Market Report: Serco transported to new high by US deal

The company that operates Boris bikes, prisons and hospitals was a picture of health yesterday following news of a big contract win in the US.

Serco surged to the top of the benchmark index as rumours circulated of a $1.25 billion (£657 million) healthcare contract after a website for federal contracts released the news overnight.

Just after lunchtime yesterday, Serco acknowledged the speculation and said more details will follow. The contract is with the US Department of Health and Medicare and Medicaid, and Serco will manage applications for health plans and insurance schemes.

News of a US deal was welcomed by investors who have been concerned that the company is suffering as a result of US federal budget cuts. Last year, revenues in Serco's American business – which makes up 13 per cent of revenues – were squeezed. However, its trading update last week confirmed that the outsourcing specialist is on track to meet financial expectations for the full year, so the news of another new contract added to investors' relief.

Serco finished the day 40.5p better off at 665.5p – a 12-year high.

The wider market was not quite as healthy and hovered around the 6,300 level set the previous day. The FTSE 100 slipped 3.84 points to 6,303.94.

Yusuf Heusen, sales trader at the spread-betting firm IG, said: "In a week that [will feature] both the Independence Day holiday and non-farm payrolls, there is certainly the opportunity for a summer surge of one sort or another, but the FTSE 100's tussle with 6,300 is getting rather tedious."

The British luxury brand Burberry was in fashion with HSBC's style expert, Erwan Rambourg. He said Burberry's decision to take control of its beauty and fragrance business, expand its accessories lines and streamline its supply chain means the brand no longer trades at a premium to the luxury goods sector.

Mr Rambourg said the integration of Burberry's beauty arm and its Japanese business is the "last big legacy issue" and it is being addressed more quickly and more effectively than he had first thought. He has raised his 2015 estimates and said that although Burberry is predominantly still a clothing brand, its handbags and accessories lines – where luxury brands make the real money – has "credibility" which is "increasing every year".

Burberry's international expansion has been a success and now it has "operational excellence" and a "much better grip on its supply chain", he added. Mr Rambourg raised his rating to overweight – up from neutral – with a target price of 1,750p, up from 1,530p.

Punters are dedicated followers and it was the Footsie's second highest riser, strutting up 40p to 1,405p.

On the mid-cap index, the distribution group John Menzies said it remains on track to meet full-year expectations. However, it slipped 5p to 700p.

The soap maker PZ Cussons announced the expansion of its baby food business via the purchase of the Australian baby food brand Rafferty's Garden for £42.2m. PZ Cussons has taken advantage of the Australian competition regulator's decision to block a proposed takeover of the baby food company by Heinz. Analysts Darren Shirley and Clive Black at Shore Capital said the deal is good news for PZ. They upgraded their forecasts for 2014 to £117.5m from £114.9m and said: "After a challenging period, PZ's recent trading updates have encouragingly been accompanied with modest upgrades – momentum which has been retained post this announcement."

But they retain their hold rating, with a 365p price target, because in the short term the "geopolitical uncertainty in northern Nigeria", where it has operations, is still a concern.

PZ, which makes Imperial Leather soap, St Tropez fake tan and Sanctuary Spa products – which are advertised by Darcey Bussell (pictured) – cleaned up with an 18p rise to 373p.

The online grocer Ocado reported first-half earnings ahead of analysts' forecasts. Its shares hit a record high last month after it announced a deal in May to supply supermarket group Morrisons, but the price lost 3.2p to 309p after the company reported a pre-tax loss of £3.8m.

The small-cap building and paving specialist Marshalls reported a dip in first-half sales but said there is no change in its full-year forecast. It retreated 1p to 135.75p.

The AIM-listed mining tiddler African Eagle Resources agreed to sell its subsidiaries to Blackdown Resources, and its shares tumbled 0.25p to 0.32p.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Arts and Entertainment
James Hewitt has firmly denied being Harry’s father
arts + ents
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
News
news
News
Sir James Dyson: 'Students must be inspired to take up the challenge of engineering'
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?