By Tom Winnifrith & Steve Moore | Wednesday 5 July 2017
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
It was a case of the good, the bad and the ugly but on balance there were a lot more goods than bads. Let's start with the ugly from the Fox Marble (FOX) AGM..
UK distributor Pisani seems to have gone bust. There is 68,000 Euros of unpaid bills which Fox can whistle for and the demise of Pisani will reduce the forward order book. Most Pisani work will continue with Fox delivering straight to clients. That is the ugly done with.
The good is that other orders are coming in. We were told that following the Mahadev Marmo sale and purchase deed signed in February 2017 for an estimated $1.8 million per annum of block marble, Fox Marble has already completed shipments to Mahadev and it has received a purchase order for our third shipment of 1,000 tonnes. There has been an agreement signed with Simsekler Mermer A.G. one of Turkey's premier natural stone groups to supply a minimum of €0.4 million marble and a letter of intent received from RK Marble Pvt Ltd one of the largest marble companies in the world for 1,000 tonnes of block marble.
Morever Fox has begun cutting blocks at its new factory for the purpose of completing existing orders. The resin and polishing lines are being calibrated and are expected to be able to produce polished slabs in July 2017. That boosts margins. That is all good but taking into account Pisani the order book estimate has been pared to 3.6 million Euro.
Is cash okay? Fox admits it is still in a transitional year. It should be profitable and generating cash by Q1 2018 but until then it is not. It has thus issued a new convertible loan note with a value of £440,000 with an interest rate of 8%, in line with the Series 1 Loan Note issued to Amati Global Investors Limited. The Loan Note is due for conversion or repayment on 31st August 2019 with a conversion price set at 10p. Fox has almost 1 million Euro in the bank prior to this loan note issue and it has in place a draw down facility of up to £1 million to be called for at its discretion. This credit facility attracts an interest of 9% of sums drawn down.
In other words there is no cash crisis.
The statement from CEO Chris Gilbert reads:
"Following from the completion of our new processing factory in Kosovo, which is moving into production now and will allow the Company to process (cut and polish) its own marble blocks for direct sale, Fox Marble has entered into a number of sales agreements which sees the order book stand at a healthy €3.6 million.
"As we look ahead to H2 2017 we remain confident that a number of potential new offtake, distribution and sales agreements currently under discussion with customers across the UK, Europe, US and Asia, which the Company believes will positively impact Fox Marble's revenues in 2017. We look forward to keeping the market updated on our developments as the year progresses."
That statement is pretty bullish. Life has its challenges and this share tip has not prospered yet but - on balance - things are coming right. We stand by our view that breakeven will be passed in Q1 2018 and that there will be a rapid uplift in sales, margins and profits thereafter and so we sick with a strong buy stance with the shares at 9p.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian later this week click HERE
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