MARKET REPORT: Water shares on the slide as crisis rocks industry

Water companies fell amid increasing criticism of the industry as the future of Thames Water hangs in the balance.

Shares of Severn Trent, which operates in the Midlands and Wales, fell 3.5 percent, or 94 pence, to 2,593 pence, while South West Water owner Pennon Group fell 3.2 percent, or 23.5 pence, to 717 pence.

United Utilities, the provider of the North West, lost 2.8 percent, or 28.3p, to 976.2p.

The slump came as concerns mounted about an industry plagued by sewage leaks, debt and squabbles over fat cat wages and dividends.

Thames Water, which supplies water to 15 million households, is £14 billion in debt.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Investors are reconsidering the longer-term impact on other companies.

Stocks in Severn Trent, Pennon and United Utilities have fallen more sharply on the focus on the costs looming for companies that will come under increasing pressure to meet Ofwat’s environmental targets.

While their immediate situation is considered more stable compared to other countries, which have been red flagged by regulators for their high levels of debt and dividend payments, the size of the mountain to climb in terms of investment needed raises new concerns.”

The FTSE 100 fell 0.4 percent, or 28.80 points, to 7471.69 and the FTSE 250 fell 0.8 percent, or 142.08 points, to 18,270.73.

Outsourcer Serco, which manages more than 500 contracts for governments around the world, earned money on demand for its immigration and defense services in the first six months of the year.

That helped the group, which also runs six prisons in the UK and ferries in Scotland, raise its revenue forecast for 2023 by 4 percent to at least £4.8 billion.

It raised annual profit expectations by 4 percent to £245 million. Shares rose 8.6 percent, or 12.2 pence, to 153.8 pence.

Park Plaza’s parent company PPHE Hotel Group raised its guidance for the year on strong trading in the UK and the Netherlands.

Stock Watch – Built small

Video game developer Tiny Build hit a record low after it issued a warning about earnings and profits.

The US group, which buys new games from smaller writers and developers, is struggling to get subscription services to pay for the content.

Sales and profits for this year and 2024 will fall as the company expects to have between £8m and £16m of cash left over by the end of 2023 – down from a previous forecast of at least £21m.

Shares fell 78.8 percent, or 27.2 pence, to 7.3 pence.

It expects sales of at least £400 million and profits of £120 million by 2023.

That would beat the £352m to £370m sales range analysts had expected alongside profits between £106m and £111m. It increased by 6.2 percent, or 65p, to 1120p.

There was mixed news for Moonpig. The company’s online greeting card sales rose 5.2 per cent to £320.1 million in the year to the end of April, while profits fell 12.6 per cent to £34.9 million on the back of extra loans and higher interest rates .

It said earnings should rise at least 5 percent by the end of the new fiscal year, while shares rose 4 percent, or 5.5 pence, to 143.4 pence.

Private equity firm 3i added 1.5 percent or 29 pence to 1910.5 pence thanks to a 22 percent increase in sales for its largest investment, Action, the Dutch non-food discount retailer.

3i owns more than half of Action, which was valued at £11.2 billion at the end of March.

Barclays enjoyed a positive session after Citi raised the lender’s price target from 285 pence to 300 pence. It rose 2 percent, or 2.98p, to 151.32p.

Office landlord IWG fell 5 percent, or 7 pence, to 133 pence after suggesting it would cut its stake in digital platform Worka later than hoped.

A huge demand for projects that furnish and furnish offices has helped construction group Morgan Sindall raise its profit expectations for this year. It increased by 4.6 percent, or 80p, to 1820p.

Direct Line fell 5.3 percent, or 7.5 pence, to 133.9 pence after the insurer confirmed it was reviewing driver compensation for written-off cars between 2017 and 2022.

After months of unrest, banknote printer De La Rue pointed to “signs of recovery” as demand for cash returned. Shares rose 20.6 percent, or 7.5 pence, to 44 pence.