The Investment Column: BHP buoyed by China recovery

Software sales boom makes Invu a wise buy - BPP should come out fighting from City slump
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The Independent Online

Like the big oil companies, the world's mining majors are experiencing an embarrassment of riches due to very high commodity prices. BHP Billiton is in the happiest position: it is both the world's biggest miner and has a substantial oil production business, too.

Like the big oil companies, the world's mining majors are experiencing an embarrassment of riches due to very high commodity prices. BHP Billiton is in the happiest position: it is both the world's biggest miner and has a substantial oil production business, too.

The company reported an 83 per cent jump in net profit for the year ended June, a whopping $3.5bn, and is forecast to make $5bn next time around.

The reason for the bonanza is that global demand for raw materials has boomed, and stockpiles whittled down, thanks to improved economic growth and the boom in China.

Although Chinese growth has moderated slightly, the economy there is still roaring ahead by any standard. Chinese industry has a voracious appetite for the commodities that BHP Billiton can supply, such as copper, aluminium, iron ore and coal. Other Asian economies, such as Japan, and the US are also seeing healthy growth.

BHP Billiton's profits from selling base metals, for instance, were up more than 300 per cent in the year. Of the group profits, the underlying benefit from higher prices was $1.7bn.

The message is that these prices levels - in many cases the highest seen in years - are set to continue. BHP Billiton's line yesterday was that "commodity prices could be sustained at higher levels than experienced in recent years".

The company has been cranking up production and bringing new mines on-stream. Yesterday it highlighted 14 new projects that it is working on.

What differentiates BHP Billiton is not only its size but the fact that it has a sizeable oil business. This gives it the widest spread of products all across the globe, making it the ideal investment in this sector.

The cost savings from the 2001 merger of Australia's BHP with the UK-based Billiton have now reached $780m - greater than the $770m figure set at the time of the deal. The company said it was considering returning $2bn to shareholders. It has yet to decide the best way to do this, but the prospect ought to buoy the shares. Buy.

Software sales boom makes Invu a wise buy

The only technology stock in the FTSE 100 is Sage Group, which brought accounting software to the mass of small businesses in the UK. Invu, which floated on AIM in January, likes to think of itself as Son of Sage.

This is partly because Daniel Goldman, Invu's chairman, is the son of David Goldman, who founded Sage in 1981, and the company also boasts the former Sage director Tom Maxfield among its non-executives. But it is also because Invu aims to bring the sort of sophisticated document management software that was previously the preserve of large corporations to the small business world.

Invu's products allow businesses to computerise, sort and easily retrieve all the documents that arrive, from letters and faxes to emails and web pages. All of this saves time - which, as every small business manager will tell you, is money - and mistakes.

Shareholders, at Invu's annual meeting yesterday, were told the company has signed up 26 more partners to sell and offer after-sales support for its products so far this year, including some with especially big marketing muscle. Some 3,800 pieces of software have been sold to date this year, against 4,200 in the whole of 2003.

With projected sales growth of more than 50 per cent a year and with break-even for the first time this year, Invu ought quickly to generate profits to justify its 11.12p-a-share valuation. Buy.

BPP should come out fighting from City slump

The fallout from the great bear market and economic downturn at the start of the Millennium is still being felt by BPP, which trains City professionals and accountants.

The company is likely to manage only flat profits this year, but that is a relatively benign outcome under the circumstances. Most of its students are signed up for multi-year courses, so a slowdown in recruitment feeds through the system only gradually. The upturn, too, will be a while yet, although one City headhunter said this week that the recruitment of accountants has surged this year.

BPP has also offset the downturn in its City-focused training markets with cost cutting, a property portfolio rejig, the benefits of which really kick in next year, and its bold move into law schools, whose intake is much less likely to ebb and flow with the economy.

The first law school in London is going great guns, interim results showed yesterday, and a second opens in Leeds in a few weeks. A third, in Manchester, will be opened in 2005.

All this investment has been managed despite the tough trading conditions and while being able to grow the dividend. It is a sterling achievement and the shares, with a dividend yield well over 5 per cent, are a buy.

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