Listing on the London Stock Exchange was a way for Fox Marble to generate inward investment to the Balkans and bring out the region’s marbles. CEO Chris Gilbert talks about the move and his role in it.
Shares in Fox Marble rallied 25% in two days to reach 12.75p on 7 March following the company’s announcement of an advance of €390,000 on a €2million order for its stone.
The stone industry in the UK has not associated much with the Stock Market, and the few companies that have chosen it as a route to finance expansion have tended to end up with burnt fingers. Investors from outside the industry find it hard to understand dimension stone.
But Chris Gilbert, the Chief Executive Officer of Fox Marble, is optimistic.
“I agree markets find it difficult to understand stone,” he says. Nevertheless, he believes investors like the Fox Marble story. “I think they’re very confident in our ability to deliver the kinds of returns we want to see. It’s taken longer than we originally thought it would to get there, but we are now generating revenues and feel pretty good about ourselves.”
He continues: “The one thing I would say is, if you go into a big development like Bloomberg – which is £350million, I think – the stone would be a very small fraction of that. But it’s a must-have fraction. I like being in the must-have part of things that is only a fraction of the overall cost.
“Stone is a high margin business. You have to be competitive but a pound more or less doesn’t matter. What’s more important is that the suppliers are people who can deliver on time and supply consistent material. We have millions of tonnes of all of our stones. I like that position. And we start with a natural advantage because we are an English PLC. We win because people trust that.”
Fox Marble was listed on the London Stock Exchange when it started opening quarries on greenfield sites in the Balkans.
The stones were identified as a resource by Italians who produced a report on the potential there. US aid was behind the investigation as part of getting the region back on its feet after the war.
Chris Gilbert met Dr Etrur Albani, another Director of Fox, through a mutual acquaintance. Chris’s background is in film and media. Dr Albani ran a telecoms company in Kosovo, the equivalent of BT. It was one of the country’s largest companies. Dr Albani asked Chris to come to Kosovo. Chris was reluctant to do so because of his perceptions of the region. Also, he admits, he knew nothing about marble. He says he had been “a big investor in marble” in the bathrooms of his own homes, “but no, I didn’t know a thing about the industry that produces it”.
Dr Albani convinced Chris he would be safe and said Kosovo needed money and jobs. It wanted inward investment from a company with the respectability of being listed in London or New York.
Chris went. “We looked at the resources and discovered vast quantities of very high quality marble – some very scarce. When we researched the industry I found the economics very alluring.”
What he liked, he tells Natural Stone Specialist, was that while the fortunes of individual businesses fluctuated, the market for marble was growing consistently internationally. It was also changing.
“We are seeing a moment in this industry when people are destocking. It’s an industry that’s much more project led. I need to supply these projects. Some of the middle men are finding life very difficult.
“If you can connect with your customer base – and that’s our job – you can do well.
“Quarry owners and developers want to be more closely connected. We are seeing a lot of customers visiting our quarries. They are not interested in the 10 middle men that used to supply the stone.
“When I say ‘middle men’, I am talking about the normal scrap when a project becomes known – people offering to knock a quid off… all these people jockeying for position between the client and the source. We don’t like what we see as a lack of professionalism in that.”
Chris admits that coming from outside the industry, his learning curve has been steep. One of his biggest surprises related to the way decisions are made about the choice of stones. “I’m surprised at the rough and tumble of it all… for a material that is placed in a very professional built environment.”
But he distinguishes between that and working with professional supply companies such as Pisani. He says Fox is not going to open a wholesale business, so was happy to work with Pisani on the supply of stone for the prestigious Chelsea Creek development.
Pisani came to Fox for its very much on-trend white Sivec and Grigio Argento for the dockside development in London by St George, a Berkley Homes company. The starting price of apartments there is £6million. The stone was supplied through Pisani to London stone specialist Classique.
Fox is working with other suppliers as well as Pisani, including a new company called Eboracum set up by Scott Oldfield, with which Fox now has a long-term distribution agreement. It was through Eboracum that the €2million order has come.
The headline stone from Fox is its Sivec, from a quarry in Macedonia. “It’s special,” says Chris, who believes the marbles from Fox are on par with anything Italy has to offer.
“Italians are the centre of the universe for stone. Turkey is the biggest producer, but the quality is questionable. Our stone is Italian quality with lower cost labour – and we are on the doorstep of Europe.”
While the Kosovans wanted to be listed on the London Stock Exchange, the UK was never intended to be the main market for the stone. Fox always expected to look to North America, the Middle East and Europe, even China (although only for use in China – not for re-export as worked stone). Fox understood from the beginning that stone is an international business.
In fact, the UK is expected to represent a fairly small part of the company’s business, with the USA most dynamic. The company hopes India will also prove fruitful in 2016 and, of course, the Kosovans have a market on their own doorstep. “We have quite a dynamic domestic business in the Balkans,” says Chris.
Fox still has plans to develop more quarries as demand requires and in November announced it has started extracting stone from another new quarry “that we are really excited about”. That is where the pearly, or milky, white Illirico Bianco and a light, silver grey Illirico Selene are coming from for the €2million order. Chris says the stone is coming out of the quarry in consistent, 20tonne blocks. “The response has been very enthusiastic, particularly in North America and China.”
As well as the quarries, Fox is building a factory in Kosovo, with all Italian equipment in it. It should start full scale production this year. The blocks had previously been sent to Italy for processing and some will continue to be shipped there because that is where a lot of buyers go to source their stones. The Chinese also buy block, but Chris says: “We are watching to make sure the Chinese aren’t selling our stone to other parts of the world.”
Fox Marble might have got off to a slower start than initial enthusiasm had predicted, with sales internationally last year expected to be €230,000, but this year is already looking better with confirmed orders of €3.5million. Chris is still expecting Fox to be a highly profitable business.
So far, no dividend has been paid to shareholders but the forecast is to be cash flow positive this year as well as seeing a further expansion of the company’s portfolio of stones. “It’s not particularly capital intensive, so we expect to finance growth out of cash flow,” he says.
Fox Marble obtained the Sivec quarry because Fox is well connected in Kosovo and the same connections are expected to result in other opportunities coming along the way Illirico did. Although Chris has already learnt that not all quarries are equal. “Stone is always subject… you know… the earth gives up its treasures in a strange way.”
Fox has a quarry that produces a stone similar to Crema Marfil. But the block has not proved to be consistent. Chris: “The stone industry has a tendency to say yes, it can do it, then doesn’t. As a PLC we can’t do that.” Fox has not given up on the stone but, says its CEO, “until I see the bench, and blocks coming off it, and what it looks like from the gang saw, we won’t even offer it.”
In the UK, Fox employs 12 people at its head office in London on sales and administration functions. There are another 12 technical people working for it in Italy and 150 in Kosovo and the quarries. It expects to recruit another 200 to work in the factory this year.