Serco had a dismal start to the week. The outsourcer admitted it had been stripped of a government contract to run the facilities that make nuclear warheads.
The Ministry of Defence has decided to take back control of the Atomic Weapons Establishment (AWE) from a group including Serco – which had a 24.5 per cent stake – as well as American firms Jacobs and Lockheed Martin.
It will be renationalised next June, turning it into an ‘arms-length body wholly owned by the Ministry of Defence’ and cutting short a 25-year contract handed out at the turn of the millennium.
The MoD has decided to take back control of the Atomic Weapons Establishment from a group including Serco as well as American firms Jacobs and Lockheed Martin
Serco is due to make around £17million from the contract this year and stressed it was unlikely to affect profits much in 2021.
But this can’t be guaranteed and, as it also said, Covid is making any financial planning that bit harder.
More so than profits at this stage, perhaps, the decision deals another blow to Serco’s reputation. Recently it has been criticised for its role in managing several coronavirus call centres and testing sites – but it was previously in the spotlight when a fire broke out at AWE in 2013.
It was one of a string of embarrassments that led to longtime boss Chris Hyman being replaced by Winston Churchill’s grandson Rupert Soames in 2014.
Stock Watch – I3 Energy
Oil and gas minnow I3 Energy shot up 8.6 per cent, or 0.35p, to 4.4p, after it completed a deal to buy assets from a Canadian group called Toscana Energy Income Corporation.
Toscana’s projects already pump out around 9,500 barrels a day, of which about two-thirds is gas.
I3 has been given the go-ahead to start trading shares on the Toronto Stock Exchange from Friday.
The AIM-listed group also confirmed it plans to pay a dividend in the first quarter of 2021.
Serco shares plunged 13.3 per cent, or 17.2p, to 112.2p.
Rolls-Royce, on the other hand, saw investors pile in after it unveiled a project that will see it work on 20 futuristic new technologies for the aerospace industry.
The engineer’s tech whizzes will develop ‘snake robots’ that can travel inside jet engines to repair them and lots of other miniature maintenance tools.
Shares in the group, which has been hammered this year by the Covid crisis and its hit to global air travel, surged 7.4 per cent, or 5.24p, to 76.56p.
Rolls’s rise helped boost the FTSE 100, which rose 1.4 per cent, or 77.7 points, to 5654.97, despite Prime Minister Boris Johnson’s lockdown announcement on Saturday.
This is likely because the Footsie is more exposed to what happens abroad than at home, whereas the FTSE 250 index closed marginally in the red, down 0.2 per cent, or 33.86 points, at 17180.52.
Leisure stocks were unsurprisingly among the worst performers yesterday – including the likes of The Gym Group (down 9.4 per cent, or 13p, to 125p) and pub groups Marston’s (down 7.6 per cent, or 3.66p, to 44.66p) and Mitchells & Butlers (down 1.7 per cent, or 2.6p, to 154.2p), which were stung by the Government’s decision not to allow pubs to provide takeaway pints during lockdown.
AO World, one of the so-called lockdown winners, was at the top of the mid-cap index, where it rose 6.5 per cent, or 23.5p, to 384p. It was boosted during the first lockdown by people’s enthusiasm to revamp their homes and buy bread makers to keep busy.
Long-suffering cruise giant Carnival was buoyant, rising 3.4 per cent, or 29p, to 877.6p after a no-sail order in the US was allowed to expire over the weekend.
It means it can start offering trips again in a phased return and under strict rules.
Cruise ships were early hubs for coronavirus – including some of Carnival’s vessels.
It was a mixed day on the US markets ahead of today’s presidential election, with the Dow Jones up 1.1pc and the S&P 500 up 0.5 per cent, but the tech-heavy Nasdaq fell 0.5pc.
Back in the UK, clothes retailer Superdry tanked 11.2 per cent, or 20.2p, to close at 160p after it appointed a finance boss, former Harrods finance boss Benedict Smith.
Storage provider Lok’n Store climbed 6.7 per cent, or 35p, to 560p after increasing its dividend by 8 per cent to 13p per share after a 7 per cent increase in profits, which stood at £4million.