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Serco posted a narrower annual loss but warned revenue will fall next year.

Shares in Serco surged almost 10% early on Thursday (25 February), after the British outsourcing firm reported a sharp reduction in its pre-tax loss on the back of a decline in costs related to restructuring operations.

In the 12 months to 31 December 2015, the FTSE 250 group posted a pre-tax loss of £69.4m (€87.6m, $96.6m), significantly narrower than the £990.5m loss it logged in the previous 12 months as the costs related to one-off charges it booked fell substantially.

Revenue, however, declined from £3.60bn to £3.16bn but said its pipeline of larger new bid opportunities grew by approximately £1.5bn compared with the corresponding period in 2014 to £6.5bn, while operating costs also fell by over £330m.

Serco, which is working to recover from a series of setbacks that have seen significant writedowns on the value of its contract book in recent years, added it expects revenue to decline in 2016 as it forecast it to fall to approximately £2.8bn.

Meanwhile, the sale of the of business process outsourcing division and "contract attrition" are expected to result in a decline in underlying trading profit to about £50m, the group added.

"The business has delivered a much better performance than we expected at the start of the year, which reflects the fact that we are making good progress in the first year of the implementation of our strategy," said group chief executive Rupert Soames.

"In line with our plan, we expect revenues and profits to decline in 2016, as a result of the disposal of our private sector BPO business and contract attrition."