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."