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CARILLION IN EFFICIENCY DRIVE HOPE

POSITIVE: Carillion received a boost

Friday November 6,2009

By David Shand

HOPES that a multi-billion-pound Government efficiency drive will deliver more outsourcing work in areas such as property management boosted support services giant Carillion yesterday.

Broker Morgan Stanley reckoned the Government would increasingly look to outsourcing to cut costs, with the market for Carillion’s core expertise in estate and facilities management potentially worth £4billion.

It added: “Although specific opportunities are difficult to identify currently, we think the size of their property asset base and lower level of outsourcing means local government is the most likely area for incremental growth. In central government, we think the Departments of Health and the Home Office could be targets for improved asset utilization.”

Carillion shares gained 7¼p to 302¼p.

A broader switch into support services lifted pest control firm Rentokil Initial 3¼p higher to 112p before today’s third-quarter figures, while Serco Group added 12p to 524p.

Investors topped up with brewing giant SABMiller, 24p ahead at 1640p on the back of better-than-expected savings at its MillerCoors business.

Tesco, rumoured as a possible buyer of Dutch grocer Ahold, advanced 9¾p to 418¾p, while BT Group rang up a 3¼p rise to 137p as it benefited from investors switching out of Cable & Wireless.

Supportive comments from broker Numis failed to stop investors checking out of Premier Inn operator Whitbread, down 55p to 1234p, as dealers said Citigroup had placed a large chunk of shares.

State-backed lenders Lloyds Banking Group and Royal Bank of Scotland were overdrawn 3¼p to 83p and 1¼p to 35¼p, while Barclays lost 4¾p to 332¼p.

Insurer RSA retreated ½p to 121½p following third-quarter figures which showed an overall 4 per cent rise in net written premiums, with an 8 per cent rise in international business offsetting a 3 per cent drop in UK premiums.

BBA Aviation, the aircraft servicing company that brought Microsoft founder Bill Gates on board as an investor earlier this year, climbed 7p to 156¼p as Panmure Gordon turned buyer from its previous hold stance with a 190p target, noting a pick-up in US activity in business jets last month.

Engineering investment firm Melrose strengthened 5¾p to 176p amid vague talk of an acquisition, while Gulf Keystone Petroleum rose¼p to 108½p as traders anticipated a positive update on its Shaikan-1 well in Kurdistan. The company may then look to tap investors for cash.

The FTSE 100 Index recovered from an earlier 72-point deficit to close 17.75 higher at 5125.64.

On Wall Street, the Dow Jones was 203.82 points higher by the close at 10,005.96, cheered by expanded business productivity and a fall in jobless claims.