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BHP Billiton share buyback on the cards for full year results

Last updated: 06:00 21 Aug 2018 BST, First published: 11:36 20 Aug 2018 BST

BHP

BHP Billiton plc (LON:BHP) is expected to use some of the proceeds from the sale of its US shale business towards a share buyback over the next year, according to analysts.

Deutsche Bank said the mining giant could announce a buyback as soon as its full year results on Tuesday as net debt is at the bottom of its target range and the disposal of the shale assets “should accelerate and upscale cash returns”.

“Over the medium term, the company is targeting material returns improvements across the asset base and while we see some of the related cost targets to be a stretch (particularly coking coal) the company has self-help potential to drive returns and cash flows higher,” Deutsche Bank added.

BHP agreed to sell its underperforming shale business to BP PLC (LON:BP) earlier this month after receiving pressure from activist investor Elliott Management. The disposal was part of a wider plan to exit non-core businesses.

Elliott has also been pushing BHP to cancel its London listing and trade solely on the Australian Stock Exchange but the company has so far resisted.

Investors are now waiting to hear from BHP on its next move so a strategy update from the company is likely to overshadow its annual results. 

Analysts expect BHP to post strong full year figures, supported by a recovery in commodity prices and better-than-expected fourth quarter production.

Deutsche Bank estimates earnings (EBITDA) of US$24.3bn, net debt of US$11.7bn and free cash flow of US$12bn for the year.

“On capital expenditure for fiscal year 2019/20, we expect the company to stick to its US$8bn ceiling (assumes Onshore disposal in mid 2019) and we look for an update on 2019 and medium term unit cost guidance across the major divisions,” the bank added.

The Share Centre said areas for investors to concentrate on will be costs, which have been rising for the industry as a whole, and any further comment on streamlining the business. Another key focus will be on the outlook, particularly with regard to China and global demand amid concerns about trade wars.

Persimmon outlook in focus amid slowdown in housing market

Persimmon PLC (LON:PSN) will report its first half results but there is unlikely to be any surprises given that the housebuilder has already told the market about its performance in a July trading update.

The trading update revealed a 5% increase in total revenue to £1.84bn for the first six months of the year as it completed 3.8% more homes to 8,072 and the average selling price increased by 1.2% to about £215,800.

The main area of focus will be on the outlook and whether the company is vulnerable to the recent slowdown in the housing market or if it sees any impact from an interest rate hike by the Bank of England this month.

“Investors will be waiting to see if the Monetary Policy Committee’s decision to raise interest rates at the beginning of August has impacted Persimmon’s selling power,” said George Salmon, equity analyst at Hargreaves Lansdown.

“Mortgage approval rates for July showed another month of growth; an indicator that the first time buyers Persimmon relies heavily on are continuing to find their way onto the property ladder. “

 

Significant announcements due:

Finals: BHP Billiton plc (LON:BLT)

Interims: Persimmon PLC (LON:PSN), John Wood Group PLC (LON:WG.), Empiric Student Property PLC (LON:ESP), Hostelworld PLC (LON:HSW), Charter Court Financial Services Group PLC (LON:CCFS)

Economic data: UK public sector finances; CBI industrial trends survey

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