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
ebooks
ebooksAn introduction to the ground rules of British democracy
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

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue