Mining giant Rio Tinto slipped yesterday, even as it promised to return a huge wodge of cash to investors.
The metals and minerals-focused miner announced a record half-year dividend of £1.7billion, or 97p per share.
Rio added it would also spend another £762million on buying back its own shares until May 2019, increasing the value of those owned by investors.
And it said the £3.8billion it raked in over the first half of the year from selling parts of the business, including all coal assets, would be returned to shareholders.
Rio Tinto will spend another £762m on buying back its own shares and has announced a record half-year dividend of £1.7bn, or 97p per share
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: ‘Getting out of coal makes sense to us. It’s a dirty fuel at the best of times and with oil, which is far cleaner, also under increased scrutiny, thermal coal in particular looks like it could struggle in the years ahead.’
But shares still slid by 3.4 per cent, or 142.5p, to 4054p, wiping £1.9billion off the value of the company. Underlying earnings grew by 12 per cent to £3.3billion, missing analysts’ expectations of £3.5billion.
Hyett added: ‘The threat for Rio at the moment is a global trade war which dents the Chinese economy. Its sprawling iron ore mines on Australia’s west coast fuel economic development in the world’s second-largest economy, and if demand for new cars and tower blocks slows that won’t do it any favours.’
At the end of the day, the FTSE 100 was limping along 1.24 per cent lower, having lost 95.85 points to close at 7652.91.
Stock Watch – Filtronic
Antenna company Filtronic sent out the right signals after a £1.5million order for its new product from a ‘major’ European manufacturer.
Filtronic created the Massive Mimo antenna with Nokia to increase mobile network capacity, and says it is a major step forward in the development of 5G networks.
Filtronic’s chief executive Rob Smith said the order demonstrated his company’s ‘credibility and capability as a supplier’. Shares climbed 23.8 per cent, or 2.4p, to 12.5p.
In the FTSE 250, private aeroplane services company BBA Aviation hit turbulence as its shares plummeted 11.4 per cent, or 40p, to 310p.
Though underlying operating profit was up 3 per cent to £137.6million, its profit margin slipped from 17.1 per cent to 16.3 per cent.
After a strategic review, BBA put its engine repair and overhaul arm was up for sale. The business, which helps regional commercial aircraft operators to fix their planes, contributed about a quarter of total revenue.
Meanwhile, funeral provider Dignity started digging itself out of a hole, unveiling a plan to shut dozens of branches to take on rivals with lower prices. Investors welcomed the news, as shares rose 3.9 per cent, or 39p, to 1051p.
It said it would invest £50million in the changes adding that job cuts were expected, but the overall number would be ‘modest’.
Half-year earnings were better than expected, as a rise in the number of UK deaths gave Dignity a boost. Sales climbed 3 per cent to £174.7million in the first six months of 2018 while profits fell 15 per cent to £38.5million, better than analysts had predicted. Debenhams closed up 4 per cent, or 0.49p, higher to 12.5p despite a credit rating downgrade by Moody’s, which was concerned that the department store chain could be set for a further fall in profits after three profit warnings since December.
But an upbeat response from Debenhams appeared to give investors enough confidence in the stock. It said it had taken action to strengthen its finances and was continuing ‘constructive’ discussions with landlords.
Cenkos Securities, which has been targeted by activist investor Crystal Amber after issuing a profit warning, announced that it had acquired the broking business of the wealth manager Smith & Williamson, paying a maximum of £2million, depending on the amount of corporate finance fees the unit earns over the next 12 months, but the actual amount was likely to be ‘significantly below’ that.
The deal is understood to have done little to change Crystal Amber’s critical stance. Shares rose 3.8 per cent, or 3.5p, to 95.5p.