SHARES in outsourcing company Serco, the operator of the Caledonian Sleeper service, soared after it said trading in the first half of the year had been better than anticipated.
The business, now run by former Aggreko boss Rupert Soames and finance director Angus Cockburn, reaffirmed guidance that it expects annual revenue to be around £3.5 billion with profits coming in at £90m.
Investors were cheered by the update with the share up 9.5p, or eight per cent, at 127.5p at 1.30pm.
Serco, which runs a wide range of services around the world from prisons and waste processing to rail services, said first half revenue will come in around £1.7bn.
That is behind the £2bn from a year earlier as a result of the end of a number of contracts including the operation of the Docklands Light Railway and the withdrawal of IT support to intelligence services in the United States. There was also a reduction in work for the Australian Immigration Service.
Underlying trading profit is anticipated to be flat at £45m while net debt at the end of June is predicted to be £350m, down from £682m in December.
Among the £1bn worth contracts Serco secured in the first half of the year was an agreement to provide facilities management at the new NHS Dumfries and Galloway district general hospital.
It also extended deals with US air traffic control and an unnamed international financial services company.
Serco, which also operates Northlink Ferries, said the financial predictions do not take into account any disposals which may be made over the rest of the year.
Mr Soames, who joined Serco in April last year and was later followed by Mr Cockburn, said: "We have ended the first half in reasonably good order and are making progress in implementing our plans.
"Whilst our recovery is at an early stage, and there will be bumps along the road, I am confident that we are doing the right things, with a stronger balance sheet and supported by an excellent management team."
Serco won the 15-year Caledonia Sleeper contract last year and formally took over the running of the service from FirstGroup in April this year.
Mr Soames has been leading a drastic overhaul to improve the group's relationship with the UK Government and make the business smaller and more focused.
Serco was thrown into crisis in 2013 when it had to repay the Government £68.5m for overcharging on criminal tagging contracts as well as £2m from past profits for a prisoner-escort deal.
It has since issued a series of profit warnings and tapped investors for more than £160m last year.
Roger Johnston, analyst at Edison Investment Research, said: "The overall process to get Serco back on track is still firmly just beginning, however [the first half of the year] appears to have gone as well as expected which is the first time that has been said for some while."
Brenda Kelly, head analyst at London Capital Group, said: "With Serco's shares shedding a whopping 75 per cent since July 2013 on the back of its government overcharging scandal, it seems the company may be back on track."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article