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

Water firms dipped amid rising scrutiny on the industry as the future of Thames Water hangs in the balance.

Shares in Severn Trent, which operates in the Midlands and Wales, fell 3.5 per cent, or 94p, to 2593p, while South West Water owner Pennon Group was down 3.2 per cent, or 23.5p, to 717p. 

United Utilities, the North West’s provider, shed 2.8 per cent, or 28.3p, to 976.2p.

The slump came as concerns mounted over a sector plagued by sewage leaks, debt and rows over fat cat pay and dividends.

Thames Water, which supplies 15m households, is in £14billion worth of debt. 

Severn Trent, which operates in the Midlands and Wales, fell 3.3%, while South West Water owner Pennon Group was down 3.2% and North West provider United Utilities shed 2.7%

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘Investors are reassessing longer-term implications for other firms.

‘Shares in Severn Trent, Pennon and United Utilities have fallen back more steeply amid the focus on the costs looming for firms which are set to come under increasing pressure to meet environmental targets set by Ofwat.

Although their immediate situation is considered to be more stable compared to others, who have been red-flagged by regulators for their high levels of debt and dividend payments, the scale of the mountain to climb in terms of investment needed is sparking fresh concerns.’

The FTSE 100 fell 0.4 per cent, or 28.80 points, to 7471.69 and the FTSE 250 was down 0.8 per cent, or 142.08 points, to 18,270.73.

Outsourcer Serco, which manages more than 500 contracts for governments around the world, cashed in on demand for its immigration and defence 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, to increase its revenue forecast for 2023 by 4 per cent to at least £4.8billion.

It raised annual profit expectations by 4 per cent to £245million. Shares rose 8.6 per cent, or 12.2p, to 153.8p.

Park Plaza’s parent company PPHE Hotel Group increased its forecasts for the year on the back of strong trading in the UK and the Netherlands.

Stock Watch – Tiny Build

Computer games developer Tiny Build hit a record low after it issued a warning over revenues and profits.

The US group, which buys new games from smaller writers and developers, has struggled to get subscription services to pay for its content.

Revenue and profit for this year and 2024 will fall as it expects to have between £8million and £16million of cash left at the end of 2023 – down from a previous forecast of at least £21million. 

Shares, tumbled 78.8 per cent, or 27.2p, to 7.3p.

It expects revenues of at least £400million and £120million of profit in 2023. 

That would beat the sales range of £352million to £370million which analysts had expected alongside profits of between £106million and £111million. It rose 6.2 per cent, or 65p, to 1120p.

There was mixed news for Moonpig. The online greetings card company’s revenue rose 5.2 per cent to £320.1million in the year to the end of April, while profit slumped 12.6 per cent to £34.9million due to extra borrowing and higher interest rates.

It said revenues by the end of the new financial year should rise by at least 5 per cent, as shares gained 4 per cent, or 5.5p, to 143.4p.

Private equity firm 3i added 1.5 per cent, or 29p, to 1910.5p on the back of a 22 per cent increase in sales for its largest investment, Action, the Dutch non-food discount retailer.

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

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

Office landlord IWG slid 5 per cent, or 7p, to 133p after it suggested it will lower its stake in the digital platform Worka later than hoped.

A boom in demand for projects that decorate and furnish offices has helped the construction group Morgan Sindall to increase its profit forecasts for this year. It rose 4.6 per cent, or 80p, to 1820p.

Direct Line slid 5.3 per cent, or 7.5p, to 133.9p after the insurer confirmed it was reviewing the compensation paid to drivers between 2017 and 2022 for written-off cars.

Banknote printer De La Rue, following months of turmoil, pointed towards ‘signs of recovery’ as demand for cash returned. Shares soared 20.6 per cent, or 7.5p, to 44p.

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