REG - Fox Marble Holdings - Final Results
30/09/2020 07:00
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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 €1.4 million (2018 -
€1.4 million) with 6,830 tonnes of block material sold in 2019 (2018 - 5,059
tonnes).
• Operating loss for the year of €2.27 million
(2018 - €2.4 million). Loss for the year of €2.5 million (2018 - €2.3
million).
Highlights year to date 2020
• Sales agreements worth in excess of €1.8
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 £2.1 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 £0.8 million before expenses to provide working capital.
• Cash balance as at 15 September 2020 of €0.47
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
(http://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
(http://www.foxmarble.net) .
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 (Corporate Finance) Tel: +44 (0) 20 3394 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 (about:blank) ), 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 €1.4 million (2018 €1.4 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 €0.4 million
in 2018 to €0.9 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 €1.4 million (2018 - €1.4 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 €1.2 million (2018 - €1.0 million). Sales of
block marble from the Maleshevë quarry fell to €0.4 million (2018 - €0.6
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 €0.9 million (2018
- €0.4 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 €400,000, and once all
20,000 square metres have been supplied is the project is expected to be worth
in excess of €750,000. 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
€700,000.
· 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 €700k 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 €1.8 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 €1.785
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 £1,000,000 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 €195 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 €1,422,872 €1,409,730
Average recorded selling price (blocks per tonne) €217 €210
Average recorded selling processed (per sqm) €28 €56
EBITDA (€2,022,027) (€2,324,762)
Operating loss for the year (€2,273,673) (€2,427,022)
Loss for the year (€2,533,540) (€2,264,975)
Expenditure on property, plant and equipment €649,015 €713,315
The Group recorded revenues of €1,422,872 in the year ended 31 December 2019
(2018 - €1,409,730). 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 €2,273,673 for the year ended 31
December 2019 (2018 - €2,427,022). 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
€2,533,540 (2018 - €2,264,975).
Reconciliation of EBITDA to Loss for the year Year to 31 December 2019 Year to 31 December 2018
€ €
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 €0.47 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 2019 2018
€ €
(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 (2,533,540) (2,264,975)
company
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 € (restated)
€ €
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
€ €
Cash flows from operating activities
Loss before taxation (2,533,540) (2,264,975)
Adjustment for:
Finance costs 517,638 119,507
Finance income (257,771) (281,554)
Operating loss for the year (2,273,673) (2,427,022)
Adjustment for: 43,796
Amortisation 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 payment reserve Other Reserve Accumulated losses Total equity
Note
€ € € € € €
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 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. 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 €6,125 at 31 December 2019 (2018 -
€262,459). The main assumptions used in the valuation of the derivative
conversion option as at 31 December 2019 were: underlying share price of
£0.0245 (31 December 2018: £0.0738), 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 €1.2 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.
For the year ended 31 December Adjustment For the year ended 31 December
2018 2018
€ €
€
As previously reported As restated
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 December As at 31 December As at 31 December As at 1 January As at 1 January As at 1 January
2018 2018 2018 2018 2018 2018
€ € € € €
€
As previously reported Adjustment As restated As previously reported Adjustment As restated
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
For the year ended 31 December Adjustment For the year ended 31 December
2018 2018
€ €
€
As previously reported As restated
Cash flows from operating activities
Loss before taxation (2,296,379) 31,403 (2,264,975)
Adjustment for:
Finance costs 119,507 - 119,507
Finance income (281,554) - (281,554)
Operating loss for the year (2,458,426) 31,403 (2,427,023)
Adjustment for: 31,403
Amortisation 43,299 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 €8,127,917 (2018 -
€7,725,491), €4,262,651 (2018 - €4,481,511) relates to Property, Plant
and Machinery acquired for the exploitation of assets in Kosovo and €588,902
(2018 - €362,612) 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 €2,674,866 (2018 - €2,716,304) and
exploration and evaluation expenditure incurred in Kosovo of €77,572 (2018 -
€79,930).
Kosovo Macedonia Other Total
31 December 2019 31 December 2019 31 December 2019 31 December 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 2018 31 December 2018 31 December 2018 31 December 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 €2,881,919 (2018 - €2,949,396) were costs incurred in the
United Kingdom of €1,385,145(2018 - €1,314,226). Net interest cost of
the Group of €259,867 (2018 - income of €162,047) 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
€ €
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
€ €
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
€ €
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
€ €
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
€ €
(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
€ €
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
€ €
Finance costs
Interest expense on borrowings 343,952 119,507
Net foreign exchange loss on loan note instrument 171,235 -
Interest payable on lease liabilities 2,451 -
517,638 119,507
9. Net finance income
2019 2018
€ €
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
€ €
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 and evaluation expenditure Total
€ €
Mining rights and licences
Goodwill €
€
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 €1,256,376 (£1,000,000) 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 €1,469,464 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 €84,504 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 Plant & Machinery Factory Plant & Machinery Rights of use asset Land and buildings Office Equipment and Total
Leasehold improvements
€ €
€ €
€
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 €713,315 in the year ended 31 December 2018
are €213,469 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 €461,170 of depreciation was
included in the cost of inventory produced (2018 €532,284).
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 €161,000 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
€ €
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
£440,000 ("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 €521,885 (31 December 2018 - €489,235). 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
€520 (31 December 2018 - €16,818). 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 £160,000 ("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 €185,514 (31 December 2018 - €174,202). 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
€180 (31 December 2018 - €7,918). 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
£75,000 ("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 €91,073 (31 December 2018 - €85,258). 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 €84 (31 December 2018 - €3,711). 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
£300,000 ("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 €353,229 (31 December 2018 - €331,310). 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 €338 (31 December 2018 - €24,121). 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 £300,000 ("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 €357,529 (31 December 2018 - €335,044). 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 €338 (31 December 2018 - €27,223). 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 €1,785,000. 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 €1,676,062 (31 December 2018 - €1,541,502). 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 €382 (31 December 2018 - €182,669). 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
£700,000 ("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 €847,396. 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 €868. 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 £345,000 ("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 €407,618. On
the 27 May 2020 holders of £225,000 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 capital Share capital Share premium Share premium
Number Number 2019 2018 2019 2018
€ € € €
Issued, called up and fully paid Ordinary shares of £0.01 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 €31,969 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 €119,424, due to investments made in the
power installation at the M3 quarry with a carrying value in the accounts of
€64,424, and deposit paid for quarry reconditioning of €55,000.
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 €195 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 £0.8 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 £2.1 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 (http://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 identified 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 reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors
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