MARKET REPORT: Serco fighting fit as boss Soames hands over reins

Outsourcing giant Serco looked set to end the year on a strong footing as its chief executive Rupert Soames prepares to bow out.

The firm, which runs security, transport and immigration contracts, said revenue for the year should be around £4.5billion, up from £4.42billion in 2021.

Serco also hiked its profit forecast for the year by £5million to £235million, despite inflation being expected to eat into contract fees.

It was also the final trading update Soames will oversee as the boss of a public company, with the 63-year-old grandson of Winston Churchill retiring at the end of the year. He joined in 2013 and took the helm a year later.

At the time it was making heavy losses but Soames wasted no time turning it around.

He was hailed for revising the business strategy to focus on government services in areas such as defence, health and transport.

That paid off during the pandemic, where it helped with the rollout of the NHS Test and Trace scheme by managing a fifth of the test centres and half the non-clinical call centres.

Soames leaves Serco with a stronger balance sheet, a reinstated dividend and large loss-making contracts firmly in the past. 

Mark Irwin, of the UK & Europe division, will succeed him. Shares are up 16 per cent this year, but dipped 1.2 per cent, or 1.9p, at 155.9p.

The FTSE 100 fell 0.93 per cent, or 69.76 points, to 7426.17 and the FTSE 250 fell 0.76 per cent, or 144.13 points, to 18,893.79 after the Bank of England hiked interest rates to 3.5 per cent. 

Stock Watch – Zotefoams

Zotefoams rose 5.7 per cent, or 17p, to 315p after an upbeat outlook on profit.

The group, which makes materials used for shoes, insulation and packaging, hailed a strong performance in October and November, largely driven by its polyolefin foams and high-performance products businesses.

It expects profit for the year to beat analyst estimates of £10.7million. 

David Stirling, who has been at the helm for 20 years, hailed ‘excellent growth in revenue and profitability’.

‘Anyone who wanted an interest rate rise for Christmas has got it, but consumers will be wondering whether this is bad or good because while savings rates will rise, so will borrowing costs,’ said AJ Bell analyst Laith Khalaf.

National Express slammed into reverse over fears of a hit from inflation, interest rates and wage pressures across the Atlantic.

Shares in the coach operator, which have languished around 44 per cent this year, tumbled 6.5 per cent, or 10p, to 143.8p after City analysts painted a bleak picture.

Peel Hunt lowered its rating on the stock to ‘hold’ from ‘buy’ and cut its target price to 175p from 270p, saying it could be squeezed by costly wage settlements in the UK and North America.

Its North America school bus division has been hampered by driver shortages sparking unprecedented levels of wage inflation.

Mining giant Rio Tinto revealed it is open to buying critical mineral assets such as lithium and nickel less than a week after sealing a £2.7billion takeover of Canada’s Turquoise Hill.

Traders were excited by some possible merger and acquisitions activity and shares inched up 0.6 per cent, or 35p, to 5657p. In a bid to wash its hands of Vladimir Putin’s regime, packaging firm Mondi agreed to sell three Russian plants to the Moscow producer Gotek for around £21million.

But such disposals will be far from smooth, with Mondi expecting a loss of around £61million to £70million. It sank 2.2 per cent, or 31.5p, to 1437p.

Gambling giant Flutter, owner of Paddy Power and Betfair, said that Paul Edgecliffe-Johnson, who is the chief financial officer at the Holiday Inn and the Crowne Plaza owner IHG, will start as finance chief on March 20. 

Finance boss Jonathan Hill steps up to be group chief operating officer. Shares slumped 2.9 per cent, or 345p, to 11,595p.

There was also good news for RWS, which employs language specialists around the world to translate niche documents such as patient reports for drug companies.

It reported an 8 per cent rise in revenue to £749.2million for the year to September while profit jumped 51 per cent to £83.2million. The stock rose 1.8 per cent, or 6.2p, to 347.6p.