 1.45p, to 12.58p.