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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Fox Marble Holdings Plc | LSE:FOX | London | Ordinary Share | GB00B7LGG306 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.35 | 1.30 | 1.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMFOX
RNS Number : 5148A
Fox Marble Holdings PLC
30 September 2020
30 September 2020
Fox Marble Holdings plc
("Fox Marble" or the "Company")
Final Results for the year ended 31 December 2019
Fox Marble, the AIM listed company focused on marble quarrying and finishing in Kosovo and the Balkans region is pleased to announce its final results for the year ended 31 December 2019.
Highlights for the year ended 2019
-- Total production of 14,370 tonnes of marble at the Prilep Alpha and Maleshevë quarries (2018 - 13,094 tonnes).
-- Revenue for the year of EUR1.4 million (2018 - EUR1.4 million) with 6,830 tonnes of block material sold in 2019 (2018 - 5,059 tonnes).
-- Operating loss for the year of EUR2.27 million (2018 - EUR2.4 million). Loss for the year of EUR2.5 million (2018 - EUR2.3 million).
Highlights year to date 2020
-- Sales agreements worth in excess of EUR1.8 million signed for processed marble to be supplied to projects in Kosovo over 2020 and 2021 from our factory in Prilep. The agreements were signed in 2020 and are expected to be supplied over 2020 and 2021.
-- Quarrying operations restarted in Prilep in August 2020 and in Cervenillë in September 2020.
-- New equipment supplied to factory to boost cut to size capacity. The factory has processed over 3,500 tonnes of marble to date in 2020, despite the Covid-19 restrictions put in place, compared to slightly over 1,000 tonnes processed in 2019.
-- The Company reached agreement with the holders of GBP2.1 million of its convertible loan notes, to replace the existing loan notes with a new single class of loan note, which have a maturity date of 1 December 2026. The Loan Notes are convertible at a conversion price of 5p per share and an interest rate of 2% per annum. In June 2020 the Company completed a placing to raise GBP0.8 million before expenses to provide working capital.
-- Cash balance as at 15 September 2020 of EUR0.47 million.
The Annual Report and Accounts for the year ended 31 December 2019 together with the Notice of Annual General Meeting and the associated form of proxy will be posted to shareholders on later today.
The Annual Report, the Notice and related documents are available on Fox Marble's website and can be downloaded from: www.foxmarble.net/investors .
The GM will be held at 9.00am on 29 October 2020 at 160 Camden High Street, London NW1 0NE.
In light of the rapidly evolving situation and recent government guidance regarding the outbreak of Covid-19 (Coronavirus), the Company has taken the decision to alter the format of the Company's general meeting to be held at 9.00 a.m. on 29 October 2020 at the registered offices of the Company. The safety and security of the Company's officers, shareholders, guests and service providers is of paramount importance. The formalities of the meeting shall continue, as required by the Companies Act 2006 and the Company's Articles of Association, but all shareholders are encouraged to vote by proxy, and, given the government guidance, not to attend the meeting in person. In the event that shareholders have a question for the Company, please contact the Company Secretary by email (please see the notes) or telephone, and we will arrange for a response to be provided to you.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For further information please visit www.foxmarble.net .
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Fox Marble Holdings plc
Chris Gilbert, Chief Executive Officer Tel: +44 (0) 20 7380
0999
Fiona Hadfield, Finance Director Tel: +44 (0) 20 7380
0999
Allenby Capital (Joint Broker)
Nick Naylor/Nick Athanas/Liz Kirchner Tel: +44 (0) 20 3394
(Corporate Finance) 2973
Amrit Nahal (Sales)
Brandon Hill Capital (Joint Broker)
Oliver Stansfield Tel: +44 (0) 20 3463
5000
Cairn Financial Advisers LLP (Nomad)
Liam Murray/Sandy Jamieson Tel: +44 (0) 20 7213
0880
Notes to Editors:
Fox Marble ( AIM: FOX ), is a marble production, processing and distribution company in Kosovo and the Balkans region.
Its marble products, which includes Alexandrian Blue, Alexandrian White, Breccia Paradisea, Etruscan gold and Grigio Argento and are gaining sales globally both to international wholesale companies as well as being supplied directly into luxury residential properties. In the UK these include among others St George's Homes and Capital and Counties Plc's Lillie Square development. In Sydney, Australia Rosso Cait, Alexandrian White and Breccia Paradisea marble have been used in what is expected to be Australia's most expensive residential property. These sales serve to demonstrate the desirability of Fox's premium marble products as the stone of choice in some of the most prestigious and expensive residential developments around the world.
Chairman's statement
Although much of this report is about the results for the financial year 2019 these now seem to relate to a previous age. The Covid-19 pandemic has changed how the Company operates for the time being and our expectations of the future have been delayed.
The Company continues to focus on three legs of strategy over the short to medium term:-
-- Factory sales of processed marble with a focus on growth in sales within Kosovo and the greater Balkans area;
-- block sales to China and other large block markets; and -- growing our marble reserves base and opening new quarries.
The 2019 financial year saw sales of EUR1.4 million (2018 EUR1.4 million). The Company maintained stable revenues despite the loss of the production from the Maleshevë quarry in July 2019 which had formed over 40% of revenues in 2018. Block sales from the Prilep quarry which increased from EUR0.4 million in 2018 to EUR0.9 million. A significant focus on operations at the factory and sales effort focusing on the local Kosovan and Balkan market, has been successful with multiple new large-scale contracts signed. In December 2019 the Company signed a contract for the processing of third party blocks and during 2020 to date the Company has signed three large scale contracts for the supply of cut and finished marble from its own quarries.
The dispute over the Maleshevë quarry that begun in 2019 has prevented us from exploiting what was a significant asset for the Company. The Arbitration case against the government of Kosovo continues to progress, along with the civil case against the licence holder with whom we had an operating agreement. The Company will continue to seek restitution through the courts.
The Covid-19 outbreak has slowed progress on the strategy in 2020, with the international block market having stalled throughout most of 2020, and slower than expected sales through the factory as projects were delayed or customers sought to manage their own response to the global pandemic. From a financial point of view, the 2020 year will not show the progress we had anticipated before the Covid-19 outbreak. Although we have taken measures to secure cash flow and maximise sales, it is inevitable that we will emerge with lower sales than we had planned and make losses for a large part of the year. The Company took steps in June 2020 to obtain substantial concessions from our loan note holders and secure liquidity in the light of the impact of Covid 19 on sales and operations.
Despite all this significant progress has been made in securing large scale contracts through the factory with supply starting in Q2 2020 and continuing into 2021. Quarrying at the Prilep quarry recommenced in August 2020 and in Cervenillë in September 2020. The Company continues to carefully manage its working capital and closely monitor progress on sales from the newly re-opened quarries.
Fox Marble continues to examine opportunities to grow its marble reserve base. The Company has secured a new licence for a quarry site believed to contain Illirico Selene. This asset will provide potential for expansion as well as broadening the Company's resource base. Subject to a successful drilling programme and quarry plan, the Company will look to develop this quarry during 2021.
I would like to thank all our employees who are very committed and work very hard, and, importantly have embraced our vision to establish Kosovo and the Balkans as a major supplier of high quality marble worldwide.
Andrew Allner
Non-Executive Chairman
Strategic Report
Sales for the year ended 2019 were EUR1.4 million (2018 - EUR1.4 million). The fall in block sales of Illirico Selene following the closure of operations in Maleshevë was offset by increased block sales from the Prilep quarry in Macedonia. Sales from the factory increased significantly in the final quarter of the year, outpacing the previous three quarters, following the appointment of a new factory manager and a non-board COO. Sales of processed marble are expected to form an increasing proportion of sales from 2020 onwards.
Block sales
Block marble sales were EUR1.2 million (2018 - EUR1.0 million). Sales of block marble from the Maleshevë quarry fell to EUR0.4 million (2018 - EUR0.6 million), as a result of the closure of the quarry in July 2019, however increased production in the Prilep quarry drove an increase in block marble sales of Alexandrian Blue and Alexandrian White marble to EUR0.9 million (2018 - EUR0.4 million).
Block sales overall were significantly impacted by the Covid-19 outbreak. The prominence of China in the block marble market meant that sales of block marble showed a sharp drop from the start of 2020. As international borders were closed and the outbreak spread through Europe, the decision was made to temporarily close the quarry at Prilep for the safety of staff and to preserve working capital until such point as buyers returned to market.
The Prilep quarry was reopened in August 2020 and the board will continue to closely watch the progress on the block market through the end of 2020 and into 2021.
Processed marble sales
The new sales team has generated increased interest in the products, and discussions with large natural stone companies are ongoing to supply blocks for their project portfolios.
The formal opening of the Company's new showroom and office in Pristina in April 2020 is a demonstration of Fox Marble's confidence in the market growth potential of the region, both for its own processed products as well as providing cutting services to third parties.
A number of new contracts were signed for processing services and processed marble which are expected to form the backbone of sales through the end of 2020 and 2021.
-- In December 2019 the Company signed a contract for the processing of third-party blocks, which represents an additional revenue stream for the Company. Under this new third-party agreement, Fox Marble will process stone on behalf of Inter Stone LLC at the Company's factory at Lipjan in Kosovo. The contract is for twelve months and it is expected that Fox Marble will continue to process blocks of material each month. Following this, the Company signed two further processing contracts in February 2020 with Egzoni Sh.P.K and Skifteri Sh.P.K.
-- In April 2020 Fox Marble signed a contract to supply up to 20,000 square metres of paving to a local municipality for the town square of Suhareka in Kosovo with the first 8000 square metres to be delivered by September 2020. Material already specified and contracted under the first two stages of the project has a total value in excess of EUR400,000, and once all 20,000 square metres have been supplied is the project is expected
to be worth in excess of EUR750,000. Fox Marble has already supplied over 5000 sqm of material.
-- In June 2020 Fox Marble signed a contract to supply 35,000 square metres of cut and polished tiles to CC Apartments LLC. CC Apartments LLC is engaged in developing several prestigious projects including apartments in Kosovo, as well as Albania and surrounding countries. Fox Marble will be processing blocks of a range of marble from its own quarries for this project and supplying this material from its factory in Kosovo over the course of 2021 starting in January. The total value of the contract is in excess of EUR700,000.
-- In July 2020 Fox Marble signed a new contract to supply 20,000 square metres of cut and polished paving tiles for installation in the town square for the Municipality of Podujeva in Kosovo. This contract has been entered into with the contractors charged with developing and completing the town square which will be paved with material exclusively supplied by Fox Marble. Fox Marble began supplying material for this project in
August 2020. The total value of this contract is around EUR700k over 2020 and 2021.
Factory
A 5,400 square metre double skinned steel factory for the cutting and processing of blocks into polished slabs and tiles has been erected on a 10-hectare site that the Company acquired in Lipjan in 2013, close to Pristina airport in Kosovo.
A new Factory Manager was appointed in 2019, Secundino Costas da Vila who is a natural Stone professional with 30 years of experience in some of the top global companies.
Fox Marble is experiencing a developing local market for its processed material and range of products from cut and polished tiles to stair pieces, door and window lintels to slabs, which is driving increased production at the factory.
In June 2020, the Company announced that it had acquired two additional automatic CNC cutting machines to be installed in its factory in Kosovo. The two machines are manufactured by Simec Srl and Garcia Ramos SA and with the existing Gravellona Machine Marmo CNC machine will double the capacity to cut tiles. The machines have been installed and are now fully operational.
This will help underpin the 3-year factory expansion plan currently being developed by the recently appointed COO/GM Sales, in conjunction with the anticipated increased demand being generated.
Quarry Operations
Prilep
The Company entered into an agreement to operate a quarry in Prilep, North Macedonia in 2013. The agreement was for a period of 20 years with an irrevocable option to extend the period for a further 20 years thereafter. The Prilep quarry contains a highly desirable white marble Alexandrian White and Alexandrian Blue. This is one of a small cluster of quarries, in the Stara river valley, overlooked by the Sivec pass.
The introduction of a new quarry team at the site in November 2018 increased the total production for the quarry to 11,547 tonnes (2018 - 5,816 tonnes).
On 8 October 2018, Fox Marble acquired Gulf Marble Investments Limited (Dubai) its investment partner in the Prilep Alpha quarry in North Macedonia, including all the rights attached to that Company. Under the terms of the original agreement to acquire the Prilep Alpha quarry in North Macedonia in 2013, Gulf Marble Investments Limited provided the funds to acquire the licence to the site and capital investment amounting to EUR1.8 million, and then entered into an operating agreement with Fox Marble to operate the quarry. In compensation Gulf Marble Investments Limited was provided with a royalty amounting to 40% of the gross revenues received from the sale of its block marble from the quarry.
Through the acquisition of 100% of the share capital of Gulf Marble Investments Limited, Fox Marble has effectively acquired the licence to the site eliminating the royalty of 40% of gross revenue that was payable to Gulf Marble Investments Limited under the original agreement, as well as acquiring the capital equipment held by Gulf Marble. Consideration for the acquisition was the issue of a convertible loan note with a carrying value of EUR1.785 million. Following the completion of this transaction Fox Marble will be eligible to retain 65% of the gross revenue from the sale of block marble from the quarry. A royalty of 35 % of gross revenue will remain payable to the original licence holder of the quarry.
The Company also has the rights to an additional quarry nearby, Prilep Omega, which it acquired in 2014.
Quarrying was suspended at Prilep in April 2020 as a result of the un-folding Covid-19 crisis. It was re-opened in August 2020.
Cervenillë
This site was the first of our quarries to be opened in November 2012. It is being exploited across three separate locations (Cervenillë A, B & C) from which red (Rosso Cait), red tinged grey (Flora) light and darker grey (Grigio Argento) marble is being produced in significant quantities. The polished slabs from this quarry have sold well. The most noteworthy sales included those to St George PLC (Berkeley Homes) for the prestigious Thames riverside Chelsea Creek development in London.
In 2016, the decision was made to focus quarry resources at the nearby Maleshevë quarry to accelerate development to address expected demand. Quarry staff and equipment were therefore re allocated from this quarry. The quarry was re-opened in September 2020 to address the anticipated upcoming demand for Argento Grigio from existing and future contracts.
Syriganë
The quarry at Syriganë is open across four benches. The site contains a variety of the multi-tonal breccia and Calacatta-type marble and produces significant volumes of breccia marble in large compact blocks. Output is marketed as Breccia Paradisea (predominantly grey and pink) and Etrusco Dorato (predominantly gold and grey).
Growing marble reserves base and the opening of new quarries in Kosovo
The foundation of a successful and growing natural stone company is its reserves base. Fox's strategy is to seek to grow this over the medium term, finding and aiming to open on average at least one new quarry a year in opportunity rich Kosovo. For 2020, two new potential quarries were identified and after initial examination of the resource the Company secured the licence over one new quarry site. Progress on developing the quarry is expected to start in 2021, subject to an initial drilling program. This will provide the opportunity to increase both block sales and processed marble from the factory from the end of 2021 onwards.
Maleshevë
In October 2015, the Company acquired the rights to a 300-hectare site close to the Company's existing licence resource in Maleshevë from a local company. By November 2015, this quarry had been opened and the first blocks extracted and sent for testing. The quarry was operated subject to an agreement with the licence holder, Green Power Sh.p.k ("Green Power"), a company incorporated in Kosovo, which granted Fox Marble's Kosovan subsidiary the rights to develop and operate the quarry, in return for a royalty arrangement.
The quarry contained a mixture of Illirico Bianco, Illirico Superiore and the silver-grey marble Illirico Selene. The initial market response to both the Illirico Selene and Illirico Bianco was significant and to address this anticipated demand the Company has invested significant resources and effort since 2016 to accelerate the development of these quarries to produce multiple open high volume benches capable of producing blocks in the quantities to meet demand. The Company quarried 2,850 tonnes during 2019 (2018 - 7,278 tonnes).
On 4 April 2019, Fox Marble announced it had conditionally acquired the entire share capital of Green Power, for a consideration of GBP1,000,000 to be satisfied by the issue of 13,000,000 new ordinary shares in the Company at a price that equates to 7.69 pence per share. However prior to approval of the issue of shares at the AGM in June 2019 Green Power announced their intention to breach the agreed acquisition contract and blocked Fox Marble's access to the quarry site
Quarry production at the Maleshevë quarry in Kosovo was stopped in July 2019 as a result of the ongoing dispute with Green Power Sh.p.k.. The Company has filed civil claims in Kosovo against Green Power Sh.pk for breach of contract and damages, in addition to the wider Arbitration case launched against the Government of Kosovo, as announced in September 2019. Further details on the arbitration claim can be found below.
Arbitration Proceedings
On 4 September 2019 Fox Marble launched United National Commission on International Trade Law (UNCITRAL) arbitration proceedings, against the Republic of Kosovo for damages in excess of EUR195 million, as a result of the failure of the State to protect Fox Marble's rights over the Maleshevë quarry.
The Company believes the Kosovan Government to be in clear breach of its responsibilities towards the Company as a foreign investor in Kosovo and that this action is in the best interests of its shareholders and employees. The Company anticipates a fair and satisfactory resolution.
All the Company's other operations, including the quarries and processing factory in Kosovo and the Prilep quarry in Northern Macedonia, are unaffected.
The background to the claim is the dispute arising with the former shareholders of Green Power Sh.p.k and Scope Sh.p.k, which has resulted in Fox Marble being prevented from operating the Maleshevë quarry. Since the dispute arose Fox Marble has been working to resolve the matter with the appropriate Kosovan Government agencies, namely the Kosovo mining regulator, the Independent Commission of Mines and Mineral ("ICMM") and the Agjencia e Regjistrimit të Bizneseve ("ARBK"), the Kosovo business registration agency. However, in what is a clear breach of Kosovo Law 04/L-220 "On Foreign Investment" (2014), Fox Marble has been prevented from asserting its rights in these matters.
Despite the cumulative weight of evidence, Fox Marble was denied the right to appeal any decision relating to the Maleshevë quarry in direct contravention of the provisions of the Kosovo foreign investment law, Law 04 /L-220.
As a direct consequence of the ARBK and ICMM decisions, the Company has brought arbitration proceedings against the Republic of Kosovo pursuant to Article 16 of the Kosovo foreign investment law (as above). The basis of the claim for damages is the investment made to date in the Maleshevë quarry, loss of future revenues associated with the site and future investment plans in Kosovo. Significant future investment plans are the subject of the MOU signed in October 2016 by the Government of Kosovo and Stone Alliance LLC which is majority owned by Fox Marble.
The Company is represented by its legal advisers, Stephenson Harwood LLP, as well as its Kosovan lawyers.
Covid-19 Response
The spread of Coronavirus (COVID-19) continues to have a significant impact across industries worldwide, including the marble extraction and processing market, given the changeable international travel and working restrictions in place in many countries.
The Board's highest priority is the continued wellbeing of its employees, customers and stakeholders both in the UK and Kosovo. Given the continued uncertainty on the potential impact and duration of the COVID-19 pandemic, the Board has taken preemptive steps not only to ensure the well-being of those affected, but also to best position the Company for future operations.
In line with many other nations, Kosovo introduced a number of measures to try and curb the further spread of COVID-19, including travel restrictions, school closures and closures of non-essential shops and venues. All flights into Kosovo were cancelled on 16 March 2020, whilst land borders are also closed to non-Kosovo citizens. On 23 March 2020 all private businesses, apart from of some designated sectors, were also ordered to close. Since this date some restrictions have been lifted, however travel continues to be tightly controlled.
Fox Marble's factory operations were permitted to continue, as it fell within a designated sector. The Company continued to operate the factory, though with scaled back operations. Extra distancing procedures to protect our workforce were implemented. Operations were slowly increased over the summer.
Demand for block marble fell significantly as a result of travel restrictions placed on China, the principal buyers of the Company's block marble, since January 2020. The spread of the virus into Europe and the resulting impact on cross border travel and trade has magnified this effect. The Company elected to suspend production at the quarry in order to keep operational cash flow neutral until the international block marble market returns to normality. Operations at the Prilep quarry were re-started in August 2020.
Whilst quarrying operations are temporarily suspended, the Company will seek to eliminate all unnecessary expenditure and the Board offered to not take any salary or fees until operations resume. Head Office staff in London were placed on furlough through to June 2020.
Results and Dividends
Key Performance Indicators 2019 2018 ------------------------------------ --------------- --------------- Number of operational quarries 4 4 Quarry production (tonnes) 14,370 13,094 Revenue EUR1,422,872 EUR1,409,730 Average recorded selling price (blocks per tonne) EUR217 EUR210 Average recorded selling processed (per sqm) EUR28 EUR56 EBITDA (EUR2,022,027) (EUR2,324,762) Operating loss for the year (EUR2,273,673) (EUR2,427,022) Loss for the year (EUR2,533,540) (EUR2,264,975) Expenditure on property, plant and equipment EUR649,015 EUR713,315
The Group recorded revenues of EUR1,422,872 in the year ended 31 December 2019 (2018 - EUR1,409,730). Revenues for the year were consistent on prior year with increases in block sales from the Prilep quarry substituting for the fall in revenues following the suspension of quarrying operations at Malesheve. The Group incurred an operating loss of EUR2,273,673 for the year ended 31 December 2019 (2018 - EUR2,427,022). The operating loss reflects the costs incurred to bring the quarries and to a stage required for production of more consistent and larger block sizes and develop the factory site. Additionally, the Group has invested in targeted marketing activity to increase sales. The average recorded selling price per tonne remained consistent on prior year. The fall in the selling price per sqm for processed material as focus was shifted to the Kosovan and Balkan market.
The Group incurred a loss after tax for the year ended 31 December 2019 of EUR2,533,540 (2018 - EUR2,264,975).
Reconciliation of EBITDA to Loss Year to Year to
for the year 31 December 31 December
2019 2018 EUR
EUR
---------------------------------- ------------- -------------
Loss for the year (2,533,540) (2,264,976)
Plus/(less):
Net finance costs/(income) 259,867 (162,047)
Depreciation 207,850 90,365
Amortisation 43,796 11,896
EBITDA (2,022,027) (2,324,762)
The Company does not anticipate payment of dividends until its operations become significantly cash generative.
Sustainable development
Fox Marble aims to build and maintain relationships based on trust and mutual benefit with its stakeholders. Preventing and managing social and environmental risks, while seeking opportunities for improvement, are critical to maintaining the Group's competitiveness and capacity to grow.
Risk
Fox Marble recognises that risk is inherent in all of its business activities. Its risks can have a financial, operational or reputational impact. The Company's system of risk identification, supported by established governance controls, ensures that it effectively responds to such risks, whilst acting ethically and with integrity for the benefit of all of our stakeholders.
Once identified, risks are evaluated to establish root causes, financial and non-financial impacts, and likelihood of occurrence. Consideration of risk impact and likelihood is taken into account to create a prioritised risk register and to determine which of the risks should be considered as a principal risk. The effectiveness and adequacy of mitigating controls are assessed. If additional controls are required, these will be identified and responsibilities assigned.
The Company's management is responsible for monitoring the progress of actions to mitigate key risks. The risk management process is continuous; key risks are reported to the Audit Committee and at least once a year to the full Board.
Going Concern
The Directors have reviewed detailed projected cash flow forecasts and are of the opinion that it is appropriate to prepare this report on a going concern basis. In making this assessment they have considered:
(a) the current working capital position and operational requirements; (b) the timing of expected sales receipts and completion of existing orders; (c) the sensitivities of forecast sales figures over the next two years; (d) the timing and magnitude of planned capital expenditure; and
(e) the level of indebtedness of the company and timing of when such liabilities may fall due, and accordingly the working capital position over the next 18 months.
The forecasts assume that production at the Prilep and Cervenillë quarries will continue, which were reopened respectively in August and September 2020. It further assumes that production at the factory will continue to operate and that recently installed machinery will drive an increase in the rate of production. The forecast assumes existing contracts held by the Company will be fulfilled on a timely basis Further the forecasts assume that sales of block marble will resume over the final quarter of 2020, in line with the reopening of international borders. Further the Company is anticipating significant growth in revenue through the realisation of existing sale contracts and offtake agreements as well as from newly generated sales.
There are several key risks and uncertainties that could impact the financial performance of the Company. These include the fact that levels of production at Cervenillë and Prilep can be impacted by unforeseen delays due to inclement weather or equipment failure; lower than expected quality of material being produced by the quarries; and delays in the fulfilment of the Company's order book. The continued progression of the Covid-19 may have a further detrimental impact on sales, and the resumption of block sales to the international block market may be slower than expected.
As at 15 September 2020 the Company has EUR0.47 million in cash.
If the cash receipts from sales are lower than anticipated the Company has identified that it has available to it a number of other contingent actions, in addition to those noted above, that it can take to mitigate the impact of potential downside scenarios. These include seeking additional financing, leveraging existing sale agreements, reviewing planned capital expenditure, reducing overheads and further renegotiation of the terms on its existing debt obligations.
In conclusion having regard to the existing and future working capital position and projected sales, the Directors are of the opinion that the application of the going concern basis is appropriate.
Finally, I would like to thank all our staff and our Board colleagues for their unstinting efforts on behalf of Fox Marble.
On behalf of the board
Chris Gilbert
Chief Executive Officer
30 September 2020
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Note 2018
2019 EUR
EUR (restated)
------------------------------------ ------ ------------ ------------
Revenue 1,422,872 1,409,730
Cost of sales (814,626) (887,356)
------------ ------------
Gross profit 608,246 522,374
============ ============
Administrative and other operating
expenses (2,881,919) (2,949,396)
Operating loss (2,273,673) (2,427,022)
============ ============
Finance costs (517,638) (119,507)
Finance income 257,771 281,554
Loss before taxation (2,533,540) (2,264,975)
============ ============
Taxation - -
Loss for the year (2,533,540) (2,264,975)
============ ============
Other comprehensive income - -
============ ============
Total comprehensive loss for
the year attributable to owners
of the parent company (2,533,540) (2,264,975)
============ ============
Earnings per share
Basic earnings per share (0.01) (0.01)
Diluted earnings per share (0.01) (0.01)
Consolidated Statement of Financial Position
As at 31 December 2019
Note As at 31
December
2018 As at 1
January
As at 31 December (restated) 2018
2019 EUR (restated)
EUR EUR
------------------------------- ------ -------------------- ------------------------ -------------
Assets
Non-current assets
Intangible assets 2,836,942 2,880,739 1,338,666
Property, plant and equipment 5,088,344 4,844,752 4,754,087
Trade and other receivables - - 56,307
Total non-current assets 7,925,286 7,725,491 6,149,060
=================== ======================== =============
Current assets
Trade and other receivables 1,182,685 889,299 985,647
Inventories 3,928,397 3,807,140 3,319,467
Cash and cash equivalents 578,417 438,270 542,287
Total current assets 5,689,499 5,134,709 4,847,401
=================== ======================== =============
Total assets 13,614,785 12,860,200 10,996,461
=================== ======================== =============
Current liabilities
Trade and other payables 1,199,376 1,184,855 1,373,096
Borrowings 1,929,696 88,970 1,739,025
Total current liabilities 3,129,072 1,273,825 3,112,121
=================== ======================== =============
Non-current liabilities
Deferred tax liability 84,504 84,504 -
Lease Commitments 220,721 - -
Borrowings 2,524,721 3,683,990 1,702,453
Total non-current liabilities 2,829,946 3,768,494 1,702,453
=================== ======================== =============
Total liabilities 5,959,018 5,042,319 4,814,574
=================== ======================== =============
Net assets 7,655,767 7,817,881 6,181,887
Equity
Called up share capital 3,220,221 2,700,688 2,284.476
Share premium 31,793,870 29,941,977 26,424,202
Accumulated losses (27,479,114) (24,945,575) (22,646,505)
Share based payment reserve 85,247 85,247 84,171
Other reserve 35,543 35,543 35,543
Total equity 7,655,767 7,817,881 6,181,887
=================== ======================== =============
Consolidated Statement of Cash Flows
For the year ended 31 December 2019
Note 2019 2018
EUR EUR
----------------------------------------------- ------- ------------ --------------------------
Cash flows from operating activities
( 2,264,975
Loss before taxation (2,533,540) )
Adjustment for:
Finance costs 517,638 119,507
Finance income (257,771) (281,554)
( 2,427,022
Operating loss for the year (2,273,673) )
============ ==========================
Adjustment for:
Amortisation 43,796 11,896
Depreciation 648,133 90,365
Foreign exchange losses on operating
activities - 6,522
Equity settled transactions - 1,076
Provision for impairment of receivables 162,578 124,643
Provision for inventory 392,412 251,552
Changes in working capital:
Increase in trade and other receivables (455,965) (6,081)
Increase in inventories (513,669) (206,942)
Increase/(decrease) in accruals 124,116 (31,266)
Decrease in trade and other payables (109,593) (156,975)
Net cash used in operating activities (1,981,865) (2,342,231)
============ ==========================
Cash flow from investing activities
Expenditure on property, plant &
equipment (649,715) (499,847)
Expenditure on rights of use assets (23,736) -
Interest on bank deposits 1,437 838
Net cash used in investing activities (672,014) (499,009)
============ ==========================
Cash flows from financing activities
Proceeds from issue of shares (net
of issue costs) 2,371,425 3,137,538
Proceeds from the issue of long-term
debt (net of issue costs) 609,696 1,314,030
Repayment of debt - (1,604,278)
Interest paid on loan note instrument (187,096) (102,705)
Net cash generated from financing
activities 2,794,026 2,744,585
============ ==========================
Net increase/(decrease) in cash and
cash equivalents 140,147 (96,655)
Cash and cash equivalents at beginning
of year 438,270 542,287
Exchange losses on cash and cash
equivalents - (7,362)
Cash and cash equivalents at end
of year 578,417 438,270
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Capital Share Premium Share based Other Reserve Accumulated
payment reserve losses Total equity
Note
EUR EUR EUR EUR EUR EUR
----------------- -------------- -------------- ----------------- -------------- ----------------- -------------
Balance at 1
January 2018 2,284,476 26,424,202 84,171 35,543 (22,823,182) 6,005,210
Prior year
adjustment - - - - 176,677 176,677
Balance at 1
January 2018
(restated) 2,284,476 26,424,202 84,171 35,543 (22,646,505) 6,181,887
Loss and total
comprehensive
loss for the
year - - - - (2,264,975) (2,264,975)
Transactions
with owners
Share options
charge - - 1,076 - - 1,076
Share capital
issued 416,212 3,517,775 - - - 3,933,987
Adjustment on
adoption of
IFRS 9 (34,094) (34,094)
Balance at 31
December 2018
and at 1
January 2019 2,700,688 29,941,977 85,247 35,543 (24,945,574) 7,817,881
-------------- -------------- ----------------- -------------- ----------------- -------------
Loss and total
comprehensive
loss for the
year (2,533,540) (2,533,540)
Transactions
with owners
Share options - - - - -
charge
Share capital
issued 519,533 1,851,893 - - - 2,371,426
-------------- -------------- ----------------- -------------- ----------------- -------------
Balance at 31
December 2019 3,220,221 31,793,870 85,247 35,543 (27,479,114) 7,665,765
-------------- -------------- ----------------- -------------- ----------------- -------------
Notes to the Consolidated Financial Statements
1. General information
The principal activity of Fox Marble Holdings plc and its subsidiary and associate companies (collectively "Fox Marble Group" or "Group") is the exploitation of quarry reserves in the Republic of Kosovo and the Republic of North Macedonia.
Fox Marble Holdings plc is the Group's ultimate Parent Company ("the parent company"). It is incorporated in England and Wales and domiciled in England. The address of its registered office is 160 Camden High Street, London, NW1 0NE. Fox Marble Holdings plc shares are admitted to trading on the London Stock Exchange's AIM market.
2. Basis of Preparation
The financial information set out herein does not constitute the Group's statutory financial statements for the year ended 31 December 2019, but is derived from the Group's audited full financial statements. The auditors have reported on the 2018 financial statements and their report was unqualified and did not contain statements under s498(2) or (3) Companies Act 2006. The 2018 Annual Report was approved by the Board of Directors on 29 September 2020, and will be mailed to shareholders on 30 September 2020. The financial information in this statement is audited but does not have the status of statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The Group's consolidated financial statements, which form part of the 2019 Annual Report, have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the requirements of the Companies Act applicable to companies reporting under IFRS. IFRS includes Interpretations issued by the IFRS Interpretations Committee (formerly - IFRIC).
The consolidated financial statements have been prepared under the historical cost convention, apart from financial assets and financial liabilities (including derivative instruments) which are recorded at fair value through the profit and loss. The preparation of consolidated financial statements under IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.
3. Critical accounting estimates and areas of judgement
Critical accounting estimates and areas of judgement
The preparation of consolidated nancial statements under IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The key areas of judgement and critical accounting estimates are explained below.
Impairment assessment
The Group assesses at each reporting date whether there are any indicators that its assets and cash generating units (CGUs) may be impaired. Operating and economic assumptions, which could affect the valuation of assets using discounted cash flows, are updated regularly as part of the Group's planning and forecasting processes. Judgement is therefore required to determine whether the updates represent significant changes in the service potential of an asset or CGU and are therefore indicators of impairment or impairment reversal.
In performing the impairment reviews, the Group assesses the recoverable amount of its operating assets principally with reference to fair value less costs of disposal, assessed using discounted cash flow models. These models are subject to estimation uncertainty and there is judgement in determining the assumptions that are considered to be reasonable and consistent with those that would be applied by market participants as outlined below.
Going concern
The Group assesses at each reporting date whether it is a going concern for the foreseeable future. In making this assessment management considers:
(a) the current working capital position and operational requirements; (b) the timing of expected sales receipts and completion of existing orders; (c) the sensitivities of forecast sales figures over the next two years; (d) the timing and magnitude of planned capital expenditure; and
(e) the level of indebtedness of the company and timing of when such liabilities may fall due, and accordingly the working capital position over the next 18 months.
Management considers in detail the going concern assessment, including the underlying assumptions, risks and mitigating actions to support the assessment. The assessment is subject to estimation uncertainty and there is judgement in determining underlying assumptions.
Quarry reserves
Engineering estimates of the Group's quarry reserves are inherently imprecise and represent only approximate amounts because of the significant judgments involved in developing such information. There are authoritative guidelines regarding the engineering criteria that must be met before estimated quarry reserves can be designated as "proved" and "probable". Proved and probable quarry reserve estimates are updated at regular intervals considering recent production and technical information about each quarry. In addition, as prices and cost levels change from year to year, the value of proved and probable quarry reserves also changes. This change is considered a change in estimate for accounting purposes and is reflected on a prospective basis in depreciation and amortisation rates calculated on units of production ("UOP") basis.
Changes in the estimate of quarry reserves are also considered in impairment assessments of non-current assets.
Treatment of convertible loan notes
The convertible loan notes have been accounted for as a liability held at amortised cost. At the date of issue, the fair value of the liability component was estimated using the prevailing market interest rate for similar non-convertible debt.
The conversion option results in the Company repaying a GBP denominated liability in return for issuing a fixed number of shares and as such has been classified as a derivative liability. The liability is held at fair value and any changes in fair value over the period are recognised in profit or loss.
The Company has fair valued the identified embedded derivatives included within the contract using a Black Scholes methodology, which has resulted in the recording of a liability of EUR6,125 at 31 December 2019 (2018 - EUR262,459). The main assumptions used in the valuation of the derivative conversion option as at 31 December 2019 were: underlying share price of GBP0.0245 (31 December 2018: GBP0.0738), EUR/GBP spot rate of 1.1815 (31 December 2018: 1.10), historic volatility of 53% (31 December 2018: 44%) and risk free rate of 1.9% (31 December 2018: 0.68%)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined based on weighted average costs and comprises direct materials and direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.
In calculating the net realisable value of the inventory management has to make a judgment about the expected sales price of the material. Management makes this judgment based on its historical experience of the sale of similar material and taking into account the quality or age of the inventory concerned.
4. Going concern
The Directors have reviewed detailed projected cash flow forecasts and are of the opinion that it is appropriate to prepare this report on a going concern basis. In making this assessment they have considered:
(a) the current working capital position and operational requirements; (b) the timing of expected sales receipts and completion of existing orders; (c) the sensitivities of forecast sales figures over the next two years; (d) the timing and magnitude of planned capital expenditure; and
(e) the level of indebtedness of the company and timing of when such liabilities may fall due, and accordingly the working capital position over the period to 31 December 2021.
If the cash receipts from sales are lower than anticipated the Company has identified that it has available to it a number of other contingent actions, in addition to those noted above, that it can take to mitigate the impact of potential downside scenarios. These include seeking additional financing, leveraging existing sale agreements, reviewing planned capital expenditure, reducing overheads and further renegotiation of the terms on its existing debt obligations.
5. Prior period adjustment
Fox Marble reviews the expected useful lives of intangible assets with finite lives on a regular basis. Upon review of the intangible asset in respect of Prilep Omega with a carrying value of EUR1.2 million, it was determined amortisation should not have started because the quarry is not in the location and condition necessary for it to be capable of operating in the manner intended by management. The Prilep Omega quarry requires additional development before it will enter production and therefore the amortisation of the intangible asset has been adjusted accordingly.
The impact of the adjustment on the Group's consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position and consolidated statement of cash flows is presented in the following tables.
Adjustment
For the For the year
year ended ended 31
31 December December
2018 2018
EUR EUR EUR
------------------------------------ -------------- ----------- -------------
As previously As restated
reported
Revenue 1,409,730 - 1,409,730
Cost of sales (887,356) - (887,356)
-------------- ----------- -------------
Gross profit 522,374 - 522,374
============== =========== =============
Administrative and other operating
expenses (2,980,800) 31,403 (2,949,396)
Operating loss (2,458,426) 31,403 (2,427,022)
============== =========== =============
Finance costs (119,507) - (119,507)
Finance income 281,554 - 281,554
Loss before taxation (2,296,379) 31,403 (2,264,975)
============== =========== =============
Taxation - - -
Loss for the year (2,296,379) 31,403 (2,264,975)
============== =========== =============
As at 31 As at As at 31 As at 1 As at As at 1
December 31 December December January 1 January January
2018 2018 2018 2018 2018 2018
EUR EUR EUR EUR EUR
EUR
--------------------- -------------- ------------- ------------- -------------- ----------- -------------
As previously Adjustment As restated As previously Adjustment As restated
reported reported
Intangible assets 2,672,658 208,080 2,880,739 1,161,989 176,677 1,338,666
Property, plant
and equipment 4,844,752 - 4,844,752 4,754,087 4,754,087
Trade and other
receivables - 56,307 56,307
-------------- ------------- -------------
Total non-current
assets 7,517,410 208,080 7,725,491 5,972,383 176,677 6,149,060
============== ============= ============= ============== =========== =============
Trade and other
receivables 889,299 - 889,299 985,647 - 985,647
Inventories 3,807,140 - 3,807,140 3,319,467 - 3,319,467
Cash and cash
equivalents 438,270 - 438,270 542,287 - 542,287
-------------- ------------- -------------
Total current
assets 5,134,709 - 5,134,709 4,874,401 - 4,874,401
============== ============= ============= ============== =========== =============
Total assets 12,652,119 208,080 12,860,200 10,819,784 176,677 10,996,461
============== ============= ============= ============== =========== =============
Trade and other
payables 1,184,855 - 1,184,855 1,373,096 - 1,373,096
Borrowings 88,970 - 88,970 1,739,025 - 1,739,025
-------------- ------------- -------------
Total current
liabilities 1,273,825 - 1,273,825 3,112,121 - 3,112,121
============== ============= ============= ============== =========== =============
Deferred tax
liability 84,504 - 84,504 - - -
Borrowings 3,683,990 - 3,683,990 1,702,453 - 1,702,453
-------------- ------------- -------------
Total non-current
liabilities 3,768,494 - 3,768,494 1,702,453 - 1,702,453
============== ============= ============= ============== =========== =============
Total liabilities 5,042,319 - 5,042,319 4,814,574 4,814,574
============== ============= ============= ============== =========== =============
Net assets 7,609,800 208,080 7,817,881 6,005,210 176,677 6,181,887
============== ============= =============
Equity
Called up share
capital 2,700,688 2,700,688 2,284.476 - 2,284.476
Share premium 29,941,977 29,941,977 26,424,202 - 26,424,202
Accumulated losses (25,153,655) 208,080 (24,945,574) (22,823,182) 176,677 (22,646,505)
Share based payment
reserve 85,247 85,247 84,171 - 84,171
Other reserve 35,543 35,543 35,543 - 35,543
-------------- ------------- -------------
Total equity 7,609,800 208,080 7,817,881 6,005,210 176,677 6,181,887
============== ============= ============= ============== =========== =============
Adjustment
For the For the year
year ended ended 31
31 December December
2018 2018
EUR EUR EUR
As previously As restated
reported
Cash flows from operating activities
( 2,296,379 ( 2,264,975
Loss before taxation ) 31,403 )
Adjustment for:
Finance costs 119,507 - 119,507
Finance income (281,554) - (281,554)
--------------------------
( 2,458,426 ( 2,427,023
Operating loss for the year ) 31,403 )
========================== =========== ==========================
Adjustment for:
Amortisation 43,299 31,403 11,896
Depreciation 90,365 - 90,365
Foreign exchange losses on operating
activities 6,522 - 6,522
Equity settled transactions 1,076 - 1,076
Provision for impairment of receivables 124,643 - 124,643
Provision for inventory 251,552 - 251,552
Changes in working capital:
Increase in trade and other receivables (6,081) - (6,081)
Increase in inventories (206,942) - (206,942)
Increase/(decrease) in accruals (31,266) - (31,266)
Decrease in trade and other payables (156,975) - (156,975)
--------------------------
Net cash used in operating activities (2,342,233) - (2,342,233)
========================== =========== ==========================
6. Segmental information
The chief operating decision maker is the Board of Directors. The Board of Directors reviews management accounts prepared for the Group as a whole when assessing performance.
All the operations of Fox Marble Holdings plc are in the Republic of Kosovo and the Republic of North Macedonia. All sales of the Group are as a result of the extraction and processing of marble. It is the opinion of the directors that the operations of the Company represent one segment and are treated as such when evaluating its performance.
Of the non-current assets held by the Group of EUR8,127,917 (2018 - EUR7,725,491), EUR4,262,651 (2018 - EUR4,481,511) relates to Property, Plant and Machinery acquired for the exploitation of assets in Kosovo and EUR588,902 (2018 - EUR362,612) relates to Property, Plant and Machinery acquired for the exploitation of assets in North Macedonia. Intangible assets held by the Group relate to intangible assets acquired in relation to mining rights and licences in North Macedonia of EUR2,674,866 (2018 - EUR2,716,304) and exploration and evaluation expenditure incurred in Kosovo of EUR77,572 (2018 - EUR79,930).
Kosovo Macedonia Other Total
31 December 31 December 31 December 31 December
2019 2019 2019 2019
Property, Plant
and Machinery 4,262,651 588,902 236,791 5,088,344
Intangible assets 77,572 2,674,866 84,504 2,836,942
Total non-current
assets 7,925,286
31 December 31 December 31 December 31 December
2018 2018 2018 2018
Property, Plant
and Machinery 4,481,511 362,612 629 4,844,752
Intangible assets 79,931 2,716,304 84,504 2,880,739
Total non-current
assets 7,725,491
The Group incurs certain costs in the United Kingdom in relation to head office expenses. In the year under review included in the operating costs for the year of EUR2,881,919 (2018 - EUR2,949,396) were costs incurred in the United Kingdom of EUR1,385,145(2018 - EUR1,314,226). Net interest cost of the Group of EUR259,867 (2018 - income of EUR162,047) is incurred in the United Kingdom.
All revenue, which represents turnover, arises solely within Kosovo and North Macedonia and relates to external parties.
Group Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
Revenue by territory
Europe 883,271 845,877
Middle East 148,976 260,783
China 390,625 209,616
India - 93,454
Total revenue 1,422,872 1,409,730
Revenues from contracts with customers
The Group generates revenue through the sale of quarried marble as well as the processing of marble into slabs, tiles and bespoke cut to size items.
Group Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
---------------------------------- ------------- ----------------
Revenue by product
Sale of block marble 1,219,618 1,043,313
Sale of processed marble 168,807 353,265
Provision of processing services 34,447 13,152
Total revenue 1,422,872 1,409,730
Revenue is recognised in a manner that depicts the pattern of the transfer of goods and services to customers. The amount recognised reflects the amount to which the Group expects to be entitled in exchange for those goods and services. Sales contracts are evaluated to determine the performance obligations, the transaction price and the point at which there is transfer of control. The transactional price is the amount of consideration due in exchange for transferring the promised goods or services to the customer, and is allocated against the performance obligations and recognised in accordance with whether control is recognised over a defined period or at a specific point in time.
Block marble may be sold under a sales agreement with a customer or on a non contractual basis. Sales agreements for block marble generally contain agreed pricing and minimum volume, through which customers can gain exclusivity within a given region. Block marble may be sold on an ex-quarry basis or free on board (FOB) basis. Revenue is recognised on the sale of block marble when control of the block marble is transferred to the buyer as the transfer of legal title, customer acceptance and an unconditional requirement to pay. The group derives revenue from the sale of blocks at a point in time.
Processed marble may be sold on an as seen basis or may be cut to order. The Company may enter into contracts to supply a given volume of processed marble as specified by the client. Processed marble may be sold on ex-factory basis or may include transport to customers. Revenue in relation to larger projects may involve separately identifiable performance obligations. Such performance obligations may include the separate delivery of instalments of product in accordance with the contractual schedule. Where marble is cut to order the Group does not consider the provision of marble and the processing of marble as separate obligations, unless the client selects and takes title to specific block marble.
The group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction prices for the time value of money.
Group Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
----------------------- ------------- ----------------
Contractual basis 745,201 941,349
Non-contractual basis 677,671 468,381
Total revenue 1,422,872 1,409,730
The following table sets out financial assets and liabilities that relate to sales contracts the Group has entered into
Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
----------------------------------------- ------------- -------------
Trade receivables 142.216 276,073
Contract Liabilities (Advances received
from customers) 313,582 307,743
7. Expenses by nature
Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
------------------------------------------------------ ------------- -------------
(restated)
Operating loss is stated after charging/(crediting):
Cost of materials sold 814,626 887,356
Inventory provision 392,412 251,552
Fees payable to the Company's auditors 76,050 104,860
Legal & professional fees 293,972 191,796
Consultancy fees and commissions 400,458 470,998
Staff costs 690,074 803,340
Operating lease rental 16,424 47,679
Other head office costs 147,304 166,031
Travelling, entertainment & subsistence
costs 106,194 136,292
Depreciation 207,850 90,365
Amortisation 43,796 12,972
Quarry operating costs 172,564 170,285
Foreign exchange (loss)/gain (19,205) 25,492
Marketing & PR 47,690 48,614
Testing, storage, sampling and transportation
of materials 94,858 265,805
Provision for bad debts 162,578 124,643
Sundry expenses 48,900 38,673
Cost of sales, administrative and other
operational expenses 3,696,545 3,836,752
The analysis of auditors' remunerations is as follows:
Group Year ended Year ended
31 December 31 December
2019 2018
EUR EUR
Fees payable to the Company's auditors and its associates
for services to the group
Audit of UK parent company 16,711 23,041
Audit of consolidated financial
statements 44,834 61,819
Audit of overseas subsidiaries 14,505 20,000
Audit of UK subsidiaries -
Total audit services 76,050 104,860
8. Net finance costs
2019 2018
EUR EUR
---------------------------------------- -------- --------
Finance costs
Interest expense on borrowings 343,952 119,507
Net foreign exchange loss on loan note 171,235 -
instrument
Interest payable on lease liabilities 2,451 -
517,638 119,507
9. Net finance income
2019 2018
EUR EUR
Finance income
Movement in the fair value of derivative 256,335 277,962
Net foreign exchange gain on loan
note instrument - 2,754
Interest income on bank deposits 1,436 838
257,771 281,554
10. Loss per share
2019 2018
EUR EUR
------------------------------------- ----------------------- -----------------------
Loss for the year used for the
calculation of basic EPS (2,533,540) (2,264,975)
Number of shares
Weighted average number of ordinary
shares for the purpose of basic
EPS 230,948,303 214,022,550
Effect of potentially dilutive - -
ordinary shares
Weighted average number of ordinary
shares for the purpose of diluted
EPS 230,948,303 214,022,550
Earnings per share:
Basic (0.01) (0.01)
Diluted (0.01) (0.01)
Basic earnings per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year..
The following potentially dilutive instruments have been excluded from the calculation of weighted average number of ordinary shares for the year ended 31 December 2019 for the purpose of calculating diluted loss per share on the basis that the instruments would be anti-dilutive.
-- A grant of 120,000 options granted under the DSOP. -- Shares issuable under unsecured convertible loan notes issued by the Company.
175,000 performance warrants granted to Beaufort Securities Limited.
11. Intangible assets
Capitalised
exploration
Mining rights and evaluation
Goodwill and licences expenditure Total
EUR EUR EUR EUR
------------------------------- ----------- ---------------- ---------------- -----------
Cost (restated) (restated)
As at 1 January 2018 - 1,256,376 92,866 1,349,242
Addition 84,504 1,469,464 - 1,553,968
As at 31 December 2018,1
January 2019 and 31 December
2019 84,504 2,725,840 92,866 2,903,210
Accumulated amortisation
As at 1 January 2018 - - 10,576 10,576
Amortisation charge - 9,537 2,360 11,897
As at 31 December 2018
and as at 1 January 2019 - 9,537 12,936 22,473
Charge for the year - 41,438 2,358 43,796
As at 31 December 2019 - 50,975 15,294 66,269
Net Book Value
As at 1 January 2018 - 1,256,376 82,290 1,338,666
As at 31 December 2018 84,504 2,716,304 79,930 2,880,738
As at 31 December 2019 84,504 2,674,866 77,572 2,836,942
Capitalised exploration and evaluation expenditure represent rights to the mining of decorative stone reserves in the Pejë, Syriganë and Rahovec quarries in Kosovo. The Group was granted in 2011 rights of use by the local municipality for twenty years over land in the Syriganë and Rahovec region through acquisition of the issued share capital of Rex Marble SH.P.K and H&P SH.P.K.
On 16 August 2014 the Company entered into a sub-lease arrangement with New World Holdings (Malta) Limited in relation to the Omega Alexandrian White marble quarry at Prilep in North Macedonia. This new quarry site is adjacent to the Company's existing operations in Prilep. The consideration for the sub-lease was EUR1,256,376 (GBP1,000,000) and a subsequent 40% gross revenue royalty obligation. The sub-lease has an initial term of 20 years, which is extendable by the Company for a further twenty years. The sub-lease grants the Company the exclusive right to quarry, process, remove and sell marble from the quarry. The Company will pay for and provide all the equipment and staff required to operate this quarry. The quarry is not yet operational.
On 8 October 2018 the Company acquired Gulf Marble Investments Limited (UAE). As part of this acquisition the Group acquired the direct sub licence to the Prilep Alpha quarry and eliminated the 40% gross revenue royalty payable under the original agreements. The Group has recognised an intangible asset with a provisional fair value of EUR1,469,464 which will be amortised over the remaining period of the licence. The acquisition gave rise to a technical deferred tax liability and a corresponding entry to goodwill of EUR84,504 in accordance with IFRS 3.
Intangible assets relating to quarries not yet in operation are treated as exploration and evaluation assets and assessed for impairment in accordance with IFRS 6 Exploration and evaluation of mineral resources. The Group has assessed intangible assets for indicators of impairment and concluded there are no indicators of impairment arising in the current year.
Other intangible assets relating to quarries in operation include amounts spent by the Group acquiring licences. Where intangible assets are acquired through business combinations and no active market for the assets exists, the fair value of these assets is determined by discounting estimated future net cash flows generated by the asset. Intangible assets relating to quarries in operation are assessed annually for indicators of impairment in accordance with IAS 36.
12. Property, plant and equipment
Quarry Factory Rights Land Office Equipment Total
Plant Plant of use and buildings and
& Machinery & Machinery asset Leasehold
EUR improvements
EUR
EUR EUR EUR
-------------------------- -------------- ------------- -------- --------------- ----------------- ----------
Cost
As at 1 January
2018 2,988,900 3,040,590 - 160,000 30,488 6,219,978
Additions 322,593 390,722 - - - 713,315
As at 31 December
2018 and as at 1
January 2019 3,311,493 3,431,312 - 160,000 30,488 6,933,293
Additions(1) 597,773 50,306 242,710 - 936 891,725
As at 31 December
2019 3,909,266 3,481,618 242,710 160,000 31,424 7,825,018
Accumulated depreciation
As at 1 January
2018 1,393,784 44,949 - - 27,158 1,465,891
Depreciation charge
(2) 526,490 93,459 - - 2,701 622,650
As at 31 December
2018 and as at 1
January 2019 1,920,274 138,408 - - 29,859 2,088,541
Depreciation charge
(2) 530,593 110,056 6,827 - 657 648,133
As at 31 December
2019 2,450,867 248,464 6,827 - 30,516 2,736,674
Net Book Value
As at 1 January
2018 1,595,116 2,995,641 - 160,000 3,330 4,754,087
As at 31 December
2018 1,391,219 3,292,904 - 160,000 629 4,844,752
As at 31 December
2019 1,458,399 3,233,154 235,883 160,000 908 5,088,345
(1) Included in additions of EUR713,315 in the year ended 31 December 2018 are EUR213,469 of assets acquired as result of the acquisition of Gulf Marble Investments Limited.
(2) Depreciation on plant and machinery is included in in the cost of inventory to the extent it is directly related to production of that inventory. In the year ended 31 December 2019 EUR461,170 of depreciation was included in the cost of inventory produced (2018 EUR532,284).
The Group has assessed property, plant and equipment for indicators of impairment and concluded there are no indicators of impairment arising in the current year. Included in property, plant and equipment is EUR161,000 of assets that are currently located at the Maleshevë quarry site. Access to the quarry site has been under dispute since July 2019, as disclosed further in Note 30. Due to the dispute with Green Power Sh.P.K the Company were unable to physically inspect the assets as at 31 December 2019 year end. The assets were counted by an independent assessor in October 2019 as part of ongoing civil litigation against Green Power Sh.P.K, and an injunction was granted to the Company stopping Green Power Sh.P.K or any other third party moving, selling or interfering with them in any way. The Company is confident of its rights over the assets and the enforcement of those rights, and that the value of the assets is not impaired.
The Group has assessed property, plant and equipment for indicators of impairment and concluded there are no indicators of impairment arising in the current year.
Right-of-use assets
From 1 January 2019, the Group has adopted IFRS 16 Leases. for the accounting policy. The right-of-use assets recognised on adoption of the new leasing standard are reflected in the underlying asset classes of property, plant and equipment.
13. Borrowings
Group and Company: 2019 2018
EUR EUR
------------------------------------------ ---------- ----------
Current borrowings
Convertible loan notes held at amortised
cost 1,924,821 85,259
Derivative over own equity at fair
value 4,875 3,711
1,929,696 88,970
Non-current borrowings
Convertible loan notes held at amortised
cost 2,523,471 2,871,292
Other borrowings held at amortised
cost - 553,950
Derivative over own equity at fair
value 1,250 258,748
2,524,721 3,683,990
a. Series 3 Loan Note
On 28 June 2017, the Company issued a convertible loan note with a value of GBP440,000 ("Series 3 Loan Note") to a non related party. This new Series 3 Loan Note has an interest rate of 8% per annum, in line with the Series 1 Loan Note issued to Amati Global Investors Limited. The Loan Note was due for conversion or repayment on 31 August 2020 with a conversion price set at 10p.
As at 31 December 2019 , the Series 3 Loan Note held at amortised cost had a balance of EUR521,885 (31 December 2018 - EUR489,235). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019 the derivative had a value of EUR520 (31 December 2018 - EUR16,818). The fair value has been assessed using a Black Scholes methodology. The derivative is classified as a level 3 derivative on the basis that the valuation includes one or more significant inputs not based on observable market data.
b. Series 4 Loan Note
On 28 December 2017, the Company issued a convertible loan note with a value of GBP160,000 ("Series 4 Loan Note") to a non related party. This new Series 4 Loan Note has an interest rate of 8% per annum, in line with the Series 1 Loan Note issued to Amati Global Investors Limited. The Loan Note was due for conversion or repayment on 31 August 2020 with a conversion price set at 10.5p.
As at 31 December 2019, the Series 4 Loan Note held at amortised cost had a balance of EUR185,514 (31 December 2018 - EUR174,202). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019 the derivative had a value of EUR180 (31 December 2018 - EUR7,918). The fair value has been assessed using a Black Scholes methodology . The derivative is classified as a level 3 derivative on the basis that the valuation includes one or more significant inputs not based on observable market data.
c. Series 5 Loan Note
On 19 January 2018, the Company issued a convertible loan note with a value of GBP75,000 ("Series 5 Loan Note") to a non related party. This new Series 5 Loan Note has an interest rate of 8% per annum. The Loan Note was due for conversion or repayment on 19 January 2020 with a conversion price set at 10.5p.
As at 31 December 2019, the Series 5 Loan Note held at amortised cost had a balance of EUR91,073 (31 December 2018 - EUR85,258). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019, the derivative had a value of EUR84 (31 December 2018 - EUR3,711). The fair value has been assessed using a Black Scholes methodology . The derivative is classified as a level 3 derivative on the basis that the valuation includes one or more significant inputs not based on observable market data.
d. Series 6 Loan Note
On 30 July 2018, the Company issued a convertible loan note with a value of GBP300,000 ("Series 6 Loan Note") to a non related party. This new Series 6 Loan Note has an interest rate of 8% per annum. The Loan Note was due for conversion or repayment on 30 July 2020 with a conversion price set at 10.5p.
As at 31 December 2019, the Series 6 Loan Note held at amortised cost had a balance of EUR353,229 (31 December 2018 - EUR331,310). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019, the derivative had a value of EUR338 (31 December 2018 - EUR24,121). The fair value has been assessed using a Black Scholes methodology . The derivative is classified as a level 3 derivative on the basis that the valuation includes one or more significant inputs not based on observable market data.
e. Series 7 Loan Note
On 30 September 2018, the Company issued a convertible loan note with a value of GBP300,000 ("Series 7 Loan Note") to a non related party. This new Series 7 Loan Note has an interest rate of 8% per annum. The Loan Note was due for conversion or repayment on 30 September 2020 with a conversion price set at 10.5p.
As at 31 December 2019, the Series 7 Loan Note held at amortised cost had a balance of EUR357,529 (31 December 2018 - EUR335,044). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019, the derivative had a value of EUR338 (31 December 2018 - EUR27,223). The fair value has been assessed using a Black Scholes methodology .
f. Convertible Loan Notes 2020
As consideration for the acquisition of Gulf Marble Investments Limited Fox Marble has issued an Unsecured Convertible Loan Note ("Gulf Loan Note") in the amount of EUR1,785,000. Under the terms of the Loan Note, the holder may elect to convert at a conversion price of 130% of the 3 month volume weighted average share price. The Loan Note is repayable from 1 October 2020. The Loan Note carries an interest rate of Libor plus 1.5% payable annually in arrears.
As at 31 December 2019, the Gulf Loan Note held at amortised cost had a balance of EUR1,676,062 (31 December 2018 - EUR1,541,502). The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019, the derivative had a value of EUR382 (31 December 2018 - EUR182,669). The fair value has been assessed using a Black Scholes methodology . The derivative is classified as a level 3 derivative on the basis that the valuation includes one or more significant inputs not based on observable market data.
g. Series 8-10 Loan Note
On 4 February 2019, the Company issued a convertible loan note with a value of GBP700,000 ("Series 8-10 Loan Note") to a non related party. This new Series 8-10 Loan Note has an interest rate of 8% per annum. The Loan Note was due for conversion or repayment on 4 February 2021 with a conversion price set at 10.5p.
As at 31 December 2019, the Series 8-10 Loan Notes held at amortised cost had a balance of EUR847,396. The Stockholders' option to convert the loan has been treated as an embedded derivative and measured at fair value. As at 31 December 2019, the derivative had a value of EUR868. The fair value has been assessed using a Black Scholes methodology .
h. Other Borrowings
In September 2019, the Company entered a short-term borrowing arrangement with a value of GBP345,000 ("Other Borrowings"). The interest rate was 1% per calendar month with a repayment date of the 31 March 2020.
As at 31 December 2019 the carrying value of these loans was EUR407,618. On the 27 May 2020 holders of GBP225,000 of these borrowings agreed to exchange them with Series 11 Loan notes as described below.
i. Series 11 Loan Note
On the 27 May 2020 the company reached agreement with the holders of the Series 3, 4, 6, 7, 8 , 9 and 10 loan note holders to reschedule the terms of the loan notes.
The existing loan notes were cancelled and replaced to Series 11 Loan Note. The Series 11 Loan Note has an interest rate of 2% per annum. The Loan note is due for conversion or repayment on the 30 June 2026 with a conversion price of 5p.
The directors consider that the carrying amount of borrowings approximates their fair value at 31 December 2019.
14. Share capital
2019 2018 Share Share Share premium Share
Number Number capital capital 2019 premium
2019 2018 EUR 2018
EUR EUR EUR
---------------- ------------ ------------ ---------- ---------- -------------- -----------
Issued, called up and fully paid
Ordinary shares of GBP0.01 each
At 1 January 217,885,322 181,344,851 2,700,688 2,284,476 29,941,977 26,424,202
Issued in the
year 44,772,560 36,540,471 519,532 416,212 1,851,893 3,517,775
At 31 December 262,657,882 217,885,322 3,220,221 2,700,688 31,793,870 29,941,977
On the 4 February 2019 the Company issued 13,263,121 shares at a price 9.5 per share. On the 19 December 2019 the Company issued 31,509,439 shares at a price of 2.7 per share. As part of these share issues EUR31,969 was capitalised into share premium.
15. Contingent Liabilities
The Company has launched Civil Proceedings against the owners of Green Power Sh.P.K in Kosovo for breach of contract for the sale of Green Power and the pre-existing operating contract for the M3 quarry.
Should the Company be unsuccessful in asserting its rights over the M3 quarry it will incur a direct loss of EUR119,424, due to investments made in the power installation at the M3 quarry with a carrying value in the accounts of EUR64,424, and deposit paid for quarry reconditioning of EUR55,000.
On 4 September 2019 Fox Marble launched United National Commission on International Trade Law (UNCITRAL) arbitration proceedings, against the Republic of Kosovo for damages in excess of EUR195 million, as a result of the failure of the State to protect Fox Marble's rights over the Maleshevë quarry.
The Company believes the Kosovan Government to be in clear breach of its responsibilities towards the Company as a foreign investor in Kosovo and that this action is in the best interests of its shareholders and employees. The Company anticipates a fair and satisfactory resolution.
All the Company's other operations, including the quarries and processing factory in Kosovo and the Prilep quarry in Northern Macedonia, are unaffected.
The background to the claim is the dispute arising with the former shareholders of Green Power Sh.P.K and Scope Sh.P.K, which has resulted in Fox Marble being prevented from operating the Maleshevë quarry. Since the dispute arose Fox Marble has been working to resolve the matter with the appropriate Kosovan Government agencies, namely the Kosovo mining regulator, the Independent Commission of Mines and Mineral ("ICMM") and the Agjencia e Regjistrimit të Bizneseve ("ARBK"), the Kosovo business registration agency. However, in what is a clear breach of Kosovo Law 04/L-220 "On Foreign Investment" (2014), Fox Marble has been prevented from asserting its rights in these matters.
Despite the cumulative weight of evidence, Fox Marble was denied the right to appeal any decision relating to the Maleshevë quarry in direct contravention of the provisions of the Kosovo foreign investment law, Law 04 /L-220.
As a direct consequence of the ARBK and ICMM decisions, the Company has brought arbitration proceedings against the Republic of Kosovo pursuant to Article 16 of the Kosovo foreign investment law (as above). The basis of the claim for damages is the investment made to date in the Maleshevë quarry, loss of future revenues associated with the site and future investment plans in Kosovo. Significant future investment plans are the subject of the MOU signed in October 2016 by the Government of Kosovo and Stone Alliance LLC which is majority owned by Fox Marble.
The Company is represented by its legal advisers, Stephenson Harwood LLP, as well as its Kosovan lawyers.
Mermeren Kombinat AD launched proceedings against the Company claiming that the Company's use of the name of Sivec for the marble produced at its quarries in Prilep, North Macedonia was in breach of trademark they held.
On 14 June 2017, the Intellectual Property and Enterprise Court held that the use of the name SIVEC by Fox Marble Holdings plc was an infringement of Mermeren Kombinat AD's EU trade mark. Damages awarded are still being assessed by the Court but are not expected to be material.
16. Events after the reporting period
On 27 May 2020, the Company announced its intention to raise GBP0.8 million (before expenses) by the placing of 45,714,292 new Ordinary Shares at a price of 1.75 pence per share to existing and new investors. In connection with the placing 22,857,146 warrants were issued to the placees at a price 3.5 pence which may be exercised for 18 months following the date of Admission. The Warrants will not be admitted to trading on AIM or any other stock market and are not transferable.
The Company has reached agreement with the holders of GBP2.1 million of its CULNs. Under this agreement the Company will replace the eight existing series of CULNs with a new single class of CULN which will have a maturity date of 1 December 2026 and will be convertible at any date from 1 June 2020 at a conversion price of 5p per share. The interest rate of the new CULN is 2% per annum payable half yearly on 1 June and 1 December.
17. Information
Copies of the Annual Report and Financial Statements will be posted to shareholders today. Further copies will be available from Fox Marble Holding plc's registered office at 160 Camden High Street, NW1 0NE or on the Company's website at www.foxmarble.net
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identi ed by their use of terms and phrases such as "believe", "could", "should" "envisage", "estimate", "intend", "may", "plan", "potentially", "expect", "will" or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements re ect the Directors' current beliefs and assumptions and are based on information currently available to the Directors
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September 30, 2020 02:00 ET (06:00 GMT)
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