REG - Malvern Inter. PLC - Final Results
06/04/2023 07:00
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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 £6.51m (2021: £2.42m)
· The operating loss for the year reduced to £0.78m (2021: loss
£1.32m) reflecting continued strong cost control measures together with
ongoing investment in our sales and marketing and central operations
· The loss for the year was £1.08m (2021 loss: £1.59m)
· Loss per share of 4.95 pence (2021 loss: 8.49 pence)
· Cash balances increased by £0.81m during the year to £1.18m (2021:
£0.37m) reflecting cash inflow of £1.32m (2021: cash outflow of £1.19m).
This increase was due to the late invoicing to us of accommodation costs
· Net debt was £4.38m (2021: £5.85m) including £3.08m (2021: £3.35m)
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.£1.35m 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 (http://www.malverninternational.com/)
Mark Elliott - Chairman Via our website
Richard Mace - Chief Executive Officer
WH Ireland (NOMAD & Broker) www.whirelandcm.com (http://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
(http://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 £6.51m (2021: £2.42m). The operating loss for the
year reduced to £0.78m (2021: loss £1.32m) reflecting continued strong cost
control measures together with ongoing investment in our sales and marketing
and central operations.
The loss for the year was £1.08m (2021 loss: £1.59m), resulting in a loss
per share of 4.95 pence (2021 loss: 8.49 pence).
Cash balances increased by £0.81m during the year to £1.18m (2021: £0.37m)
reflecting cash inflow of £1.32m (2021: cash outflow of £1.19m). This
increase was due to the late invoicing to us of accommodation costs. Net debt
was £4.38m (2021: £5.85m) including £3.08m (2021: £3.35m) 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 £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 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.£1.35m 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 £6.51m (2021: £2.42m). 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 c£1.35m 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 c£0.24m (excluding
salaries) in 2022 (2021: c£0.08m). 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, £2.06m v £1.34m 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 £1.08m (2021 loss: £1.59m), 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: £0.27m).
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 c£200k
Junior's accommodation invoice from 2019.
The cash balance at the end of the financial year was £1.18m (2021: £0.37m).
This increase was due to the late invoicing (c£0.75m) 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 £2.6m 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 2021
2022
£ £
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
84,744
Other income 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 (1,083,833) (1,145,649)
the parent
2022 2021
£ £
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
£ £ £ £
TOTAL ASSETS
Non-current assets
Property, plant, and 30,662 50,427 - -
equipment
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 1,135,990 289,607 41,771 112,788
prepayments
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
£ £ £ £
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 £1,185,496 (2021: Loss £1,103,278).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Translation Capital Convertible loan reserve
capital premium earnings reserve reserve Total
£ £ £ £ £ £ £
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
£
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 £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 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 c£1.4m 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
£ £
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
£ £
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
£ £
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
£ £
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 32,500 31,425
subsidiary Companies
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 £1,083,833
(2021: loss of £1,145,649) 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
£ £ £ £
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
£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 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 £100,000 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 £76,566 (2021: £89,872).
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 £189,762. 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 £0.0015, 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 £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
Unwinding Interest £2,217
Share Conversion (£100,000)
Discount on payout and redemption (£178,102)
Balance at 31/12/2022 -
9. Share capital
Allotted, called up and fully paid
No of Ordinary shares Nominal Value of Ordinary shares No of deferred shares Nominal value of deferred shares Nominal value of All shares
At 31 December 2021 - 0.1p ordinary shares and 0.1p, 1p & 5p deferred 2,109,018,964 2,109,019 2,828,138,750 9,104,659 11,213,678
shares
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, £7,057
(2021: £3,313).
On 18 February 2022, convertible loan notes of £50,000 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 £50,000 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 £200,000 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 £3,745 (2021:
£3,128) 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 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 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:
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 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 date EMI options Hurdles Strike price on grant date (pence) Expiry Volatility Option price Share price
(pence)
(years)
(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 strike price
Outstanding at 1 January 2022* 1,460,000 17.00p
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, £3,745 (2021: £3,128).
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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