TIDMMLVN
RNS Number : 5603V
Malvern International PLC
06 April 2023
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
06 April 2023
Malvern International plc
("Malvern", the "Company" or the "Group" )
Final results for the year ended 31 December 2022
Malvern International plc (AIM: MLVN), the global learning and
skills development partner, announces its final results for the
year ended 31 December 2022.
Results
-- Revenues increased 169% to GBP6.51m (2021: GBP2.42m)
-- The operating loss for the year reduced to GBP0.78m (2021:
loss GBP1.32m) reflecting continued strong cost control measures
together with ongoing investment in our sales and marketing and
central operations
-- The loss for the year was GBP1.08m (2021 loss: GBP1.59m)
-- Loss per share of 4.95 pence (2021 loss: 8.49 pence)
-- Cash balances increased by GBP0.81m during the year to
GBP1.18m (2021: GBP0.37m) reflecting cash inflow of GBP1.32m (2021:
cash outflow of GBP1.19m). This increase was due to the late
invoicing to us of accommodation costs
-- Net debt was GBP4.38m (2021: GBP5.85m) including GBP3.08m
(2021: GBP3.35m) of lease liabilities
Operational highlights
-- Over three-fold an increase in University Pathways students
for 2022/23 academic year with 500 University Pathway students now
enrolled
-- Revenues in English Language Training ("ELT") centres bounced
back during summer months ahead of pre-pandemic levels
-- Continued to strengthen and deepen relationship with the
University of East London ("UEL") with five-year partnership aiming
to increase rapidly the volume of Chinese student enrolments
-- Strengthened senior management team with promotions and
appointments of a Director of University Partnerships, Director of
Student Recruitment, Commercial Director of ELT, Head of Operations
and a Group HR Manager
-- Appointed an experienced East Asia Director to manage and grow our agent network across China
-- Junior programmes relaunched in summer of 2022 with 976
students enrolled after two years of no activity
Richard Mace, Chief Executive Officer, said: "Student numbers
continued to rebuild throughout 2022 as limitations on
international travel eased. English Language Training bounced back
in 2022 with three centres posting revenues ahead of the
pre-pandemic period during the busy summer months. Our University
Pathways saw a three-fold increase in student numbers for the
2022/23 academic year start, contributing significantly to our
overall University Pathways population of 500 students and giving a
strong indication of the potential of this division. Juniors
delivered programmes to 976 students, generating revenues of
c.GBP1.35m after two years of no activity.
Our forward bookings and revenue visibility for the start of
2023, combine with the removal of all COVID-19 restrictions, gives
us confidence in Malvern's near and longer term prospects. We
expect to move towards profitable growth in all divisions in
2023."
For further information please
contact:
Malvern International Plc www.malverninternational.com
Mark Elliott - Chairman Via our website
Richard Mace - Chief Executive
Officer
WH Ireland (NOMAD & Broker) www.whirelandcm.com
Mike Coe / Sarah Mather 0207 220 1666
Notes to Editors:
Malvern International is a learning and language skills
development partner, offering international students essential
academic and English language skills, cultural experiences and the
support they need to thrive in their academic studies, daily life
and career development.
University Pathways - on and off-campus university pathway
programmes helping students progress to a range of universities, as
well as in-sessional and pre-sessional courses.
Malvern House Schools - British Council accredited English
Language Training at English UK registered schools in London,
Brighton and Manchester.
Malvern Online Academy - British Council accredited online
school, offering supported tuition to students from around the
world in English language, higher education, and professional
education.
Juniors and summer camps - fully-immersive summer residential
English language camps and bespoke group programmes for 13 to 18
year olds.
For further investor information go to
www.malverninternational.com .
CHAIRMAN'S STATEMENT
Introduction
Student numbers continued to rebuild throughout 2022 as the
limitations on international travel eased. The second half of the
year saw more significant growth and a return to pre-pandemic
levels of student numbers in our adult ELT schools. The Juniors
division which runs two-week courses mostly over the summer
holidays saw a c.50% return of student numbers compared to 2019,
which was in line with the wider market performance since the
majority of these courses are booked many months in advance and at
a time where uncertainty around travel remained. We welcomed our
largest cohort of 500 students for University Pathways in the
2022/23 academic year.
Financial performance
Revenues increased 169% to GBP6.51m (2021: GBP2.42m). The
operating loss for the year reduced to GBP0.78m (2021: loss
GBP1.32m) reflecting continued strong cost control measures
together with ongoing investment in our sales and marketing and
central operations.
The loss for the year was GBP1.08m (2021 loss: GBP1.59m),
resulting in a loss per share of 4.95 pence (2021 loss: 8.49
pence).
Cash balances increased by GBP0.81m during the year to GBP1.18m
(2021: GBP0.37m) reflecting cash inflow of GBP1.32m (2021: cash
outflow of GBP1.19m). This increase was due to the late invoicing
to us of accommodation costs. Net debt was GBP4.38m (2021:
GBP5.85m) including GBP3.08m (2021: GBP3.35m) of lease liabilities
(see note 24 of the financial statements).
Financing and debt restructure
In March 2022, successful negotiations were finalised with
BOOST&Co., (the Group's fund manager, acting on behalf of the
Company's debtholder IL2 (2018) Sarl) to restructure the Group's
GBP2.6m debt facility. Under the original agreement monthly
payments were due to commence in April 2022 over a 24-month period.
The new agreement provides for a 12-month payment and interest
holiday with monthly payments commencing from March 2023, over a
five-year period. To assist with the lumpy nature of our cash flow
we have also agreed with them to vary the timing of these payments
during 2023. At the same time BOOST&Co., provided a letter of
comfort to provide ongoing financial support to the Group for any
short-term working capital requirement should that become
necessary.
Share option scheme
The Company continued to offer an EMI share option scheme to
retain, incentivise and align the interests of employees with
certain performance targets and strategic goals. The Company
awarded 575,000 ordinary shares of 1 pence each in the capital of
the Company, pursuant to the Company's EMI share option scheme (the
"EMI Options") to Richard Mace, Daniel Fisher and certain employees
of the Company in December 2022. The EMI Options granted, when
added to the previously granted EMI Options of 2,002,500 represent
8.2% of the existing issued share capital of the Company.
Staff and staff appointments
Malvern continued to build and strengthen its sales and
marketing team, appointing an experienced East Asia Director to
manage the region's agent network primarily across China following
our February 2023 expansion of operations there. As the business
grows so does the need to continue to build our excellent senior
management team and this we will continue to do to drive the
business in 2023.
I would like to take this opportunity to thank all our
colleagues for their continued dedication in delivering quality
education to our students and in the significant contribution they
have made in the post COVID-19 recovery of our business.
Outlook
The significant revenue growth seen in H2 2022, in combination
with the visibility of University Pathways revenue in H1 2023, and
no COVID-19 restrictions affecting students' ability to travel,
gives us confidence in Malvern's near and longer term prospects. We
expect to achieve growth in all divisions in 2023.
Student numbers in our language schools have returned to
pre-pandemic levels and the pipeline for 2023 is encouraging. In
our University Pathways division, student numbers are up 247% on
the prior academic year (21/22 v 22/23), which reflects the
significant investment in this division. Finally, pre-bookings for
2023 summer camps are very encouraging and revenue growth is
expected as an outcome.
We have a great management team and the services we offer are in
demand. We expect to grow and diversify our revenue by bringing on
board new educational establishments and attracting students from
more countries than ever before.
COVID-19 was a very difficult time for our industry but with the
support of all our stakeholders we survived. We now see great
opportunities for us to prosper in 2023 and beyond.
Mark Elliott
Chairman
OPERATING REVIEW
English Language Training ("ELT")
The ELT industry has bounced back after international borders
reopened following two years of travel restrictions. This is
evidenced through revenues across the Group's three ELT centres
during the Group's busiest summer period, coming in slightly ahead
of the pre-pandemic level in 2019.
Adult ELT revenue increased in 2022, mainly coming from the MENA
and Latin America markets. This was helped by the Government's
announcement in early May 2022 that Saudi Arabia nationals can
apply to travel to the UK for tourism, business, study or medical
treatment for up to six months with an electronic visa waiver from
1 June 2022.
The English language schools provided a mixture of in-class,
online, and blended learning in 2022, although there is now a clear
return to predominately in-class learning.
The focus for the Group continues to be increasing the volume of
accommodation options for students, which is a challenge across the
industry, and continuing to develop our student acquisition model.
Recruiting students via our growing agency network and directly via
our digital presence and processes is a key strategy for this
division. With our investment in systems and appointment of a
Commercial Director we are well placed to grow in 2023 and
beyond.
University Partnerships
Underpinned by strong partnership structures with UEL, including
regular joint senior management group meetings and excellent
relationships with colleagues from across UEL, our International
Study Centre welcomed a three-fold increase of students for the
2022/23 academic year, contributing significantly to our overall
University Pathways population of 500 students. An increase of over
240% on the 2021-22 academic year compared which had 144 students
across our International Study Centres.
This increase in student numbers is being driven by our expanded
sales team and improved processes to manage and convert potential
students from across the world. In parallel, staffing and
operational arrangements have developed rapidly in our centre,
driving our focus on learning and teaching excellence and
maximising student attainment and progression to the University.
These are built on a continued focus on optimising quality
assurance within the centre, which has been recognised by our
University partners during a range of formal and informal quality
assurance processes.
We have formally launched a five-year strategic collaborative
partnership with UEL, significantly extending our partnership with
the University and aiming to increase rapidly the volume of Chinese
students enrolled at UEL's three London campuses. Our centre is
expected to expand further over the next five years.
Following the appointment of an experienced East Asia Director,
we will manage an extensive education agent network across China
via our in-country team and undertake extensive marketing, student
recruitment and conversion activities on behalf of UEL in mainland
China. Together with UEL colleagues, we will support partnership
development with academic institutions in China. These partnerships
will support the identification and development of articulation
agreements (an articulation agreement is a formal partnership with
another institution, which guarantees a UEL place on a particular
programme, or programmes, on successful completion at another
institution) and transnational education opportunities.
NCUK
Our NCUK centre at Malvern House London continues to grow,
playing its part within our University Pathways division. We have
attracted an increased number of students to both the September
2022 and January 2023 cohorts, aiming to progress to high quality
universities via their International Foundation Year programme.
The building of our brand presence in key recruitment regions
such as China, Nigeria and Sub-Saharan Africa, is expected to
greatly increase the numbers of students on the NCUK programme
during 2023/24. Delivery of further NCUK programmes, such as
Science and Engineering routes, is currently being explored with
our partners at NCUK, with both organisations looking to our NCUK
centre to support their strong growth trajectories.
Malvern Juniors
As expected, the Italian funded INPS programmes went ahead in
July and August 2022. The Company delivered programmes to 976
students, generating revenues of c.GBP1.35m after two years of no
activity. The bulk of the students originate from Italy.
This performance was in line with the wider Junior market with
2022 programmes running at around 50% to 60% of pre-pandemic
levels.
The team had a very successful British Council inspection in
July 2022. The final result is excellent and puts Malvern in the
top quartile of inspections in the industry. Our next full
inspection of Junior programmes is due in 2026.
In China, the biggest international student market to the UK for
Junior summer camps, we are expecting students to begin travelling
again in 2023. The Group's strategic investment in this market is
expected to contribute significant growth from 2024.
The Group is well placed for growth in this division. There
remains a clear backlog of demand for 2023 based on pre-bookings,
consequently we expect significant growth in student numbers and
revenues in 2023.
Central services
We continue to make improvements to our shared central services
which includes both back-office and sales and marketing. Our
priority is to place quality at the heart of our business,
standardising and optimising our education provision. This is
backed by a decision to centralise quality assurance in order to
support each division in managing student feedback processes,
accreditations, reviews and compliance.
The creation of our China recruitment function and appointment
of an experienced East Asia Director to manage the agent network
across China continues to build on our sales and marketing
capabilities. We continue to work with our agent network as well as
supporting our direct student recruitment channels. For the latter,
we are improving lead generation and conversion processes as well
as expanding our marketing collateral.
With the international student market re-stabilising we are
aware of the need to develop and engage our staff to promote a
positive and high-performance team. Our HR team has been working to
improve remuneration packages to attract the best talent, enhance
training and CPD opportunities as well as identifying future
leaders within the business.
We are looking at ways to extend our current social
responsibility activities beyond offering scholarship places,
establishing charity days at each of our centres and developing a
company-wide giving back culture.
Richard Mace
Chief Executive Officer
FINANCIAL REVIEW
Revenue
Revenues increased 169% to GBP6.51m (2021: GBP2.42m). Revenues
have increased across all areas of the business. Student numbers
recovered following a long period of travel restrictions. Juniors
ran for the first time in 2019, generating cGBP1.35m in revenue,
the bulk of students coming from Italy. Freedom of travel and
continued investment in our pathway partnerships, resulted in a
247% increase in student numbers from the prior academic year
(21/22 vs. 22/23).
Operating costs
The reopening of international borders aside, continued
investment in the Group's sales and marketing functions has also
been critical to the growth of revenue in 2022. Spending on these
functions totalled cGBP0.24m (excluding salaries) in 2022 (2021:
cGBP0.08m). Much of this increased spend is the result of increased
travel. Across all divisions, student number growth is built on
relationships with the Group's agent network. The relaxation of
travel restrictions allowed our people to travel to key recruitment
markets for the first time in two years.
Group salaries and benefits also increased in 2022, GBP2.06m v
GBP1.34m in 2021. This increase can be attributed to an increased
number of student facing staff to deal with the large increase in
student numbers during the year. As previously stated, the Group
continues to invest in the sales function, including additional
headcount, and as an extension of the sales function, the Group has
also invested in the UEL admissions pipeline and student support
structure. These UEL functions have been key to delivering growth
in student numbers in this division. As the staffing structure
continues to take shape, the Group is well positioned to scale
effectively in 2023.
The loss for the year was GBP1.08m (2021 loss: GBP1.59m),
resulting in a loss per share of 4.95 pence (2021 loss: 8.49
pence). The reduced loss position is the result of a strong H2
revenue performance. The total loss in 2022 was significantly
impacted by supressed revenue in H1 2022, caused by the impact of
COVID-19. An anticipated full year of normal operating conditions
in 2023, in combination with the visibility of University Pathway
revenue in H1 2023, gives the board confidence about Malvern's near
and longer term prospects.
Consolidated Statement of Financial Position
The Group continues to make incremental improvements on the
Consolidated Statement of Financial Position. The convertible loan
note, first issued in 2017, was fully redeemed during the year
following a placing (2021: GBP0.27m). The levels of historical
creditor balances were also reduced in 2022. This included making
the final payment of a long payment plan to clear a cGBP200k
Junior's accommodation invoice from 2019.
The cash balance at the end of the financial year was GBP1.18m
(2021: GBP0.37m). This increase was due to the late invoicing
(cGBP0.75m) to us of accommodation costs. The Group has managed
expenditure tightly. In addition, debtor days have reduced which is
important for our working capital and growth requirements. The
Group's GBP2.6m debt was restructured in 2022, providing a 12-month
payment and interest holiday with monthly payments commencing from
March 2023, over a five-year period. To assist with the uneven
nature of our cashflow we have also agreed with BOOST&Co
Limited to vary the timing of these payments during 2023.
Daniel Fisher
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2022 2021
GBP GBP
Revenue
Sale of services 3 6,511,602 2,417,524
------------------------------------- ------ ------------ ------------
Total revenue 6,511,602 2,417,524
------------------------------------- ------ ------------ ------------
Cost of services sold (3,558,448) (1,071,679)
------------------------------------- ------ ------------ ------------
Gross profit 2,953,154 1,345,845
Other income 84,744 223,989
Salaries and employees' benefits (2,063,363) (1,346,486)
Share based payments (3,745) (3,128)
Depreciation of property,
plant and equipment (372,457) (409,271)
Other operating expenses (1,387,080) (1,135,149)
------------------------------------- ------ ------------ ------------
Operating loss (788,747) (1,324,200)
Finance costs 4 (295,086) (270,190)
------------------------------------- ------ ------------ ------------
Loss before tax (1,083,833) (1,594,390)
Income tax charge - -
------------------------------------- ------ ------------ ------------
Loss for the year from continuing
operations (1,083,833) (1,594,390)
Profit from discontinued
operation - 448,741
------------------------------------- ------ ------------ ------------
Loss for the year being total
comprehensive expense attributable
to owners of the parent (1,083,833) (1,145,649)
------------------------------------- ------ ------------ ------------
2022 2021
GBP GBP
----------------------------- ----------- -----------
Total comprehensive expense
for the year (1,083,833) (1,145,649)
------------------------------ ----------- -----------
Continuing operations (1,083,833) (1,594,390)
Discontinued operations - 448,741
Attributable to:
Equity holders of the parent (1,083,833) (1,145,649)
------------------------------ ----------- -----------
2022 2021
restated*
------------------------------------- ----- ------ ----------
Loss per share from continuing operations
attributed to equity holders of the
Company (in pence)
Basic (4.95) (8.49)
Diluted 6 (4.95) (8.49)
------------------------------------- ----- ------ ----------
*Total ordinary shares for 2021 have been restated to provide a
meaningful comparison with 2022. A share consolidation was
completed in 2022, increasing the nominal value of the Group's
ordinary shares.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
Group Company
-------------------- --------------------
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------------ --------- --------- --------- ---------
TOTAL ASSETS
Non-current assets
Property, plant, and
equipment 30,662 50,427 - -
Goodwill 1,419,350 1,419,350 - -
Investment in subsidiaries - - 1,419,350 1,419,350
Right-of-use assets 2,215,076 2,553,726 - -
------------------------------- --------- --------- --------- ---------
Total non-current assets 3,665,088 4,023,503 1,419,350 1,419,350
------------------------------- --------- --------- --------- ---------
Current assets
Trade receivables 405,051 705,271 - -
Other receivables and
prepayments 1,135,990 289,607 41,771 112,788
Amounts due from subsidiaries - - - 501,409
Cash and cash equivalents 1,181,631 377,170 13,101 45,701
------------------------------- --------- --------- --------- ---------
Total current assets 2,722,672 1,372,048 54,872 659,898
------------------------------- --------- --------- --------- ---------
Total assets 6,387,760 5,395,551 1,474,222 2,079,248
------------------------------- --------- --------- --------- ---------
Group Company
-------------------------- ---------------------------
Note 2022 2021 2022 2021
GBP GBP GBP GBP
-------------------------------- ---- ------------ ------------ ------------ -------------
EQUITY AND LIABILITIES
Non-current liabilities
Term loan 7 2,052,808 1,791,952 1,997,540 1,723,537
Warrants 7 189,762 72,801 189,762 72,801
Lease liabilities 7 2,624,792 3,075,517 - -
Deferred tax liabilities 10,279 10,279 - -
-------------------------------- ---- ------------ ------------ ------------ -------------
Total non-current liabilities 4,877,641 4,950,549 2,187,302 1,796,338
-------------------------------- ---- ------------ ------------ ------------ -------------
Current liabilities
Trade payables 416,944 413,297 788 31,896
Contract liabilities 2,199,570 899,137 - -
Other payables and accruals 1,640,517 598,253 96,984 108,294
Amounts due to subsidiary - - 1,262,410 661,326
Convertible loan notes 8 - 275,885 - 275,885
Lease liabilities 7 450,726 278,961 - -
Term loan 7 436,341 808,869 415,044 787,573
Total current liabilities 5,144,098 3,274,402 1,775,226 1,864,974
-------------------------------- ---- ------------ ------------ ------------ -------------
Total liabilities 10,021,739 8,224,951 3,962,528 3,661,312
-------------------------------- ---- ------------ ------------ ------------ -------------
Equity attributable
to equity
holders of the Company
Share capital 9 11,330,956 11,216,991 11,330,956 11,216,991
Share premium 6,797,950 6,603,839 6,797,950 6,603,839
Retained earnings (21,762,885) (20,679,052) (20,617,212) (19,431,716)
Convertible loan reserve - 28,822 - 28,822
-------------------------------- ---- ------------ ------------ ------------ ------------
Total equity (3,633,979) (2,829,400) (2,488,306) (1,582,064)
-------------------------------- ---- ------------ ------------ ------------ ------------
Total equity and liabilities 6,387,760 5,395,551 1,474,222 2,079,248
-------------------------------- ---- ------------ ------------ ------------ ------------
The loss for the year as per the financial statements of the
parent company at 31 December 2022 was GBP1,185,496 (2021: Loss
GBP1,103,278).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Translation Capital Convertible
capital premium earnings reserve reserve loan reserve Total
GBP GBP GBP GBP GBP GBP GBP
--------------- ---------- ---------- --------------- ----------- --------- --------------- -------------------
Balance at 1
January 2021 10,309,811 5,782,394 (19,703,963) 288,149 170,560 28,822 (3,124,227)
Direct costs
relating to
issue of
shares - (89,503) - - - - (89,503)
Total
comprehensive
expense for
the year - - (1,145,649) - - - (1,145,649)
Capital reserve
transferred to
retained
earnings on
disposal of
Singapore - - 170,560 - (170,560) - -
Translation
reserve
transferred to
retained
earnings on
disposal of
Singapore - - - (288,149) - - (288,149)
New Share Issue 891,702 898,598 - - - - 1,790,300
Share based
payments (inc.
EMI options) 15,478 12,350 - - - - 27,828
--------------- ---------- ---------- --------------- ----------- --------- --------------- -------------------
Balance at 31
December 2021 11,216,991 6,603,839 (20,679,052) - - 28,822 (2,829,400)
--------------- ---------- ---------- --------------- ----------- --------- --------------- -------------------
Direct costs
relating to
issue of
shares - (24,500) - - - - (24,500)
--------------- ---------- ---------- --------------- ----------- --------- --------------- -------------------
Total
comprehensive
expense for
the year - - (1,083,833) - - - (1,083,833)
Convertible
loan notes 85,211 14,789 - - - 100,000
Convertible
loan note
reserve
transferred to
share premium - 28,822 - - - (28,822) -
New Share Issue 25,009 175,000 - - - - 200,009
Share based
payments (EMI
options) 3,745 - - - - - 3,745
Balance at 31
December 2022 11,330,956 6,797,950 (21,762,885) - - - (3,633,979)
--------------- ---------- ---------- --------------- ----------- --------- --------------- -------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
2022 2021
GBP
--------------------------------------------- ----------- -----------
Cash flows from operating activities
Loss after income tax from
Continuing activities (1,083,833) (1,594,390)
Discontinued activities - 448,741
Adjustments for:
Depreciation of tangible assets 372,457 409,271
Fair value movements (40,019) 16,755
Share based payments 3,745 3,128
Profit/(loss) on disposal of tangible
assets 503 2,400
Loss on disposal of discontinued operations - (503,040)
Impairment of trade receivables 113,583 311,102
Finance cost 295,086 270,190
Interest paid (41,117) (59,526)
Tax paid - -
--------------------------------------------- ----------- -----------
(379,595) (695,369)
--------------------------------------------- ----------- -----------
Changes in working capital:
(Increase)/decrease in receivables (659,746) (110,781)
Increase/(decrease) in payables 2,171,471 (348,043)
Decrease in amounts due to related
parties - (40,000)
--------------------------------------------- ----------- -----------
Net cash flows generated / (used)
in operating activities 1,132,130 (1,194,193)
--------------------------------------------- ----------- -----------
Cash Flows from Investing Activities
Purchases of property, plant, and
equipment (14,545) (11,280)
--------------------------------------------- ----------- -----------
Net cash used in investing activities (14,545) (11,280)
--------------------------------------------- ----------- -----------
Cash Flows from Financing Activities
Repayment of lease liabilities (473,359) (161,475)
New equity issued 175,509 1,650,797
Term Loan (15,275) (10,288)
Net cash generated by financing activities (313,125) 1,479,034
Net change in cash and cash equivalents 804,461 273,561
Cash and cash equivalents at the beginning
of the year 377,170 103,609
Exchange losses on cash and cash equivalents - -
Cash and cash equivalent at the end
of the year 1,181,631 377,170
--------------------------------------------- ----------- -----------
Notes to the financial statements
1. General information
Malvern International plc (the "Company") is a public limited
company incorporated in England and Wales on 8 July 2004. The
Company was admitted to the AIM on 10 December 2004. Its registered
office is 3rd Floor 1 Ashley Road, Altrincham, Cheshire, United
Kingdom, WA14 2DT. The registration number of the Company is
05174452.
The principal activity of the Group is to provide an educational
offering that is broad and geared principally towards preparing
students to meet the demands of business and management. There have
been no significant changes in the nature of these activities
during the year.
2. Significant accounting policies
Basis of Preparation
These financial statements of the Group and Company are prepared
on a going concern basis, under the historical cost convention
(with the exception of goodwill) and in accordance with
International Financial Reporting Standards (IFRS) and IFRIC
interpretations issued by the International Accounting Standards
Board (IASB) and adopted by the United Kingdom, in accordance with
the Companies Act 2006.
The Parent Company's financial statements have also been
prepared in accordance with IFRS and the Companies Act 2006. The
preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
Going concern
The financial statements have been prepared on a going concern
basis. The directors consider the going concern basis to be
appropriate having paid due regard to the Group and Company's
projected results during the twelve months from the date the
financial statements are approved and the anticipated cash flows,
availability of loan facilities and mitigating actions that can be
taken during that period.
In March 2022, successful negotiations were finalised with
BOOST&CO Limited (the Group's fund manager, acting on behalf of
the Company's debtholder IL2 (2018) Sarl) to restructure the
Group's GBP2.6m debt facility. Under the original agreement monthly
payments were due to commence in April 2022 over a 24-month period.
The new agreement provides for a 12-month payment and interest
holiday with monthly payments commencing from March 2023, over a
five-year period.
BOOST&CO Limited, acting on behalf of IL2 (2018) Sarl, have
again provided a letter of comfort to provide ongoing financial
support to the Group for any short-term working capital requirement
should that become necessary. It is the present policy of
BOOST&CO to ensure that the Group has adequate financial
resources to meet their obligations and to enable it to continue as
a going concern for a period of at least 12 months from the date of
the signing of the financial statements. To assist with the uneven
nature of our cash flow we have also agreed with BOOST&CO
Limited to vary the timing of these payments during 2023.
The significant revenue growth seen in H2 2022, in combination
with the visibility of University Pathway revenue in H1 2023, and
no COVID-19 restrictions affecting students' ability to travel,
gives the Board confidence about Malvern's short- and long-term
prospects. The board expects to achieve growth in all divisions in
2023.
Student numbers in our language schools have returned to
pre-pandemic levels and the pipeline for 2023 is encouraging. In
our Pathway division, student numbers are up 247% on the prior
academic year (21/22 vs. 22/23), which reflects the significant
investment in this division. Finally, our summer camps successfully
returned in 2022, delivering cGBP1.4m in revenue to the Group.
Pre-bookings for 2023 summer camps are very encouraging and revenue
growth is expected as an outcome.
Profit and cash flow projections for the Group indicate that the
Group is moving towards profitable growth in its key operating
entities. A large part of this assumed growth is driven by the more
profitable pathways division of the Group.
Despite significant revenue growth in H2 and FY23 forecast,
current UK and worldwide macroeconomic factors continue to create
uncertainty in the profit and cash flow projections for the Group,
in particular lecturers and staff wage inflation. The provision of
the letter of comfort from the Group's lenders referred to above
provides confidence to the Group with respect to future funding.
However, there still remains a material uncertainty with respect to
the going concern status of the Group..
3. Sale of services
2022 2021
GBP GBP
----------------------------------------------- --------- ---------
Course fees 5,338,335 2,189,651
Accommodation fees 965,254 162,106
Application fees, registration and examination
fees 143,148 50,264
Course materials and student activities 64,865 15,503
----------------------------------------------- --------- ---------
6,511,602 2,417,524
----------------------------------------------- --------- ---------
Segments
The directors consider that the Group has a single business
segment, being the sale of education services. The operations of
the Group are managed centrally with group-wide functions covering
sales and marketing, finance and administration. Geographically,
operations are all UK based.
Other Income
2022 2021
GBP GBP
---------------------- ------ -------
Rental income 44,020 23,595
R&D credits - 48,758
Government subsidies* 40,724 151,636
---------------------- ------ -------
84,744 223,989
---------------------- ------ -------
*Government subsidies includes the amount received from the
furlough job retention scheme in 2021 and council grants in
2022.
4. Finance costs
2022 2021
GBP GBP
----------------------------------- ------- -------
Interest on leases (IFRS 16) 194,399 162,935
Interest on term loan 68,368 80,845
Interest on convertible loan notes 24,555 21,503
Other finance costs 7,764 4, 907
----------------------------------- ------- -------
295,086 270,190
----------------------------------- ------- -------
5. Operating expenses
2022 2021
GBP GBP
----------------------------------------------- --------- ---------
Auditors' remuneration:
Fees payable to the Group's auditors for
statutory audit 41,000 30,500
Fees payable to the Group's auditors and
associates for statutory audit of subsidiary
Companies 32,500 31,425
Non-audit fees for taxation compliance
fees 8,570 9,200
Administrative and marketing expenses 1,123,930 736,167
Expected credit losses - trade receivables 221,099 311,102
Fair value movements (40,019) 16,755
----------------------------------------------- --------- ---------
1,387,080 1,135,149
----------------------------------------------- --------- ---------
6. Loss per share
The basic and diluted loss per share attributable to equity
holders of the Company was based on the loss attributable to
shareholders of GBP1,083,833 (2021: loss of GBP1,145,649) and the
weighted average number of ordinary shares in issue during the year
of 21,915,119 shares (2021 restated*: 18,788,985 shares). The loss
per share (in pence) attributed to shareholders is 4.95 (2021
restated*: loss per share of 8.49).
Calculations for dilutive EPS have not been made in respect of
the convertible loan notes (note 25 of the financial statements) on
the basis the impact would be anti-dilutive.
*Total ordinary shares for 2021 have been restated to provide a
meaningful comparison with 2022. A share consolidation was
completed in 2022, increasing the nominal value of the Group's
ordinary shares.
7. Financial liabilities
Group Company
-------------------- --------------------
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------- --------- --------- --------- ---------
Non-current liabilities
Term Loan 2,052,808 1,791,952 1,997,540 1,723,537
Warrants 189,762 72,801 189,762 72,801
Lease liabilities 2,624,792 3,075,517 - -
------------------------- --------- --------- --------- ---------
4,867,362 4,940,270 2,187,302 1,796,338
------------------------- --------- --------- --------- ---------
Current liabilities
Convertible Loan Notes - 275,885 - 275,885
Term Loan 436,341 808,869 415,044 675,251
Lease liabilities 450,726 278,961 - -
Trade and other payables 2,057,461 1,011,550 97,772 140,191
------------------------- --------- --------- --------- ---------
2,944,528 2,375,265 512,816 1,091,327
------------------------- --------- --------- --------- ---------
Total 7,811,890 7,315,535 2,700,120 2,887,665
------------------------- --------- --------- --------- ---------
Convertible loan notes
The convertible loan note was redeemed in 2022 (See Note 25 of
the financial statements).
Term loan
In August 2019, Malvern received a term loan from BOOST&Co
Limited for GBP2,600,000. This loan originally carried an interest
rate as the higher of (a) 10% per annum, or (b) 8% per annum plus
LIBOR. The loan was restructured in March 2022, the new terms
include a 12-month payment and interest holiday with monthly
payments commencing from March 2023 over a five-year period, with
the interest being set at 7% for the first two years and 10% for
the subsequent three years. There are no early repayment penalties
on this facility.
During 2020, the Group took advantage of the Government-backed
Bounce Back Loan Scheme (BBLS), benefitting from a total of
GBP100,000 to be repaid over a six year period with a 2.5% fixed
rate of interest. The first 12 months of this lending facility are
free of any obligation to pay capital or interest. The balance
outstanding at 31 December 2022 is GBP76,566 (2021: GBP89,872).
Warrants
As part of the term loan, Boost & Co was issued warrants
over 1,725,113* shares. These warrants are exercisable at the
Strike Price at any time over the following 10 years since the
inception of term loan in August 2019.
As at the date of financial position, the Group has fair valued
these warrants at GBP189,762. The following estimates were used to
calculate this fair value:
-- Annualised volatility of 109% and 144% at the inception of
term loan and at the year end respectively, calculated using share
price volatility over a preceding 3 year period.
-- Maturity of 10 years applied, reflecting the duration over
which Boost & Co could exercise these warrants.
-- Risk free rate of 0.50%, being the Yield on UK 10 year Government bonds.
-- Strike price of GBP0.0015, being the 28-day average share
price preceding the date (i.e. 27 Aug 2019) of drawdown.
*Restated for the share consolidation.
8. Convertible loan notes
In November 2022, the balance of the Convertible Loan Note was
redeemed following a placing.
Issue Name Convertible Unsecured Loan Notes
2020
---------------------------------- --------------------------------- -----
Date of Issue 17 November 2017
---------------------------------- --------------------------------- -----
Date of Redemption 31 December 2022
---------------------------------- --------------------------------- -----
Interest Payable 1 Jan 2018-31 Dec 2018 3%
---------------------------------- --------------------------------- -----
1 Jan 2019-31 Dec 2019 4%
-------------------------------------------------------------------- -----
1 Jan 2020-31 Dec 2020 5%
-------------------------------------------------------------------- -----
1 Jan 2021-31 Dec 2022 6%
-------------------------------------------------------------------- -----
Total Issued GBP1,200,000
---------------------------------- --------------------------------- -----
Amount converted in 2017 (GBP100,000)
---------------------------------- --------------------------------- -----
Balance at 31/12/2017 GBP1,100,000
---------------------------------- --------------------------------- -----
Amount converted in 2018 (GBP771,898)
---------------------------------- --------------------------------- -----
Fair value adjustment (GBP28,822)
---------------------------------- --------------------------------- -----
Balance at 31/12/2018 GBP299,280
---------------------------------- --------------------------------- -----
Fair value adjustment GBP17,307
---------------------------------- --------------------------------- -----
Balance at 31/12/2019 GBP316,587
---------------------------------- --------------------------------- -----
Unwinding Interest GBP6,230
---------------------------------- --------------------------------- -----
Balance at 31/12/2020 GBP322,817
---------------------------------- --------------------------------- -----
Unwinding interest GBP3,068
---------------------------------- --------------------------------- -----
Share Conversion at 31/07/2021 (GBP50,000)
---------------------------------- --------------------------------- -----
Balance at 31/12/2021 GBP275,885
---------------------------------- --------------------------------- -----
Unwinding Interest GBP2,217
---------------------------------- --------------------------------- -----
Share Conversion (GBP100,000)
---------------------------------- --------------------------------- -----
Discount on payout and redemption (GBP178,102)
---------------------------------- --------------------------------- -----
Balance at 31/12/2022 -
---------------------------------- --------------------------------- -----
9. Share capital
Allotted, called up and fully paid
-------------------------------------------------------------------------
No of Ordinary Nominal Value No of deferred Nominal value Nominal
shares of Ordinary shares of deferred value of
shares shares All shares
--------------------------- -------------- ------------- -------------- ------------- -----------
At 31 December 2021
- 0.1p ordinary shares
and 0.1p, 1p & 5p
deferred shares 2,109,018,964 2,109,019 2,828,138,750 9,104,659 11,213,678
Additions during
the year - 18 February
2022 0.1p ordinary
shares 35,211,724 35,212 - - 35,212
--------------------------- -------------- ------------- -------------- ------------- -----------
Additions during
the year - 20 August
2022 0.1p ordinary
shares 50,000,000 50,000 - - 50,000
--------------------------- -------------- ------------- -------------- ------------- -----------
Additions during
the year - 3 November
2022 0.1p ordinary
shares 9,312 9 - - 9
--------------------------- -------------- ------------- -------------- ------------- -----------
At 3 November 2022
- pre-share consolidation 2,194,240,000 2,194,240 2,828,138,750 9,104,659 11,298,899
--------------------------- -------------- ------------- -------------- ------------- -----------
Share consolidation*
Share consolidation
- ordinary shares
0.1p to 1p - 3 November 21,942,400* 219,424 2,828,138,750 9,104,659 9,324,083
---------------------------- ----------- ------- -------------- ---------- -----------
Additions during
the year - 3 November
2022 1p deferred
shares - - *197,481,600 1,974,816 1,974,816
---------------------------- ----------- ------- -------------- ---------- -----------
At 3 November 2022
- post-share consolidation 21,942,400 219,424 3,025,620,350 11,079,475 11,298,899
---------------------------- ----------- ------- -------------- ---------- -----------
Additions during
the year - 14 November
2022 1p ordinary
shares 2,500,000 25,000 - - 25,000
---------------------------- ----------- ------- -------------- ---------- -----------
At 31 December 2022
1p ordinary shares
and 0.1p, 1p & 5p
deferred shares 24,442,400 244,424 3,025,620,350 11,079,475 11,323,899*
---------------------------- ----------- ------- -------------- ---------- -----------
*Excludes the accumulated share-based payment balance taken to
equity, GBP7,057 (2021: GBP3,313).
On 18 February 2022, convertible loan notes of GBP50,000 were
converted to shares at 0.142p, adding a further 35,211,724 0.1p
ordinary shares.
On 20 August 2022, further convertible loan notes of GBP50,000
were converted to shares at 0.1p, adding a further 50,000,000 0.1p
ordinary shares.
On 3 November 2022, 9,312 0.1p ordinary shares were issued as
part of the preparation for the ordinary shares split. This was
done to ensure that as part of the share reorganisation, an exact
whole number of consolidated ordinary shares could be issued.
*All ordinary shares were then consolidated on the basis of one
consolidated ordinary share for each 20,000 ordinary shares. Each
consolidated ordinary share was then sub-divided into 200 new
ordinary shares and 1,800 new deferred shares.
On 14 November 2022, the Group undertook a placing of 2,500,00
1p ordinary shares at 8p to raise GBP200,000 to redeem the balance
of the convertible loan note.
The Company has Enterprise Management Incentive share option
scheme for certain directors and employees. The cost related to it
GBP3,745 (2021: GBP3,128) has been added to share capital in the
financial statement.
10. Share-based payments and share options
The Company has an Enterprise Management Incentive share option
scheme for certain directors and employees. Under the scheme,
participants have been awarded options to acquire up to a
prescribed level of shares following a 3-year vesting period if the
Company's share price has met the pre-determined target conditions.
There are two market-based conditions, each accounting for 50% of
the share options awarded to the employee. In addition, the m
id-market share price of the Company on the AIM Market of the
London Stock Exchange, must stay at or above the exercise price,
for 40 consecutive business days.
The Group used the Black Scholes valuation framework for all
share options awarded pre 2022. These options have also been valued
using the Monte Carlo valuation method to validate the
reasonableness of the results. The results from the Monte Carlo
valuation were not considered materially different from the Black
Scholes valuation.
The inputs into the Black Scholes model as at 31 December 2022
are as follows:
Deemed
Strike probability
price on of
Exercise grant Vesting achieving
price date period Expected Risk free Fair market
Grant date EMI options* (pence)* (pence)* (years) volatility rate value condition
------------ ------------------ --------- --------- ---------- ----------- ---------- ---------- ------------
02/12/2020 336,250 50 15 3 12.30% 0.35% 0.34 5.02%
02/12/2020 336,250 90 15 3 12.30% 0.35% 0.74 0.37%
07/01/2021 50,000 50 15 3 11.98% 0.35% 0.35 5.30%
07/01/2021 50,000 90 15 3 11.98% 0.35% 0.75 0.37%
18/01/2021 60,000 50 15 3 11.98% 0.35% 0.35 5.30%
18/01/2021 60,000 90 15 3 11.98% 0.35% 0.75 0.37%
01/09/2021 283,750 60 22 3 10.45% 0.26% 0.38 1.10%
01/09/2021 283,750 110 22 3 10.45% 0.26% 0.87 0.00%
------------- ----------------- --------- --------- ---------- ----------- ---------- ---------- ------------
* Total EMI options have been restated due to the share
consolidation that was completed in 2022. The share consolidation
increased the nominal value of the Group's ordinary shares.
As with options containing performance-based market targets, the
probability of achieving the set condition is factored into the
determination of the value. These will not be re-measured at
subsequent reporting dates.
The vesting probabilities presented are products of lognormal
distribution modelling over a 3-year period to determine the
likelihood of the vesting condition being reached, based off the
scaled mean and standard deviation from a prior 365-day period
The Group has used the Monte Carlo valuation framework for all
share options awarded in 2022.
The inputs into the Monte Carlo model as at 31 December 2022 are
as follows:
Grant EMI options Hurdles Strike price Expiry Volatility Option Share
date (pence) on grant (years) price price
date (pence) (pence) (pence)
------------ ---------------------- --------- -------------- --------- ----------- --------- ---------
30/11/2022 287,500 60 10 5 50% 2.93 12
30/11/2022 287,500 110 10 5 50% 1.34 12
------------ ---------------------- --------- -------------- --------- ----------- --------- ---------
For options with hurdles, early exercise is assumed to take
place as soon as the 40-day hurdle requirement is triggered after
the 3-year vesting period. The Monte Carlo simulation uses 50,000
iterations to enhance the accuracy of the predicted outcome.
Year ended 31 December 2022
Number of options Weighted average
s trike price
--------------------------------- ------------------ -----------------
Outstanding at 1 January 2022* 1 ,460,000 1 7.00p
Granted during the year 575,000 10p
Forfeited during the year 70,000 -
Outstanding at 31 December 2022 1,965,000 15.54p
Exercisable - -
---------------------------------- ------------------ -----------------
* Total EMI options and weighted price have been restated due to
the share consolidation that was completed in 2022. The share
consolidation increased the nominal value of the Group's ordinary
shares.
Of the options outstanding at 31 December 2022, 892,500 (2021:
892,500) options have an exercise price of 15 pence, 567,500 (2021:
567,500) options have an exercise price of 22 pence, and 575,000
(2021: nil) options have an exercise price of 10 pence.
The aggregate charge for share options recognised in the Group
financial statements in the year was, GBP3,745 (2021:
GBP3,128).
The annual report and accounts together with the notice of AGM
to be held in May 2023 (date to be announced), are expected to be
uploaded to the Company's website and posted to shareholders in due
course.
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END
FR UVOARONUSRUR
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April 06, 2023 02:00 ET (06:00 GMT)
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