Rio Tino announced the withdrawal of its operations from Russia today, after pressure mounted following over 300 major brands exiting the country this week.

The news came as the stock went ex-dividend, making a bumper payout to investors following a record year.

The Rio Tinto share price was down 6% in early afternoon trading on Thursday in London.

Russia ties

“Rio Tinto is in the process of terminating all commercial relationships it has with any Russian business,” a spokesperson from the mining group said in a statement today.

The mining company said it had no operational assets or employees to remove from the country, but that it would examine any business ties to Russia in its dealings.

With Rio Tinto’s share price diverging from an otherwise strong mining sector today, Rio shares are now appearing good value when compared to their peers.

Rio Tinto’s record-breaking 2021

Rio Tinto enjoyed a record-breaking 2021, with its dividend reported as the second-highest in the FTSE 100’s history.

The company reported a total dividend per share of 1,040c compared to 557c in 2020, and an EBITDA of $37.7 billion against $23.9 billion in 2020.

Rio Tinto celebrated a consolidated sales revenue of $63.2 billion compared to $44.6 billion in 2020.

“Rio Tinto’s headline grabbing $16.8 billion total dividend payment for 2021 tops the $15.7 billion in dividends paid by Shell in 2018,” said Russ Mould, analyst at AJ Bell after they reported in February.

“The big question now is whether Rio’s dividends and earnings have peaked in the current commodities cycle.”

“There are plenty of headwinds to suggest global economic growth may slow and forecasts would suggest Rio’s dividends are going to get progressively smaller over the next three years.”

Severing ties to Russian oligarchs

Rio Tinto is set to break its aluminium joint-venture with aluminium company Rusal, founded by Russian oligarch Oleg Deripaska.

The joint-venture was in Queensland Alumina Ltd (QAL), which is owned 80% by Rio Tino and 20% by Rusal through his parent company EN+ Group.

The activist investor group, the Australasian Centre for Corporate Responsibility (ACCR), commended Rio Tinto on its decision.

“Following Russia’s invasion of Ukraine, all Australian companies should sever relationships with companies owned or part-owned by oligarchs aligned with Russian president Vladimir Putin,” said ACCR director for climate and environment Dan Gocher.

“Rio Tinto and Worley should be commended for taking appropriate action.”

Oyu Tolgoi

The company cited previous hesitancy at cutting ties with Russia after noting that it was reliant on the country to provide diesel for Rio Tinto’s Oyu Tolgoi copper mine in Mongolia.

Rio Tinto’s has an indirect ownership of the Oyu Tolgoi through their 50.8% stake in Turquoise Hill Resources. Turquoise Hill Resources principal asset is its 66% ownership in Oyu Tolgoi, which owns the Oyu Tolgoi copper-gold mine.

The Oyu Tolgoi project has experienced a long embattled journey to gain the approval of the Mongolian government, with the parties finally reaching agreement in January 2022.

The project was estimated to produce approximately 500,000 tonnes of copper per year from 2028 to 2036 and an average of around 350,000 tonnes for a further five years, compared to 163,000 tonnes in 2021.

It will prove a substantial headache for Rio Tinto to source alternative means of powering Oyu Tolgoi without resources from Russia.

However, the Oyu Tolgoi and Turquoise Hill Resources only counted for $1.9bn of gross copper sales and $1.2bn in underlying EBITDA for 2021. This compares to group underlying $37.7bn.

This means although any disruption to the project will be painful, it will not materially impact group earnings in the short term.

If there is a scenario where the issues persist to 2028 – when production is forecast to ramp up to 500,000 tonnes per year – it could result in lost future earnings for the diversified miner.

Rio Tinto Dividend

Rio Tinto has paid a substantial dividend today comprising of a 306.72p ordinary dividend, and a 45.60p special dividend.

Immediate interest in Rio Tinto for income investors will now be diminished, but with a historical PE Ratio 5.8 and forward PE Ratio of 7.2, there is ample space for multiple expansion.

This makes Rio Tinto share particularly interesting, especially if the commodities super cycle accelerates in the coming years and the miner makes further investments in battery metals.

The FTSE 100 took a blow of 1.1% in late morning trading on Thursday, as oil prices whipsawed in choppy trade and Rio Tinto announced they would break ties with Russia and paid a bumper dividend.

The price of oil rose on Thursday following a 17% drop on Wednesday, after the UAE considered pushing OPEC to increase its agreed output to ease supply fears.

“Wild swings in oil overnight reflect the febrile nature of markets right now and also just how little visibility investors have,” says AJ Bell investment director Russ Mould.

European shares were also heavily hit and extended declines after the ECB said they would accelerate the winding down of asset purchases.

Rio Tinto

Rio Tinto announced its decision to sever all ties to Russian business operations, including its joint-venture between the company and Russian oligarch Oleg Deripska’s company, Rusal.

Rio Tinto confirmed it was “in the process of terminating all commercial relationships it has with any Russian businesses.”

The decision also brought Rio Tinto’s Oyu Tolgoi project in Mongolia into doubt, due to the venture’s reliance on Russian diesel.

Rio Tinto shares were down 5.8% on Thursday as the company went ex-dividend. Antofagasta, Glencore and Fresnillo shares were up 5%, 2.8% and 1.6% respectively.

However, Russian focused miners Polymetal and Evraz sank as the UK imposed further sanctions on Russia and Oligarchs.

“From a Western perspective the war in Russia is very much an economic one and the full ramifications may not be known for quite some time,” said Mould.

Evraz shares are down 23% to 71p after UK government accused the mining company of providing support to Russia in the war against Ukraine by supplying steel to the Russian military for the production of their tanks. Roman Abramovich, major shareholders in Evraz is one of 7 Russian oligarchs who was sanctioned today.

Evraz shares were suspended by the LSE as a result of the sanctions.

Spirax-Sarco

Spirax-Sarco shares are trading up 3% after the firm exceed pre-pandemic sales by £100m to £1.3bn in 2021. Spirax-Sarco enjoyed higher demand as their customers recovered from the pandemic. Spirax-Sarco also announced an increase of 18p in their total dividends to 136p for 2021.

Balfour Beatty has reported an underlying revenue of £8.2 billion in 2021 compared to £8.5 billion in 2020, and points to a quality £16 billion order book of future business.

Balfour Beatty enjoyed a share price rise of 3.4% to 240.6p in early morning trading on Thursday after the company results for 2021 exceeded expectations in profit recovery and hiked their dividend.

The infrastructure group reported an underlying profit from operations of £197 million in 2021 against £51 million in 2020, alongside a pre-tax profit of £187 million in 2021 compared to £36 million in 2020.

Balfour Beatty released a total dividend per share of 9p compared to 1.5p in 2020.

The company’s financial highlights included a “sector-leading” balance sheet, underpinned by a £1.1 billion investments portfolio, a £57 million dividend and continued recovery in its underlying profit from operations.

Balfour Beatty also announced the next phase of its multi-year share buyback programme of £150 million for 2022.

“In 2021, despite the challenges presented by COVID-19, we have delivered operating profits ahead of expectations,” said Balfour Beatty CEO Leo Quinn.

“Balfour Beatty emerges from the last two years with capabilities intact and a higher quality order book.” 

“Together these provide the visibility to deliver profitable managed growth and sustainable cash generation.”

“With a transformed portfolio focused on favourable infrastructure markets across our chosen geographies and our sector leading balance sheet, we are confident of delivering significant future returns to shareholders.”

The Just Group saw its share price rise 1.2% to 84.8p in early morning trading on Thursday after the release of improved profit and the reinstatement of their dividend for 2021.

The company reported an underlying operating profit of £210 million against £193 million in 2020.

Just Group’s profit was driven by a 25% increase in sales of their retirement income products to £2.7bn.

The Group further reported an underlying organic capital regeneration of £51 million compared to £18 million in 2020, alongside new business profits accounting for £225 million against £199 million in 2020.

The Just Group also reinstated its dividend with a final dividend of 1p per share.

The company reported that it aims to target growth in underlying profits over the medium term by an average of 15% per year.

“This is an excellent set of results which demonstrate our ability to generate profitable growth within a sustainable capital model,” said Just Group CEO David Richardson.

“New business premiums, underlying operating profits and underlying capital generation have improved significantly on the previous year.”

“Furthermore, we have also attained a sustainable level of underlying capital generation and coverage ratio to be in a position to re-commence dividend payments.”

“Our confidence in the growth opportunities available to the Group is reflected in our new target to grow underlying operating profits over the medium term by an average of 15% per annum.”

“Just has a clear, compelling purpose: we help people achieve a better later life.”

“We are committed to growing, helping more customers and increasing shareholder value .”

National Express shares were trading up 4.3% to 252p on Thursday morning after results revealed a solid cash inflow of £123m in 2021.

The company reported a cash inflow in 2021 of £123.4m, a phenomenal comeback from their cash outflow of £196m in 2020.

National Express saw a statuary group loss before tax of £84.9m in 2021, a great improvement from £444m in 2020, due to losses from their coach business.

The company also reported that the Stagecoach and National Express merger will not be happening as Stagecoach has accepted a £595m offer from DWS Infrastructure.

In a bid to further stabilise the business and manage their capital between obligations and growth, the group has decided not to pay a dividend for 2021.

Revenue grew 11% from £1.96bn in 2020 to £2.17bn in 2021 as travel restrictions were lifted. Passenger journeys were up 37% in 2021. The coach firm also managed to hedge fuel and energy costs.

The locomotive group saw an increase of 60% to £300m in EBITDA.

The net debt for the group has increased from by £50m in 2021 as a result of higher growth capital expenditure of £134m and an increase of roughly £6m in acquisitions and disposals.

Going forward, the company is building their opportunities for growth by launching Evolve, a project by National Express, which targets cities with high traffic congestion being taken over with efficient public transportation systems.

Evolve is expected to grow revenues by £1bn and a minimum increase of £100m in EBIT by 2027.

“Mobility restrictions are lifting across our markets and people are travelling again. But we cannot return to ‘travel as usual’ if we are going to meet the pressing needs of COP 26,” said Ignacio Garat, Group Chief Executive, National Express.

“In 2021 we launched our Evolve Strategy with a clear vision and purpose, to be the world’s premier shared mobility operator, leading modal shift from cars to public transport.”

“Modal shift is a necessity for the planet and good for our business. We have translated Evolve into detailed action plans in each of our businesses and we are already seeing the benefits.”

“I anticipate further strong recovery in demand over the coming year, and I am excited about what lies ahead, with Evolve providing greater clarity of both the significant growth opportunities and the path towards it.”

“Based on current projections, it is our intention to reinstate consistent dividend payments starting with a dividend for full year 2022.”

Capita has reported an increase of £13m to £3bn in adjusted revenue, following a six-years declining revenue.

Adjusted pretax profit saw a 1,631% growth from £5.4m in 2020 to £93.5m in 2021 due to increased revenues and savings in transformation costs.

Reported profit before tax increased from a loss of £49.4m in 2020 to a profit of £285.6m in 2021.

The main driver of Capita’s turnaround was a 31% increase in contract wins to £3.8bn in 2021 vs £2.9bn in 2020.

In 2021, the firm sealed contracts with the Royal Navy and made profits in their public service division which increased their revenues.

The fantastic growth in pretax profits allowed for the reinstatement of the employee bonus scheme.

Disposals

Yesterday, Capita was informed that the Department for Business, Energy and Industrial Strategy will not be penalising the firm for disposal of Trustmarque to One Equity Partners. 

This disposal is expected to bring in £115m and be completed in March 2022.

As a result of the disposals, the net debt has decreased from £1,077m in 2020 to £879m in 2021.

The company met its target disposal of £700m in 2022. The income from these disposals will be able to pay off more debts that are maturing.

The company also reported cash outflow of £237.1m in 2021 due to pending obligations from 2020.

Deferred VAT from 2020 was £104m, restructuring costs accounted for £68.6m, pending pension payouts were £155.5m and other cash commitments amounted to £328m.

In 2020, the company had a cash inflow of £303.8m.

“It was a year of significant change at Capita as we completed our transformation by establishing a platform for growth, while continuing to strengthen the balance sheet,” said Jon Lewis, Chief Executive Officer, Capita.

“We grew our revenue in 2021, reversing six years of declines, and expect this trend to continue to improve, while we also expect to deliver positive sustainable free cash flow in 2022.

“Capita now has the foundations in place to deliver sustainable improving financial performance; our new simplified divisional structure will deliver significant benefits.

Capita shares are flying at 9% increase to 23.9p after disposal targets have been met and future net debt is expected to drop.

Bitcoin saw an 9% increase to around $42,000 on Wednesday after US President Joe Biden signed an executive order to monitor and regulate the use of the cryptocurrency.

The executive order reportedly signified the country’s support for the cryptocurrency industry, not only accepting to monitor it, but also potentially creating a new digital currency which will be issued by the Fed.

The US reportedly plans to produce policies for the digital currency in agreement with allied countries.

This will enable transactions dealt with Bitcoin and Ethereum to counteract any illegal moves.

The monitoring of crypto began with increased sanctions on Russia to prevent illegal transactions.

The signing of the order is reportedly set to increase the legitimacy the digital currency.

Bitcoin is subject to immense volatility with rising inflation rates and legislative issues around the world.

With the ongoing Ukraine-Russia war, the volatility has extended to the stock markets and crypto exchanges.

Ukraine took donations for the fight against Russia in cryptocurrency at the start of the conflict.

The donations have amounted to $60.5 million with over 120,000 cryptoasset donations, according to blockchain analysis company Elliptic.

Cryptocurrency has proven to be a useful asset for Ukraine, prompting Biden to legitimise its usage in the war effort.

Hopefully, with movements to fully adopt cryptocurrency across EU nations, the volatility associated with the digital currency market will reach stability.

“President Biden’s historic executive order calls for a coordinated and comprehensive approach to digital asset policy,” said US Treasury Secretary Janet Yellen.

“This approach will support responsible innovation that could result in substantial benefits for the nation, consumers, and businesses.” 

“It will also address risks related to illicit finance, protecting consumers and investors, and preventing threats to the financial system and broader economy.”