TUESDAY MARKET CLOSE: Serco drops but traders feel bullish

Shares in outsourcing firm Serco plunged by 15 per cent as traders got a chance to react to its profits warning and statement that it may issue more shares.

The magnitude of the task facing former Aggreko boss Rupert Soames when he takes the helm Thursday was laid bare in a release after the market closed on Monday that sent investors heading for the exit. The shares fell 60.7p to 343.8p in the FTSE 250, on a day when the wider market was in bullish mode.

Andrew Gibb, an analyst at Investec, said Serco may need to raise at least £500 million.

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He added: “This warning and finally recognition that the balance sheet is strained will further impact its ability to win new work.”

But the FTSE 100 was on the advance as Ukranian and Russian troops retreated from the front line. The index added more than 1 per cent to reach a seven-week high, up 69.75 points at 6,769.91.

The market was also helped by a round of positive trading updates, including annual results from Whitbread. The leisure group continued to reap the benefit of a strong performance from coffee shop chain Costa and rose 20p to 4,081p.

BP, which has a 20 per cent stake in Russia’s Rosneft, rose 14.25p to 502.6p after first-quarter profits met City expectations and included a second rise in the company’s dividend within six months.

The pharmaceuticals sector was again in the spotlight amid speculation that Shire is in the takeover sights of US healthcare company Allergan. The Basingstoke-based company spent much of the session at the top of the risers’ board but later finished 23p lower at 3,263p.

AstraZeneca, which soared 14 per cent on Monday after Pfizer confirmed its interest in a bid for the UK company, slipped 34p to 4,632.5p in the absence of further news.