Fox Marble Holdings PLC

Fox Marble Holdings PLC (FOX) is London-headquartered quarrying, stone processing and dimension stone marketing company, which is focused on quarrying in Kosovo and North Macedonia and processing in Kosovo. It is listed on the AIM market of the London Stock Exchange. Fox Marble quarry operations are built around extensive marble reserves, and it has five quarries under operating agreements and five quarries under licence (four of which are in operation). The quarries are built around extensive marble reserves, and the group holds a combined volume of over 300 million cubic metres of premium quality marble and decorative stone, which together produce nine varieties of stone found in Collections.

Recent Development
On 04 September 2019, the company announced that due to the failure of the Republic of Kosovo to protect rights of the company over the Malesheva quarry, the group had launched a €195 million international arbitration claim against the Republic of Kosovo with the United Nations Commission on International Trade Law.

Financial Highlights (FY 2018, in €m) 
              
(Source: Company Filings)

As over 7,000 sqm of processed material was sold (2017 – 5,000 sqm) and 5,059 tonnes of block material was sold in 2018 (2017 – 4,641 tonnes), revenue for the year was €1.4 million (2017 – €1.2 million) with further advances of €0.3 million for future sales. At the Prilep Alpha and Maleshevë quarries, total production was 13,094 tonnes of marble (2017 – 8,811 tonnes), as the group continued to focus on the development of quarries. As the cost of sales increased to €887k from €795k in 2017, gross profit increased to €522k from €407k, highlighting an increase in revenue. Reflecting the costs incurred to bring the quarries to a process required for the production of larger and more consistent block sizes, the company reported an operating loss of €2.45 million for the year ended 31 December 2018 (2017 – loss of €2.93 million). By attending industry fairs and key events to increase its worldwide presence, the company also invested in targeted marketing activity. The group incurred a loss after tax of €2.29 million (2017 – loss of €3.43 million), which corresponded to basic loss per share of €0.01.

Share Price Commentary

Daily Chart as at 18-September-19, before the market closed (Source: Thomson Reuters)

On 18 September 2019, at the time of writing the report (at 11:05 am GMT, before the market closed), FOX stock was trading at GBX 4.10 and remained same against the previous day closing price. Stock's 52 weeks High and Low is GBX 9.80/GBX 3.78. The company’s stock beta was 1.18, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £9.42 million.

Conclusion
The losses for the year declined and the company was still not able to turn profitable, indicating that there are still many efficiencies to be achieved, and there can be no assurance that the company will be profitable in the future. Many quarries of the group are at an early stage of development, which carry an inherent risk that marble may be of lower quality than expected. The company is at an early stage in the development of its operations, sales and customer base, and expects to continue to incur losses unless at least some quarries are at a level of development which commercially profitable production.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 4.10 (as on 17 September 2019), while we look for any upcoming catalysts in the near term.

Toople PLC

Toople PLC (TOOP) is a Letchworth Garden City, United Kingdom-headquartered provider of a range of telecommunication services primarily targeted at the small and medium-sized enterprises market of the country, focused on creating business broadband solutions. Services are delivered and managed through Merlin, the proprietary software platform of the group, and includes Traditional Services, cloud PBX and SIP Trunking, business mobile phones, EFM and Ethernet data services, fibre and business broadband.

Trading Update
The company reported strong growth in July and August, and it expects to report an increase in revenues in addition to the £500,000 incremental revenues from the contracts signed in May 2019, as 1,300 and 1,000 new customer orders respectively were added during the two months, which was ahead of the expectations of the group. The group remained debt-free, and it announced that the sales capability was considerably enhanced by the new sales facility in Durban, South Africa, which went live in July.

Financial Highlights (H1 2019, in £m)
Group revenue grew year on year by 57% to £1.08 million for the six months ended 31 March 2019, with all business segments reporting growth. Due to the decision of the group to invest in digital marketing and in-house sales team, revenue excluding the wholesale business rose by 169%. Over the prior year, mobile revenue rose by 124%, cloud telephony revenue increased by 82%, and broadband revenue was up by 159%. Gross profit increased by 150% (up 72% on H2 2018) to £207.5k, reflecting an increase in the number of Revenue Generating Units (RGUs). Due to the strategic investments made to drive future profitability, gross margins rose by 7 percentage points over the prior year. Due to continued investment in marketing related activities to grow the business, EBITDA has declined when compared to last year, while operating loss rose to £0.8 million compared with £0.7 million in H1 2018, reflecting increased administrative expenses. The company expects lower cost of acquisition per customer as a result of a significant increase in lead conversion and sales, as the group increased its marketing costs by 80% (105% higher than H2 2018). Loss before tax rose to £843k from a loss of £714k in H1 2018, which corresponded to a loss per share of £0.09, down from a loss per share of £0.35. Cash at period end was £1.15 million, and net cash outflow from operating activities was £949k.

Share Price Commentary

Daily Chart as at 18-September-19, before the market closed (Source: Thomson Reuters)

On 18 September 2019, at the time of writing the report (at 9:04 am GMT, before the market closed), TOOP stock was trading at GBX 0.2686, down by 0.51 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 0.60/GBX 0.23. The company’s stock beta was -1.02, reflecting inverse relation with the benchmark index. The outstanding market capitalisation was around £3.01 million.

Conclusion
While the demand for broadband and broadband solutions is expected to grow due to high-speed fibre networks, the company operates in a competitive market and may find it difficult to sell multiple products to customers. It is reliant on the technical robustness of its software platform, but due to dynamic nature of the industry, the technology of the group can become obsolete, which can considerably impact the market share and financials. Though the company is undertaking marketing expenses to drive growth, it is under the risk that the expenditure might not materialise enough to deliver profits. Moreover, the UK telecom market is subject to a regulation by Ofcom and performance could be adversely affected by weak economic conditions.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current price of GBX 0.2686 (as on 18 September 2019, before the market closed), while we look for any upcoming catalysts in the near term.

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