Morning Mumble: AO World's warning & are their PR Tulchan Group novices? Anglo's further woes thanks to Kumba/Exxaro, IGG stab at the regulators regarding PLUS & Tim Howkins surprise departure.

Good Morning,

AO World's (AO.) there's nothing in the results to want to purchase the equity. The inference is AO. World are attempting to turnaround the pressures they've met over the last 12 months. AO. interim management statement (IMS) for the AGM suggests they knew that July was going to be good. At no point has there been a reference to July being the turnaround in sales or of strength to be noted.

Over to AO.:

As we communicated in February we expected sales growth in the first quarter of this financial year to be muted. We report revenue growth in the UK business for the 3 months ended 30 June 2015 was 6.5%, with our orders up 13.9%. AO.com experienced revenue growth of 11.2% year on year. This growth was delivered through a period of particularly intense competitive activity in the market, compounded by the uncertainty surrounding the general election.

Despite there being a general election house sales remained resilient as reported by Persimmon (PSN), Taylor Wimpy (TW.) (Pre-election update) neither did Dixons Carphone (DC.) report any woes. Further, house sales (exclude new builds) were not impacted massively either, down circa 3% in May. So have AO. merely benefited off their IPO hype, now normal market conditions apply?

AO. had some uncertainty...grasping at straws springs to mind. AO. is still over-priced compared to DC., even allowing for mobile phone sales. Expect some relief rally in the stock, the woes of going into the AGM/results with short positions in the current market. The IMS pretty much explains why the stock has been without support.

We'll ignore the restrictive practices of Tulchan Group regarding accessing the conference call. To note, AO will be holding a conference call for analysts and investors today, 21 July 2015 at 7.45am. To register and for dial-in details please contact ao@tulchangroup.com. 

Tulchan Group are so experienced with investors, instead of publishing the details they develop a restrictive practice or data / information harvesting, or is that a message to investors. The details of the dial in should have been published in the RNS or better still in the AGM Notice. Incompetence or oversight? Take note Tulchan in the event you're pitching for one specific upcoming IPO's where this will be raised. 

Kumba Iron Ore (JSE: KIO) had some relief on the back of taxation benefits. This is going to hurt Anglo American (AAL) over the longer-term as the axe has finally fallen on the dividend. Kumba have finally admitted what the market should have acknowledged, that "prices are expected to remain under pressure as Australian and Brazilian producers increase supply, and demand growth from China slows." Please note the later...

Kumba believe they get can their cash costs down to $45/t from near $65/t average for 2014. So like the majority of mining companies in South Africa, they're cutting jobs and reducing costs, trimming the fat on capital expenditure near $200M, in addition to reducing/removing support-services (watch the lost-time injury frequency rates). They hope to "reconfiguring mine plans," although this may be trickier than just typing it.

As a positive, the higher cost Thabazimbi mine is closing. From reading my Grandfather's diaries during WW2 I think this was one of the strategic assets. Has Kumba's spat with ArcelorMittal over the 20+% Sishen been resolved yet (See: Criminal)? The saga has been going on 2+ years. With the reduction and unemployment rates increasing in South Africa, when does this impact on the political stability? A good proportion (1/3rd) of earnings being a tax rebate, the outlook isn't looking great. 

The read across with the postponement (cancellation) of the interim dividend is negative for Exxaro Resources (JSE: EXX). JSE: EXX makes Kumba Iron Ore BEE (Black Ethnic Empowerment) compliant at Sishen Mine level. Anglo as 10% holders in EXX via a the web of South African ownership entities means with the assistance of Eyesizwe Mining, its more than likely they'll have to provide guarantees or funds to support JSE: EXX. 

From JSE: EXX's own Finance Director’s 1H2015 pre-close update:

3.4. Sishen Iron Ore Company (SIOC) The significant decline in the iron ore price during this reporting period is expected to translate into significantly lower equity-accounted income and dividends from SIOC. This has a direct impact on our cash flows, our ability to comply with financing covenants, as well as to continue to pay dividends. 

With a weaker rand against the U$D, any recapitalisation/rights issue/debt restructuring will at least be a little less sour. 

IG Group (IGG) came out with a little better than expected results. With the roll out of ETF's they're certainly covering the needs of investors. Although perhaps not the first port of call for some, their revenues are looking sustainable. 

CEO Retirement of Tim Howkins spooked the market, the preliminary results weren't bad when considering the CHF issues over circa £27M. The cursory statement to the regulator is important; At IG we take very seriously our regulatory and consumer responsibilities on appropriateness tests for prospective clients. This incident underlines the need for regulators to ensure that regulatory standards are applied robustly and consistently across the industry. 

Loads more but so little time! 

Atb Fraser