Latest Business Initiatives Unveiled by Two FTSE Listed Stocks Amid the Covid-19 Mayhem: Rio Tinto & Man Group

The European and London markets were trading lower in Monday’s trading session (at the time of writing as on 20^th April 2020, GMT 9:30 AM), with the gradual restart of US activities, while some companies showed resilient performance in the first-quarter results. Today, we will discuss a blue-chip mining stock, Rio Tinto PLC and a midcap asset manager, Man Group PLC. The stock price of RIO was down by 1.72 per cent and EMG stock was up by 0.36 per cent (at the time of writing), following their first-quarter trading update. Let’s have a glance over their respective business model, financial position and outlook to understand the magnitude of their latest update.

Rio Tinto PLC (LON:RIO)

Rio Tinto PLC is an FTSE 100 listed, metals and mining company, which produces Iron Ore, Copper, Aluminum, Borates, Diamond, Salt and Titanium. Its metals and minerals are used in the manufacturing of cars, smartphones, wind turbines, household products and used in crops as well. The Company has around 60 operations and projects in 36 countries and operates with over 46,000 employees.

(Source: Annual Report)

2019 Production at a Glance by Major Business Segments

• Iron Ore: 7mt of Iron ore.
• Aluminium: 1mt of bauxite and 3,171kt of aluminium.
• Copper and Diamonds: 577kt of mined copper
• Energy and Minerals: 1,206kt of titanium dioxide slag and 10.5mt of iron ore pellets and concentrates

Strategic Objectives in the light of Key Performing Indicators (KPIs)

People

• Attracting, developing and training the diverse workforce across the global operations.
• KPI: All injury frequency rate for FY2019 stood at 0.42 per 200,000 hours worked.

Performance

• Maximizing the value from market to mine with low-carbon emission and safety concerns.
• KPI: Total shareholder return stood at 49.6% in FY2019 while Net cash generated from operating activities was USD 14,912 million.

Portfolio and Partners

• Strengthening the portfolio with collaborations and partnerships with suppliers, technology partners, government, industry leaders, among others.
• KPI: Underlying EBITDA was USD 21.2 billion while Return on capital employed was 24% in FY2019.

Significant Developments

• 8^th April 2020: Rio Tinto Group has announced a final dividend for the full-year 2019 as 231 US cents, with shareholders of Rio Tinto PLC to be paid 177.47 pence per ordinary shares.
• 24^th March 2020: The group announced the curtailment of production at Richards Bay Minerals, South Africa and in Quebec operations, following the government’s directives to contain the spread of coronavirus.
• 17^th February 2020: The group has executed the share buy-back programme and purchased 51,083 ordinary shares at the average price of 4217.8473 pence per share.

First Quarter Production Update – Achieved Robust Production Performance

• Led by robust recovery across the network in March 2020 following tropical cyclone Damien in February 2020, Pilbara iron ore shipments increased by 5% to 73 million tonnes (100% basis) in Q1 FY20 as compared with the corresponding period of the last year, but a decrease from the previous quarter (Q4 FY19: down 16%). In China, the portside trading trial persists with the one-millionth tonne of ore sold.
• Bauxite production for Q1 FY20 stood at 13.8 million tonnes, an increase of 8% from Q1 FY19, following the fruitful ramp-up of Amrun in 2019. In the current quarter, the third-party shipments surged by 7% to of 9.5 million tonnes against the same period of 2019.
• Aluminium production of 0.8 million tonnes in the first quarter of 2020, a decrease of 2% from Q1 FY19. Mined copper production of 133 thousand tonnes in the first quarter was 8% lower than the Q1 FY19, reflecting expected lower copper grades, partly offset by higher throughput.
• Due to Covid-19 restrictions in Quebec and South Africa, the Titanium dioxide slag production of 293 thousand tonnes in Q1 FY20 was 1% lower than the same period last year.

Share Price Performance

Daily Chart as of April 20th, 2020, before the market close (Source: Thomson Reuters)

RTO’s shares, at the time of writing before the market close (at 10:08 AM GMT) on 20th April 2020, were trading at GBX 3,740. Stock's 52 weeks High is GBX 4,979.14 and Low is GBX 2,954.

Outlook - Monitor and Adjust Production Levels/Product mix to Meet Clients requirements in 2020

Presently, the capital expenditure is expected to be in the range of $5-$6 billion in 2020 (down from the prior guidance), partly due to unprecedented crisis created by COVID-19 and also the favourable currency impact from the robust US dollar. For 2020, the capital expenditure originally planned may subsequently flow into 2021 and 2022. In China, the demand continues to recover, but the outlook will be more uncertain in the rest of the world. As per the 2019 financials performance front, the successful operations of the group have enabled it to deliver sector-leading cash returns to shareholders, which is backed by its strong portfolio and balance sheet. However, driven by increasing requirements for renewable energy, industrialisation and urbanisation, global demand for copper is set to grow, which augurs well for the company.

Man Group PLC (LON:EMG)

The Man Group is London, United Kingdom-based independent investment management firm, which is a constituent of FTSE 250 index of the London Stock Exchange. The group was founded in 1783, and today it has over USD 104 billion of funds under management, and it serves with around 1,436 employees from more than 60 countries and 15 offices.

(Source: Company Website)

Portfolio at a Glance

• The group provides a diverse range of strategy while investing in the portfolio of equity, commodities, credit and currency markets. Its capabilities are divided into five investment engines, namely Man AHL, Man GLG, Man GPM, Man Numeric and Man FRM.
• In 2019, the proportion of the client base was as follows:
  • 55% in EMEA
  • 28% in the Americas
  • 17% in Asia
• The group has traded in over 700 markets with 80 plus investment strategies to more than 600 institutional clients.

(Source: Annual Report)

Proceeding of Dividend and Share Repurchase Programme Amid the Covid-19 Mayhem

• 17^th April 2020: In accord with the share repurchase programme, the group has executed the purchase of 1,350,000 of its ordinary shares at a weighted average price per ordinary share of 127.3085 pence. The group has repurchased 47,803,867 ordinary shares in total since the commencement of the share repurchase programme. Besides this programme, the group confirmed the proceeding of 2019 final dividend.
• 28^th February 2020: Ceci Kurzman and Lucinda Bell joined the board of EMG as Non-Executive Directors, with immediate effect on 28^th February 2020.
• 16^th September 2019: The Man Group PLC has appointed John Cryan, as Chairman of the Board, which came in effect from 1^st January 2020.

Q1 Trading Statement for the Quarter Ended 31^st March 2020 – Reflecting Resilient Performance During Unprecedented Crisis

• The economic repercussions of Coronavirus lockdown have resulted in 21% decline in the MSCI World Index in the three months to 31st March 2020. For the first quarter of 2020, the funds under management (FUM) reduced by 11% to $104.2 billion (31 December 2019: $117.7 billion). This decrease was driven by $10.7 billion of negative investment movement as Coronavirus impacted international markets. On 31^st March 2020, the net inflows stood at $0.5 billion, with negative foreign exchange and other movements of $3.3 billion.
• The company has outperformed peers on an asset-weighted basis across the firm by 2.5 per cent in Q1 FY20.
• The business continues to have a strong balance sheet and liquidity position, with net financial assets of $570 million, including cash of $253 million. The reduction in the net financial assets since year-end mainly reflects normal seasonal working capital movements.
• As per the overall strength of the liquidity and balance sheet position, the group is proceeding with the final dividend of 2019 and share repurchase programme, as announced in October 2019, as planned.

Share Price Performance

Daily Chart as of April 20th, 2020, before the market close (Source: Thomson Reuters)

EMG’s shares, at the time of writing before the market close (at 10:10 AM GMT) on 20th April 2020, were trading at GBX 127.05. Stock's 52 weeks High is GBX 177.10 and Low is GBX 84.72.

Business Outlook While Possessing Robust Liquidity Position

The Man Group PLC has witnessed a decent performance in 2019 with USD 10.1 billion of investment gains and closing fund under management of USD 117.7 billion. Moreover, the group’s strategy has outperformed by 6.2% over 5 years, while devoting a substantial amount of resources in research and innovation.

From the macroeconomic front, as the economic uncertainties diminished regarding US-China trade and Brexit political direction, equities finished the fourth quarter with significant inflow and outperforming value for the year. Despite the coronavirus mayhem, the group has outperformed peers by 2.5% on asset weighted basis in the first-quarter 2020. Furthermore, the group holds sound liquidity and balance sheet position to combat the volatility in the market.

Over the years, the group has delivered continued inflow into their alternative strategies over the years. Going forward, the group has been consistently investing in new technology and talent acquisition to diversify their investments and client’s portfolio, which should help them in yielding progressive returns for their shareholders. The company stay focused on delivering long-term investment performance and the highest quality service to the clients.

Disclaimer

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