REG - Malvern Inter. PLC - Final Results
04/05/2022 07:00
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RNS Number : 1845K Malvern International PLC 04 May 2022
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.
04 May 2022
Malvern International plc
("Malvern", the "Company" or the "Group")
Final results for the year ended 31 December 2021
Malvern International plc (AIM: MLVN), the global learning and skills
development partner, announces its preliminary results for the year ended 31
December 2021.
Results
· Revenues increased 27 per cent. to £2.42m (2020: £1.90m). The
operating loss for the year was £1.32m (2020: loss £1.33m) reflecting strong
cost control measures coupled with increased investment in our sales and
marketing team to ramp-up student recruitment efforts in key territories.
· The loss for the year from continuing operations was £1.59m (2020
loss: £1.66m), resulting in a loss per share on continuing operations of 0.08
pence (2020 loss: 0.23 pence).
· The total loss including discontinued operations was £1.15m (2020
loss: £2.14m).
· As at 31 December 2021, the cash position was £0.4m and net debt was
£5.85m. Net debt includes £3.35m of lease liabilities.
Operational highlights
· Executive management team appointments: CFO and Director of
University Partnerships
· Reached 80 per cent. of pre-pandemic levels of students in Q4 2021
· All language schools now approved by the Kuwaiti Cultural Office
· Expanded sales team expansion to target key student recruitment
geographies
· Pathway student numbers impacted by pandemic but positioned to grow
significantly in 2022
· £2.6m loan restructured over six years (post year end)
Commenting on the results and prospects, Richard Mace, Chief Executive
Officer, said:
"Student numbers were rebuilding throughout 2021 and by Q4 we had reached 80
per cent. of pre-pandemic levels, although ongoing international travel
restrictions impacted higher education starts for the 2021/22 academic year.
We have made strong progress in building our sales and marketing team to
target key territories such as China and Middle East and North Africa
("MENA"). All our language schools are now approved by the Kuwaiti Cultural
Office which presents a significant opportunity to attract a consistent number
of students and recurring income streams.
Since the year end, we successfully renegotiated the Company's £2.6m debt
facility which is now payable over six years up to 2028.
We expect student numbers to reach pre-pandemic levels during this year and,
with fewer international student providers today than two years ago due to
M&A activity and closures, we believe we are well placed to build the
business in 2022 and beyond."
For further information please contact:
Malvern International Plc www.malverninternational.com (http://www.malverninternational.com/)
Mark Elliott - Chairman Via our website
Richard Mace - Chief Executive Officer
WH Ireland (NOMAD & Broker) www.whirelandcb.com (http://www.whirelandcb.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
(http://www.malverninternational.com/) .
CHAIRMAN'S STATEMENT
Introduction
Student numbers were rebuilding throughout 2021 as we were able to reopen
schools and offer in-class teaching. However the dynamic situation around
international travel affected student applications and bookings during crucial
windows, particularly for higher education students for the start of the
2021/22 academic year. English Language Training ("ELT") student numbers
reached 80 per cent. of pre-pandemic levels in Q4 2021.
Revenues increased 27 per cent. to £2.42m (2020: £1.90m). The operating loss
for the year was £1.32m (2020: loss £1.33m) reflecting strong cost control
measures coupled with increased investment in our sales and marketing team to
ramp-up student recruitment efforts in key territories.
The loss for the year from continuing operations was £1.59m (2020 loss:
£1.66m), resulting in a loss per share on continuing operations of 0.08 pence
(2020 loss: 0.23 pence).
The total loss including discontinued operations was £1.15m (2020 loss:
£2.14m).
As at 31 December 2021, the cash position was £0.4m and net debt was £5.85m.
Net debt includes £3.35m of lease liabilities.
Financing and debt restructure
To ensure we had the cash resources to trade through the continued
difficulties caused by Covid-19 and to build on the very significant progress
made, the Company raised £1.70 million in an oversubscribed fundraising in
April 2021.
Since the year end, the management successfully renegotiated its £2.6m debt
facility with BOOST&Co., providing for a 12-month payment and interest
holiday to March 2023, with revised interest terms and no early repayment
penalties. Full details of the new debt structure can be found in the
announcement of 4 March 2022.
Board appointment
We were delighted to appoint Daniel Fisher in 6 December 2021 to the Board of
the Company as an Executive Director and Chief Financial Officer. Daniel
joined the Board having acted as the Company's head of finance since January
2021. Daniel has a wealth of experience in financial leadership roles.
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. A total of 146,000,000 ordinary shares of 0.1
pence each were granted in 2020 and 2021 to Directors and staff in three
tranches, representing 6.9 per cent of the existing issued share capital of
the Company. The EMI options will vest three years after the date they were
granted, once defined share price targets have been attained.
Staff and staff appointments
Malvern has made a few strategic appointments to the sales and marketing team
to support the growth in student numbers and target key territories, including
China, South East Asia and MENA. I would like to take this opportunity to
thank all our colleagues for their continued dedication in delivering quality
education to our students.
Governance
We continue to make improvements to our corporate governance systems.
Following the appointment of a dedicated, group-wide HR Manager we have
reviewed and updated our internal policies, making them available to staff and
suppliers as appropriate.
The role of Company Secretary has been taken on by our Chief Financial
Officer, Daniel Fisher, with the support of external advisors, Oakwood
Corporate Services Limited.
During the year we also carried out an internal review and audit to ensure
that we continue to comply with the Quoted Companies Alliance Corporate
Governance Code 2018. We also updated our website to ensure continued
compliance with the AIM rules.
Outlook
The easing of travel restrictions is attracting international students back
into the UK.
We are making significant investment in expanding our global sales operations
and agency network, including China for the first time, with the expectation
that this investment will greatly benefit our partnerships with University of
East London, NCUK, Wrexham Glyndwr University and other future university
partnerships.
The ELT market has continued to consolidate with fewer providers today than
two years ago due to M&A activity and closures. We are growing
relationships with existing customers such as the Kuwaiti Cultural Office and
investing in our lead-management system to have industry leading capability to
generate and respond to enquiries efficiently. These factors are enabling us
to build student numbers at our Brighton centre in its first full year of
operations and are supporting our expectations to reach pre-pandemic levels in
London and Manchester during 2022, ahead of overall sector expectations.
As a business, we are well positioned to take advantage of the expected growth
in overseas student numbers over the coming years. We are confident that we
are well placed to build the business in 2022 and beyond, whilst recognising
that some uncertainty with Covid-19 and the war in Ukraine remain.
Mark Elliott
Chairman
OPERATING REVIEW
English language training ("ELT")
The English language schools provided a mixture in-class, online and blended
learning throughout 2021, with Malvern Online Academy ("MOA") supporting
students with supplementary and hybrid learning where required.
In Q4 2021, all three schools had grown their student bodies back to around 80
per cent. of pre-pandemic levels. With fewer international students the
proportion of UK-based students increased as a result of a concerted sales and
marketing effort, including upgrading our website. This audience will remain
important to us going forward.
All our schools are now approved by the Kuwait Cultural Office ("KCO") which
allow us to accept sponsored students into all our schools as well as our NCUK
programme. With an average of 8,000 sponsored students per year studying for
an average of 36 weeks, the KCO approval presents a significant opportunity
for us to attract a consistent number of students and recurring income
streams.
The focus to make profitable language schools is to have a student acquisition
model that balances agency and embassy students combined with students
recruited directly via digital methods. With our investment in systems and
people, we are well placed with this model for 2022 and beyond.
University Pathways
A total of 144 students enrolled in University Pathways courses for the
2021/22 academic year compared to 170 students in the previous year. Of
these, 16 students are part of our first ever NCUK cohort based out of our
London Kings Cross school, a number on which we can build for the next
academic year. NCUK, a consortium of leading universities dedicated to giving
international students guaranteed access to universities worldwide
The lower overall figures are the result of the traffic light system on
international travel extending into the autumn of 2021 which coincided with
application deadlines for key geographies. However an increased intake in
January 2022 of 80 students compared to 45 students in January 2021 is
indicative of gradual return of international students to the UK.
University of East London ("UEL") Since the year end, the governance of our
partnership with UEL has been enhanced with the formation of a joint Strategic
Management Group, which met for the first time in March 2022. Within the
centre, an experienced Academic Director has been appointed with primary
responsibility for the quality of all aspects of our learning and teaching,
building on structural and staffing changes made within the study centre in
2021. Increased numbers of students were recruited for the January cohort,
and the centre is now well placed to support the projected significant growth
in student numbers for the 2022/23 academic year.
NCUK
2021 saw the launch of our NCUK International Foundation Year programme, and
we welcomed a cohort of 16 students. For 2022/23 academic year we are
growing our NCUK portfolio by offering Science and Engineering routes, in
parallel with our Business oriented programme, and look forward to welcoming
students looking to progress to high quality universities in our London
centre.
Malvern Juniors
Due to Covid-19, all of our Junior language camps were postponed into 2022.
There remains strong demand from Italian students with three camps running in
the summer of 2022. Hungarian groups will resume in 2023.
In parallel, we have been building our sales and marketing teams, targeting
Junior students from China and South East Asia in particular. We expect this
to reflect in significant growth in student numbers for 2023.
Central services
The Group continued to make improvements to its central shared services, which
includes both back-office and sales and marketing. More positions have been
brought into the head office function in Manchester to strengthen the
executive management team and supporting team including a CFO, Management
Accountant, Deputy Head of Sales, Marketing Manager, Group HR Manager. The
transactional support team in Nepal has expanded to support post-pandemic
growth in admissions. Our continued investment in the development of our
HubSpot CRM has seen a tighter control of all enquiries and management of
service level agreements. Further development, process controls and automation
is planned for 2022.
We have continued to build our sales and marketing capability. In China - the
biggest international student market to the UK for Higher Education and Junior
summer camps - we appointed two Regional Sales Managers based in Chengdu and
Beijing and launched a Chinese website. In addition we appointed a Sales
Manager based in Indonesia and a Regional Director for MENA and Turkey. We are
in late stages of appointing an international recruitment advisor in India and
one in Nepal. Both are growth markets for Higher Education student
recruitment. We are expecting the new recruits to drive the growth of a global
partner network and in turn our student numbers across University Pathways and
ELT adult and junior programmes.
Richard Mace
Chief Executive Officer
FINANCIAL REVIEW
The trading landscape presented many challenges for the Group in 2021 due to
the impacts of the pandemic. Despite these challenges, significant progress
was made in 2021 to stabilise our balance sheet. We continued to demonstrate
effective cash management under very challenging trading conditions.
In the past twelve months, we forged strong relationships with key suppliers
and customers. All historical debt was moved successfully onto long term
payment plans, and in some cases, large arrears have been waived or
discounted. Strategic and operational meetings have been established with
key customers. In addition to drastically improving student recruitment and
enrolment conditions, these more frequent interactions have enabled us to
increase the efficiency of the collection of receivables.
Revenues during the year increased 27 per cent. to £2.42m (2020: £1.90m).
The operating loss for the year was £1.32m (2020: loss £1.33m) reflecting
strong cost control measures coupled with increased investment in our sales
and marketing team to ramp up student recruitment efforts in key
territories.
Cost control continues to be a focus across the Group. New systems and
policies befitting a PLC were implemented in 2021 to aid the control and
tracking of our spending. Our shared services function based in Nepal has also
been expanded, which benefits the Group through lower staffing costs, and
helps us to achieve required synergies as the Group continues to scale up.
Additional smarter spending strategies include our more targeted digital
approach to marketing, which will continue to bring down customer acquisition
costs. This approach is accompanied by an increase in travel costs as our
sales staff return to key markets to build the Group's brands, and to enhance
our relationships with key agents.
The disposal of the main operating entity in Singapore significantly reduced
the expenditure in that region and is another step towards a much healthier
balance sheet.
We continued to work closely with BOOST&Co., the Group's largest debt
provider, to ensure that the Group had sufficient working capital to operate
through periods of very difficult trading in 2021. In March 2021,
BOOST&Co. invested in the Group as part of a wider £1.70m fundraise that
we undertook. This investment was an indicator of BOOST&Co.'s confidence
in the management and prospects for the business. As described in the
strategic report and the going concern statement, BOOST&Co. has committed
to supporting the Group in 2022 and beyond.
Looking forward, we will continue to invest strategically for the future with
the expectation of higher revenue growth accompanied by increased costs from
our growing sales and marketing team, along with continued investment in our
new Chinese student recruitment function and a resumption in staff travel.
This critical investment accelerates the Group's drive towards
profitability.
Daniel Fisher
Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Note 2021
2020
£ £
Revenue
Sale of services 5 2,417,524 1,901,307
Total revenue 2,417,524 1,901,307
Cost of services sold (1,071,679) (1,016,393)
Gross profit 1,345,845 884,914
Other income 223,989 418,363
Salaries and employees' benefits (1,346,486) (1,095,012)
Share based payments 12 (3,128) (169,278)
Depreciation of property, plant and equipment (409,271) (414,349)
Other operating expenses 7] (1,135,149) (950,745)
Operating loss (1,324,200) (1,326,107)
Finance costs 6 (270,190) (302,066)
Loss before tax (1,594,390) (1,628,173)
Income tax charge - (31,300)
Loss for the year from continuing operations (1,594,390) (1,659,473)
Profit / (loss) from discontinued operation 448,741 (480,092)
Loss for the year (1,145,649) (2,139,565)
Attributable to:
Equity holders of the Company (1,145,649) (2,139,565)
2021 2020
£ £
Loss for the year (1,145,649) (2,139,565)
Items that may be reclassified subsequently to profit or loss: -
Foreign currency translation movements 15,575
Total comprehensive income/(expense) for the year (1,145,649) (2,123,990)
Continuing operations (1,594,390) (1,659,473)
Discontinued operations 448,741 (464,517)
Attributable to:
Equity holders of the parent (1,145,649) (2,123,990)
2021 2020
Loss per share from continuing operations attributed to equity holders of the
Company (in pence)
Basic (0.08) (0.23)
Diluted (0.08) (0.23)
Profit/(loss) per share from discontinued operations attributed to equity
holders (in pence)
Basic and diluted 0.02 (0.06)
Consolidated Statement of Financial Position
as at 31 December 2021
Note 2021 2020
£ £
TOTAL ASSETS
Non-current assets
Property, plant, and 50,427 80,781
equipment
Goodwill 1,419,350 1,419,350
Investment in subsidiaries - -
Right-of-use assets 2,553,726 2,612,614
Total non-current assets 4,023,503 4,112,745
Current assets
Trade receivables 705,271 1,033,105
Other receivables and 289,607 162,093
prepayments
Amounts due from subsidiaries - -
Cash and cash equivalents 377,170 103,609
Total current assets 1,372,048 1,298,807
Assets classified for disposal - 1,846
Total assets 5,395,551 5,413,398
2021 2020
£ £
EQUITY AND LIABILITIES
Non-current liabilities
Term loan 1,791,952 2,532,115
Warrants 72,801 63,701
Convertible loan notes 11 - 272,817
Lease liabilities 3,075,517 2,491,486
Deferred tax liabilities 10,279 10,279
Total non-current liabilities 4,950,549 5,370,398
Current liabilities
Trade payables 413,297 603,631
Contract liabilities 899,137 676,287
Other payables and accruals 598,253 1,229,743
Amounts due to subsidiary - -
Amounts due to related parties - 40,000
Convertible loan notes 11 275,885 50,000
Lease liabilities 278,961 350,829
Term loan 808,869 -
Total current liabilities 3,274,402 2,950,490
Liabilities directly associated with assets classified for disposal - 216,737
Total liabilities 8,224,951 8,537,625
Equity attributable to equity
holders of the Company
Share capital 11,216,991 10,309,811
Share premium 6,603,839 5,782,394
Retained earnings (20,679,052) (19,703,963)
Translation reserve - 288,149
Capital reserve - 170,560
Convertible loan reserve 28,822 28,822
Total equity (2,829,400) (3,124,227)
Total equity and liabilities 5,395,551 5,413,398
The loss for the year as per the financial statements of the parent company
at 31 December 2021 was £1,103,278 (2020: Loss £896,815).
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Share Share Retained Translation Capital Convertible loan reserve Attributable
capital premium earnings reserve reserve to equity Total
holders of the Company
£ £ £ £ £ £ £ £
Balance at 1 January 2020 9,363,236 5,431,449 (17,564,398) 272,574 170,560 28,822 (2,297,757) (2,297,757)
Direct costs relating to issue of shares - (122,250) - - - - (122,250) (122,250)
Total comprehensive income for the year - - (2,139,565) 15,575 - - (2,123,990) (2,123,990)
New share issue 833,333 416,667 - - - - 1,250,000 1,250,000
Share based payments (inc EMI options) 113,242 56,528 - - - - 169,770 169,770
Balance at 31 December 2020 10,309,811 5,782,394 (19,703,963) 288,149 170,560 28,822 (3,124,227) (3,124,227)
Direct costs relating to issue of shares - (89,503) - - - - (89,503) (89,503)
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) (288,149)
Total comprehensive income for the year - - (1,145,649) - - - (1,145,649) (1,145,649)
New share issue 891,702 898,598 - - - - 1,790,300 1,790,300
Share based payments (EMI options) 15,478 12,350 - - - - 27,828 27,828
Balance at 31 December 2021 11,216,991 6,603,839 (20,679,052) - - 28,822 (2,829,400) (2,829,400)
Consolidated Statement of Cash Flows
for the year ended 31 December 2021
2021 2020
£ £
Cash flows from operating activities
Loss after income tax from
Continuing activities (1,594,390) (1,659,473)
Discontinued activities 448,741 (480,092)
Adjustments for:
Depreciation of tangible assets 409,271 414,349
Fair value movement on warrants 16,755 (61,939)
Share based payments 3,128 175,278
Disposal of tangible assets 2,400 (115,587)
Loss on disposal of discontinued operations (503,040) -
Impairment of trade receivables 311,102 123,690
Finance cost 270,190 302,066
Adjustments for deferred tax - -
Interest paid (59,526) (51,583)
Tax paid - -
(695,369) (1,353,291)
Changes in working capital:
Decrease in stocks - 6,153
(Increase)/decrease in receivables (110,781) 94,657
Increase/(decrease) in payables (348,043) 218,561
Decrease in amounts due to related parties (40,000) (6,646)
Net cash flows used in operating (1,194,193) (1,040,566)
activities
Cash flows from investing activities
Purchases of property, plant, and equipment (11,280) -
Net cash used in investing activities (11,280) -
Cash flows from financing activities
Repayment of lease liabilities (161,475) (194,801)
New equity issued 1,650,797 1,155,712
Term loan (10,288) 100,000
Net cash generated by financing activities 1,479,034 1,060,911
Net change in cash and cash equivalents 273,561 20,345
Cash and cash equivalents at the beginning of the year 103,609 83,264
Exchange losses on cash and cash equivalents - -
Cash and cash equivalent at the end of the year 377,170 103,609
NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION FOR THE YEAR ENDED 31
DECEMBER 2021
1. General information
Malvern International plc (the "Company") is a public limited liability
company incorporated in England and Wales on 8 July 2004. The Company was
admitted to AIM on 10 December 2004. Its registered office is 3rd Floor 1
Ashley Road, Altrincham, Cheshire, United Kingdom, WA14 2DT and its principal
place of business is in the UK. The registration number of the Company is
05174452. The Company head office is Murray House, 85 Piccadilly, Manchester,
M1 2DA.
The principal activities of the Company are that of investment holding and
provision of educational consultancy services. 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 period
2. Significant accounting policies
Basis of preparation
The 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. (the
Group's fund manager, acting on behalf of the Company's debtholder IL2 (2018)
Sarl) to restructure the Group's £2.6m 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 twelve-month payment and interest
holiday with monthly payments commencing from March 2023, over a five-year
period.
BOOST&Co., acting on behalf of IL2 (2018) Sarl, have also 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 twelve months from the date of the
signing of the financial statements.
In making their assessment of going concern the Group's Directors have
considered the impact on the business of the Covid-19 pandemic. Whilst this
has been very disruptive to the Group's operations, the business was able to
adapt its service offering through online learning. The Government
announcement to remove testing for fully vaccinated arrivals into the UK,
provides the Directors with confidence that student numbers will return to
pre-pandemic levels in 2022.
In Q4 of 2021, the number of students across the Groups English language
schools grew back to approximately 80% of 2019 levels. In Q1 2022, this figure
increased, which supports the Directors' 2022 recovery assumptions.
Pathway numbers in January 2022 also indicate an encouraging recovery from the
impact of Covid-19, with a 55% increase in students year on year for one of
the Group's key partners. In addition, Malvern Juniors will return in the
summer of 2022.
Profit and cash flow projections for the Group assume profitable growth in its
key operating entities once operations return to normal. A large part of this
assumed growth is driven by the more profitable pathways division of the
Group.
The global pandemic continues to create uncertainty in the profit and cash
flow projections for the Group. 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 going concern of the Group.
The above factors provide the Directors with confidence that it is appropriate
to prepare the accounts on a going concern basis, albeit there continues to be
a material uncertainty as set out above.
3. Lessee accounting
The Group's leases primarily relate to properties and office equipment. Lease
terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. Property leases will often include extension
and termination options, open market rent reviews, and uplifts.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
individual lessee company's incremental borrowing rate considering the
duration of the lease.
The lease liability is subsequently measured at amortised cost using the
effective interest method, with the finance cost charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability. It is remeasured when there is a
change in future lease payments arising from a change in index or rate, or if
the Group changes its assessment of whether it will exercise an extension or
termination option. The lease liability is recalculated using a revised
discount rate if the lease term changes as a result of a modification or
re-assessment of an extension or termination option.
The right-of-use asset is initially measured at cost, which comprises the
initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred. The
right-of-use asset is typically depreciated on a straight line basis over the
lease terms.
Amounts recognised in the statement of comprehensive income:
2021 2020
£ £
Interest expense and similar charges
Interest expense 162,935 184,897
Interest expense on disposed right-of-use assets - 103,302
Operating and administrative expenses
Depreciation of right-of-use assets 370,036 374,149
Depreciation of disposed right-of-use assets - 283,353
Total expensed to statement of comprehensive income 532,971 945,701
Right-of-use assets
At 31 December 2021 At 31 December 2020
£ £
Balance as at the beginning of the year 2,612,614 4,912,511
Net disposals - (1,605,429)
Adjustment to operating balance of depreciation 33,614 -
Depreciation of right-of-use assets (370,036) (374,149)
Depreciation of disposed right-of-use assets - (283,353)
Changes from lease revaluations 277,534 -
FX movement - (36,966)
Balance as at the end of the year 2,553,726 2,612,614
Lease liabilities
At 31 December 2021 At 31 December 2020
£ £
Current liability 278,961 350,829
Non-current liability 3,075,517 2,491,486
Total liability 3,354,478 2,842,315
Lease payments
At 31 December 2021 At 31 December 2020
£ £
Total lease rent amount (Excl. VAT) 536,365 519,501
Amount paid during the year (Excl. VAT) (161,475) (194,801)
Rent free amount (Excl. VAT) (72,495) (84,598)
Balance amount at end of the year 302,395 240,102
In October 2020, the Group disposed of the lease relating to the office of the
Singapore operations.
4. (a) Segmental Information
The Group organises its operations based on geographical locations, as the
services provided are similar in each jurisdiction with both educational and
language courses offered.
UK Discontinued Operations* Total
2021 £ £ £
Revenue from external customers 2,417,524 - 2,417,524
Depreciation and amortization 409,271 - 409,271
Loss before taxation (1,594,390) (38,447) (1,632,837)
Profit on disposal - 487,188 487,188
Taxation charge - - -
Profit/(Loss) for the year (1,594,390) 448,741 (1,145,649)
Segmental assets 5,395,551 - 5,395,551
Segmental liabilities 8,224,951 - 8,224,951
2020 £ £ £
Revenue from external customers 1,901,307 648,167 2,549,474
Depreciation and amortisation (414,349) (349,164) (763,513)
Loss before taxation (1,659,473) (480,092) (2,139,565)
Taxation charge - - -
Loss for the year (1,659,473) (480,092) (2,139,565)
Segmental assets 5,411,552 1,846 5,413,398
Segmental liabilities 8,320,888 216,737 8,537,625
(*Following the closure of the Singapore operations, 2021 figures have been
presented as discontinued operations. SAA Global Education Center filed an
application for an inability to continue business operations on 09 April 2021,
and liquidation commenced on 12 April 2021. Malvern International Academy's
application for liquidation is currently with the liquidators, all activities
ceased on 31 December 2021.)
(b) Discontinued Operations
On 4 August 2020, the group announced closure of Singapore operations and is
reported in the current period as a discontinued operation. Financial
information relating to the discontinued operation for the period to the date
of disposal is set out below.
i) Financial performance of discontinued operations.
The financial performance and cash flow of the discontinued operations are
presented as the consolidated Singapore entities, for the year ended 31
December 2021. The Singapore entities presented include; Malvern International
Academy (MIA), which ceased operating on 31 December 2021, and SAA Global
Education Center (SAAGE), which ceased operating on 9 April 2021 (SAAGE
entered formal liquidation on 12 April).
2021 2020
£ £
Singapore Singapore
Revenue - 648,167
Other Income - 118,279
Expenses (38,447) (1,246,538)
Profit/(Loss) before tax (38,447) (480,092)
Income tax expenses - -
Profit/(Loss) after income tax of discontinued operation (38,447) (480,092)
Profit on disposal of subsidiary 487,188 -
Profit/(Loss) from discontinued operations 448,741 (480,092)
Exchange differences on translation of discontinued operations - 15,575
Other comprehensive income from discontinued operations - 15,575
Net cash flow from operating activities (54,299) (24,299)
Net cash flow from investing activities - -
Net cash flow from financing activities - -
Net cash generated by subsidiary 16,994 (24,299)
ii) Details of the consideration on disposal of the
subsidiaries
2021 2020
£ £
Consideration received or receivable:
Fair value of consideration -
Carrying amount of net liabilities disposed of 196,678 -
Profit on sale of subsidiary before income tax and reclassification of foreign 196,678 -
currency translation reserve
Reclassification of foreign currency translation reserve 290,510 -
Profit on disposal of subsidiary 487,188 -
iii) The details of assets and liabilities of disposed
subsidiary
The carrying amounts of assets and liabilities of Singapore operations as of
09 April 2021 for SAAGE and 31 Dec 2021 for MIA.
2021 2020
£ £
Property, plant and equipment - 546
Cash & cash equivalents 18,049 1,300
Total assets 18,049 1,846
Trade creditors (147,396) (161,254)
Other payables (67,331) (55,483)
Total liabilities (214,727) (216,737)
Net liabilities (196,678) 214,891)
5. Sale of Services
2021 2020
£ £
Course fees 2,189,651 1,659,601
Accommodation fees 162,106 192,643
Application fees, registration and examination fees 50,264 28,470
Training fees, course materials and others 15,503 20,593
2,417,524 1,901,307
6. Finance Costs
2021 2020
£ £
Interest on leases (IFRS 16) 162,935 184,897
Interest on term loan 80,845 90,125
Interest on convertible loan notes 21,503 24,766
Other finance costs 4,097 2,278
270,190 302,066
7. Operating Expenses
2021 2020
£ £
Auditors' remuneration:
Fees payable to the Group's auditors for statutory audit 30,500 27,500
Fees payable to the Group's auditors and associates for statutory audit of 31,425 40,000
subsidiary Companies
Administrative and marketing expenses 745,367 821,494
Expected credit losses - trade receivables 311,102 123,690
Fair value movements 16,755 (61,939)
1,135,149 950,745
8. Earnings/(Loss) Per Share
The basic and diluted earnings/(loss) per share attributable to equity holders
of the Company was based on the loss attributable to shareholders of
£1,145,649 (2020: loss of £2,139,565) and the weighted average number of
ordinary shares in issue during the year of 1,878,898,511
shares (2020: 735,661,044 shares). The loss per share (in pence)
attributed to shareholders is 0.06 (2020: loss per share of 0.23).
Calculations for dilutive EPS have not been made in respect of the convertible
loan notes (note 11) on the basis the impact would be anti-dilutive.
9. Financial Liabilities
Group Company
2021 2020 2021 2020
£ £ £ £
Non-current liabilities
Convertible Loan Notes - 272,817 - 272,817
Term Loan 1,791,952 2,532,115 1,723,537 2,432,115
Warrants 72,801 63,701 72,801 63,701
Lease liabilities 3,075,517 2,491,486 - -
4,940,270 5,360,119 1,796,338 2,768,633
Current liabilities
Convertible Loan Notes 275,885 50,000 275,885 50,000
Term Loan 808,869 - 675,251 -
Lease liabilities 278,961 350,829 - -
Trade and other payables 1,011,550 1,833,374 140,191 322,493
Related parties - 40,000 - 40,000
2,375,265 2,274,203 1,091,327 412,493
Total 7,315,535 7,634,322 2,887,665 3,181,126
Convertible Loan Notes
At 31 December 2021, the Group has an obligation for £275,885 (See note 11).
Term Loan
In August 2019, Malvern received a Term Loan from BOOST&Co. for
£2,600,000. 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 April 2022, the new terms includes a twelve-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 £100,000 to be repaid over
a six-year period with a 2.5% fixed rate of interest. The first twelve months
of this lending facility are free of any obligation to pay capital or
interest. The balance outstanding at 31 December 2021 is £89,872 (2020:
£100,000).
Warrants
As part of the term loan, BOOST&Co. was issued warrants over 45,500,464
shares. These warrants are exercisable at the Strike Price at any time over
the following ten 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 £72,801. The following estimates were used to calculate this fair value:
· Annualised volatility of 109% and 154% at the inception of term loan
and at the year end respectively, calculated using share price volatility over
a preceding three-year period
· Maturity of ten years applied, reflecting the duration over which
BOOST&Co. could exercise these warrants
· Risk free rate of 0.50%, being the Yield on UK ten-year Government
bonds
· Strike price of £0.0015, being the 28-day average share price
preceding the date (i.e. 27 Aug 2019) of drawdown
10. Subsequent events
The Directors are reporting the following subsequent events to the Statement
of Financial Position which are significant to these financial statements.
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)
to restructure the Group's £2.6m debt facility.
Under the original agreement monthly payments were due to commence in April
2022 over a 24-month period at an interest rate of 7 to 10%, dependent on
quarterly revenues. The new agreement provides for a twelve-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.
In return, BOOST&Co. will receive warrants over 127,010,834 ordinary
shares at an exercise price of 0.106 pence per share, being 20% below the
average market price. In addition, BOOST&Co. will receive additional
warrants, fully diluted, with the same exercise price, if the loan is not
repaid by 1 March 2024.
Furthermore, it has been agreed that the exercise price of BOOST&Co.'s
existing warrants over an aggregate of 45,500,464shares be adjusted from 0.15
pence per share to 0.1 pence.
11. Convertible Loan Notes
The Company issued the following loan notes in
2017.
In November 2020, Convertible Loan Note holders agreed a variation of the
redemption date from 16 November 2020 to 31 December 2022.
Convertible Loan Notes
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 £1,200,000
Amount converted in 2017 (£100,000)
Balance at 31/12/2017 £1,100,000
Amount converted in 2018 (£771,898)
Fair value adjustment (£28,822)
Balance at 31/12/2018 £299,280
Fair value adjustment £17,307
Balance at 31/12/2019 £316,587
Unwinding Interest £6,230
Balance at 31/12/2020 £322,817
Unwinding interest £3,068
Share Conversion at 31/07/2021 (£50,000)
Balance at 31/12/2021 £275,885
12. 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
three-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 mid-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 has chosen to use the Black Scholes valuation framework. The options
have also been valued using the Monte Carlo valuation method. The results of
which are not considered materially different from the valuation methodology
described in this note.
The inputs into the Black Scholes model as at 31 December 2021 are as follows.
Grant date EMI options Exercise price (pence) Strike price on grant date (pence) Vesting period (years) Expected volatility Risk free rate Fair value Deemed probability of achieving market condition
02/12/2020 33,625,000 0.5 0.15 3 12.30% 0.35% 0.34 5.02%
02/12/2020 33,625,000 0.9 0.15 3 12.30% 0.35% 0.74 0.37%
07/01/2021 5,000,000 0.5 0.15 3 11.98% 0.35% 0.35 5.30%
07/01/2021 5,000,000 0.9 0.15 3 11.98% 0.35% 0.75 0.37%
18/01/2021 6,000,000 0.5 0.15 3 11.98% 0.35% 0.35 5.30%
18/01/2021 6,000,000 0.9 0.15 3 11.98% 0.35% 0.75 0.37%
01/09/2021 28,375,000 0.6 0.22 3 10.45% 0.26% 0.38 1.10%
01/09/2021 28,375,000 1.1 0.22 3 10.45% 0.26% 0.87 0.00%
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.
Year ended 31 December 2021
Number of options Weighted average strike price
Outstanding at 1 January 2021 69,500,000* 0.15p
Granted during the year 90,000,000 0.19p
Exercised during the year - -
Forfeited during the year 13,500,000 -
Outstanding at 31 December 2021 146,000,000 0.17p
Exercisable - -
(*The number of options outstanding at 31 December 2020 was incorrectly
presented as 34,750,000 in the 2020 Group accounts. This did not impact on the
financial statements. )
Of the options outstanding at 31 December 2021, 89,250,000 (2020: 69,500,000)
options have an exercise price of 0.15pence and 56,750,000 (2020: nil) options
have an exercise price of 0.22 pence.
The aggregate charge for share options recognised in the Group financial
statements in the year was £3,128(2020:£184).
During 2020, the Company also made an equity settled share-based payment in
lieu of fees to certain employees, directors and a creditor. A total of
100,262,947 ordinary shares were issued at 0.15p per share. No vesting
conditions were attached to this share issue. The fair value at the grant date
has been calculated as the total of the fees owing for services provided. The
cost recognised for 2020 in respect of these share-based payments is,
£144,394 for continuing operations, and £6,000 for discontinued operations.
In addition, a bonus was also awarded to certain directors as compensation for
an additional and significant time commitment during a change in Chief
Executive Officer during the year. The bonus was not paid until 2021,
therefore an accrual was recognised through liabilities in 2020. The cost
recognised for 2020 in respect of these share-based payments was, £24,700
(restated 2019: £19,192). The bonus was paid in 2021 when a total of
12,350,000 ordinary shares were issued at 0.20p per share (2019: 12,794,667
ordinary shares at 0.15p per share). No vesting conditions were attached to
this share issue. The fair value at the grant date has been calculated as the
total cash value of the bonus awarded.
The annual report and accounts together with the notice of AGM to be held on 8
June 2022, are expected to be uploaded to the Company's website later today
and posted to shareholders shortly.
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