UK Companies Diary: BHP’s war chest

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●BHP Billiton, the world’s biggest mining company, will publish its latest quarterly results and an update on its pipeline of exploration and development projects. This will give analysts a pretty good idea of what BHP’s annual results, which are due at the end of August, will be like. Attention is likely to be diverted, however, towards the wave of speculation over what BHP Billiton might buy following arch-rival Rio Tinto’s record-breaking $38bn (£18.5bn) bid, excluding debt, for Alcan, the Canadian aluminium group. There had been gossip that BHP would buy Alcoa, Alcan’s US rival, but sources close to BHP have been saying this is unlikely. The rumour-mill has since switched to other possible targets, including Freeport McMoRan, the US copper miner.

●After a strong first-half performance by Capita that has seen its shares reach a high of more than 775p, analysts are expecting sales for the first six months of 2007 of about £970m and earnings per share of about 12.6p, which equates to growth of about 15 per cent. The group has had a successful period of contract wins split between insurance, local authorities and retail. More may be announced on Tuesday, reinforcing the group’s market-leading position. The pace of outsourcing appears to be accelerating. Government spending is being squeezed, making local authorities more likely to look for efficiency savings with companies such as Capita, which can typically reduce costs by about 30 per cent. Analysts are also predicting margins to rise to about 14 per cent, assisted by the group’s low-cost Indian operations. Capita has a consensus price-earnings ratio of about 24 times 2008 earnings, well above the sector average. Paul Pindar, chief executive, is thought to be considering a special dividend to return more cash to shareholders. With interest cover of 16 times, the group certainly has the scope for a return of capital.

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