Malvern International PLC Final Results (2553H)

TIDMMLVN

RNS Number : 2553H

Malvern International PLC

06 June 2017

6 June 2017

Malvern International PLC

("MLVN" or the "Company" and together with its subsidiaries, the" Group")

Final results for the year ended 31 December 2016

Malvern International plc (AIM: MLVN), the provider of educational services in the UK, Europe and Asia, announces its results for the year ended

Key Points

   --    Revenues GBP4.0m (2015:GBP4.8m) 
   --    Operating loss of GBP1.45m (2015: loss of GBP1.61m) 
   --    Loss before tax of GBP 1.34m (2015: loss of GBP 1.65m) 
   --    Loss per share of 1.84p (2015: loss 2.84p) 

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Enquiries:

 
 Malvern International         www.malverninternational.com 
  PLC 
 Haider Sithawalla             [phone] 
  Dr Sam Malafeh                [phone] 
 
 WH Ireland Limited (Nomad     www.whirelandcb.com 
  and Broker) 
 Mike Coe 
  Ed Allsopp                   [phone] 
 

CHAIRMAN'S STATEMENT

Overview

2016 was both challenging and exciting. The company responded to the challenges which included severe competition, uncertainties created by Brexit in Britain and changing policies in other markets in three ways. First the two largest shareholders, namely KSP and CG Group made available substantial funding, without interest for the present to strengthen the balance sheet. Second, we recruited a dynamic young educationist from New Zealand Dr. Sam Malafeh, as the Deputy CEO of the Group in charge of operations. He has also invested GBP 450,000 to indicate his commitment to the company. Third, with new funding and new management we revamped our offerings and now stand poised to launch IT related subjects including courses related to cyber security and analytics in partnership with specialists in these areas.

As part of the new strategy, the name of the Company was changed from AEC Education Plc to Malvern International Plc on 13th September 2016. This was to link the parent company to its subsidiaries which have been operating under Malvern name. The Mission of the group is to be a Global Learning and Skills Development Partner to those who come to us to improve their employable opportunities.

The new management team has also set up fresh guidelines on quality assurance to take Malvern International Plc to a higher international level that not only complies with the relevant territory's regulatory requirements but also exceeds consumer and market expectation. The quality improvement plan started in late 2016 and continues into 2017 with series of internal audits taking place to assure the improvement.

Malvern International has also as mentioned earlier set up a new learning technology division to offer technology based products to other education providers looking for new ways of teaching/learning methods and products. This is being done in collaboration with Playware Studios in Singapore, which has patented digital learning technology that has won several awards globally. At the same time, we are also developing a number of other new programmes and these will be announced as and when they are finalised for introduction to the market in 2017 and 2018. The new products are expected to bring additional returns to Malvern in 2017 and the years ahead.

The implementation of the new strategy takes time and requires investment towards improvement of the quality of the service provided in different countries; this would involve a change in management and operations, developing new programmes and new technology products, and establishing a larger and stronger international marketing team. Hence the performance of the Group for the year 2016 was not much different from that in 2015. However, the Board is confident that going forward we are on the right track and the performance of the Group in 2017 onwards should show significant improvement.

In July 2016, the Group disposed of its Dublin subsidiary in which it had 55% interest for EUR660,000 (equivalent to GBP554,909) to enable the Group to focus on its 100% owned UK operation. The activities for Dublin have been classified as a discontinued activity for the year ended 31 December 2016 and the comparatives have been restated accordingly. The 50/50 partnership contract with Cyprus ended in August 2016 and this was not renewed.

Financial results and business review

Group

In 2016 the total revenue for the continuing operations of the Group was GBP3,992,581. This was 17% less than the Group revenue from continuing operations in 2015 of GBP4,794,168. The fall was mainly due to the fall of revenue in UK of GBP1.1m which was partially offset by the increase in revenue from Asia of GBP0.3m. As mentioned in previous reports, UK continued to be impacted by restrictions of working hours allowed under student visas, the terror threat and the uncertainty of the possible effects of Brexit.

As a result of the decrease in revenue for the 2016 financial year, the Group incurred a loss after tax of GBP1,373,410 on the continuing business as compared to the loss of GBP1,669,763 in 2015 which included impairment charges of GBP900,000 made against goodwill and intangible assets. In FY 2016, the impairment was at GBP150,000

However, after taking the gain on the sale of shares in Dublin operations and the six-month operating profit for Dublin totalling GBP573,800, the Group comprehensive loss after tax in 2016 was GBP820,681 (2015 - GBP1,718,798).

Hence net loss per share for the year on a continuing basis for 2016 was 1.84p compared to 2.84p for 2015 and the net cash at the end of the year stood at GBP0.12m ( 2015 - GBP0.42m).

During 2016, the Board has undertaken an impairment review of the carrying value of its goodwill and intangible assets within the consolidated financial statements of the investments held within the Group in accordance to the process set out in 2015, which takes into consideration our business plan and growth strategies for the Group going forward. Based on this review, an impairment provision of GBP150,000 was made for the year 2016.

Subsidiaries

With the sale of shares in Dublin and the discontinued business arrangement in Cyprus, the European Sector now comprises only the UK operations. The Southeast East Asia/Middle East sector comprises Singapore and Malaysia. Brief summary of these two sectors is set out below:

United Kingdom (Malvern House)

The revenue of the United Kingdom operations in 2016 was down by 45% to GBP1.3m compared to the revenue of GBP2.4m in 2015. Despite this sharp drop in sales, UK was able to contain its operating losses before tax to GBP433k which was only worse than the operating losses in 2015 of GBP384k by GBP49k . This was achieved through cost cutting measures that were undertaken during the past couple of years.

Despite the poor performance of the UK operations in 2016 and in the past years, the Board is still very positive about its potential going forward. It recognises that UK and especially London will continue to be a popular destination for education. Although the student numbers coming to UK have been falling because of the reasons already mentioned earlier in this and past statements, they can be increased again if the courses offered are widened to include skills development programmes This will attract not only overseas students but also UK residents. Hence the main thrust of the Strategic Plan mentioned earlier is to widen the scope of the programmes offered and strengthen the marketing network with strong management control and supervision.

Southeast Asia comprises Singapore and Malaysian operations.

The total revenue for Southeast Asian operations in 2016 was GBP2.7m compared to GBP2.3m in 2015. This was an increase of 14%. However, despite this increase in revenue the sector incurred an operating loss of GBP311K as compared to the operating loss for the 2015 financial year of GBP80k due to higher operating costs in Malaysia and further provisions for bad debts. The Malaysian operations made a marginal operating profit of GBP20K and the rest of the losses came from Singapore operations.

The Group has invested heavily in Singapore to prepare for the re-application of Edu Trust Certification which enables the operation not only to enrol overseas students but also to offer overseas diploma and degree programmes. The application for this certification has now been made and the inspection is expected to take place soon. Once this certification is obtained Singapore will be able to drive up its revenue by offering a wide range of programmes that have been developed or are in the process of being developed both to attract students in Singapore and from other countries.

The Malaysian operation is progressing well and is expected to continue to be profitable going forward. The Malaysia operation has also been through some changes to create a more sustainable business aligned with the new strategy of the group. The Board is also looking at the possibility of further expansion of the operations to the different states in Malaysia.

Dividend

The Board does not propose the payment of a final dividend for the year ended 31 December 2016 (2015: nil).

Prospects

The past few years have been difficult years for the Group. However, the Board is confident that with the reorganised management and marketing teams and proper and gradual implementation of the New Strategic Plan (which covers development and marketing of new and wider range of programmes), the impact on the performance of the Group will be positive going forward and bring the Group to profitability within a year or two.

Acknowledgements

On behalf of the Board I would like to thank all staff members for their continued dedication, commitment, and cooperation during what has been a very difficult period. We look forward to their continuing support going forward in implementing the new plans to bring back the Group to profitability in the years ahead.

We also would like to extend our appreciation and thanks to all our business partners, students, associates and valued shareholders for their support throughout the year and look forward to the same in the years ahead.

Finally, I would like to personally thank all members of the Board for their time and guidance at the Board level and the various committee levels in which they serve.

Gopinath Pillai

Chairman

CONSOLIDATED INCOME STATEMENT

FOR THE YEARED 31 DECEMBER 2016

 
                                                  2016            2015 
                                                              restated 
                                                   GBP             GBP 
 Revenue 
 Sale of services                            3,992,581       4,794,168 
 Other income                                   52,104         261,467 
                                             4,044,685       5,055,635 
 Cost of services sold                       2,210,611       2,418,647 
 Salaries and employees' benefits            1,158,797       1,292,034 
 Amortisation of brand, licences 
  and trademarks                               158,333         165,165 
 Depreciation of plant and equipment            77,579         101,244 
 Other operating expenses                    1,744,219       1,788,167 
 Impairment of goodwill                              -         404,352 
 Impairment of intangible assets               150,000         495,648 
 Operating loss                            (1,454,854)     (1,609,622) 
 Share of results of associated 
  companies and joint ventures                  49,898             965 
 Finance costs                                  61,919        (36,960) 
 Loss before income tax                    (1,343,037)     (1,645,617) 
 Income tax charge                            (30,373)        (24,146) 
 Loss for the year from continuing 
  activities                               (1,373,410)     (1,669,763) 
 Profit for the year from discontinued 
  activities                                   573,800         262,431 
 Loss for the year                           (799,610)     (1,407,332) 
 Attributable to: 
 Equity holders of the Company               (799,610)     (1,525,426) 
 Non-controlling interest                            -         118,094 
                                             (799,610)     (1,407,332) 
 
 
                                               2016        2015 
                                                       restated 
 Loss per share on continuing 
  activities (in pence) 
 Basic                                       (1.84)      (2.84) 
 Diluted                                     (1.84)      (2.84) 
 
 Profit /(loss) per share on discontinued 
  activities (in pence) 
 Basic                                         0.77        0.42 
 Diluted                                       0.77        0.42 
 
 
 Loss per share attributable to 
  equity holders of the Company 
  (in pence) 
 Basic                             (1.07)   (2.42) 
 Diluted                           (1.07)   (2.42) 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2016

 
                                           2016          2015 
                                          GBP          GBP 
 Loss for the year                    (799,610)   (1,407,332) 
 Foreign currency translation 
  movements                            (21,071)     (311,466) 
 Total comprehensive income for 
  the year                            (820,681)   (1,718,798) 
 Attributable to: 
 Equity holders of the parent         (820,681)   (1,857,769) 
 Non-controlling interest                     -       138,971 
 Total comprehensive income for 
  the year                            (820,681)   (1,718,798) 
 

STATEMENTS OF FINANCIAL POSITION

 
                                           Group 
                                    2016              2015 
                                     GBP           GBP 
 TOTAL ASSETS 
 Non-Current Assets 
 Property, plant and 
  equipment                        188,835       348,251 
 Investment in subsidiary             -             - 
  companies 
 Investment in joint 
  ventures                            -          89,675 
  Intangible assets               2,144,264     2,445,611 
 Development Expenditure            1,505           - 
 Goodwill                           1,312         1,312 
 Deferred tax asset                   -          17,120 
                                  2,335,916     2,901,969 
 Current Assets 
 Inventories                        3,129         9,142 
 Trade receivables                 460,939       575,952 
 Other receivables 
  and 
  prepayments                      619,993       804,003 
 Tax recoverable                   32,539        13,020 
 Amounts due from                     -             - 
  subsidiary companies 
 Amounts due from 
  joint ventures                   27,841        32,428 
 Amounts due from                     -             - 
  related parties 
 Cash and cash equivalents         116,541       416,268 
                                  1,260,982     1,850,813 
 Total Assets                     3,596,898     4,752,782 
 
 EQUITY AND LIABILITIES 
  Non-Current Liabilities 
 Financial liabilities             24,447         7,492 
 Deferred taxation 
  liability                           -           3,323 
                                   24,447        10,815 
 Current Liabilities 
 Trade payables                    170,675       535,940 
 Deferred income                   243,297       756,282 
 Other payables and 
  accruals                         809,824      1,487,997 
 Amounts due to a                     -             - 
  subsidiary 
  Amounts due to related 
   parties                        1,223,256     1,589,052 
 Financial liabilities              4,823        31,383 
  Provision for income 
   tax                              9,626        18,949 
                                  2,461,501     4,419,603 
  Total liabilities               2,485,948     4,430,418 
 
    Share capital                 6,823,838     5,362,491 
    Share premium                  896,111       896,111 
    Retained earnings            (7,785,081)   (6,964,400) 
    Translation reserve           1,005,522      965,602 
    Capital reserve                170,560       170,560 
                                  1,110,950      430,364 
    Non-controlling interests         -         (108,000) 
    Total equity                  1,110,950       322,364 
    Total Equity and 
     Liabilities                  3,596,898     4,752,782 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2016

 
                                                                             Share       Share     Share-Based     Retained      Translation   Capital    Attributable       Non- 
                                                                             Capital     Premium     Payment        Earnings       Reserve      Reserve     To Equity     controlling        Total 
                                                                                                     Reserve                                                 Holders       Interests 
                                                                                                                                                              of the 
                                                                                                                                                             Company 
                                                                              GBP         GBP          GBP            GBP            GBP         GBP           GBP            GBP            GBP 
 Balance at 1 January 
  2015                                                                     5,362,491    896,111         -         (5,444,476)     1,297,945    170,560      2,282,631      (246,971)      2,035,660 
 Loss for the year                                                             -           -            -         (1,525,426)         -           -        (1,525,426)      118,094      (1,407,332) 
 Total other comprehensive 
  income                                                                        -           -            -              -          (332,343)       -         (332,343)       20,877        (311,466) 
  Total comprehensive 
   income for the 
   year                                                                         -           -            -         (1,525,426)     (332,343)       -        (1,857,769)      138,971      (1,718,798) 
 Unclaimed dividends                                                           -           -            -            5,502            -           -           5,502            -            5,502 
 Balance at 31 
  December 2015/ 
  1 January 2016                                                           5,362,491    896,111         -         (6,964,400)      965,602     170,560       430,364       (108,000)       322,364 
 
   Loss for the year                                                            -           -            -          (820,681)          -           -         (820,681)       108,000       (712,681) 
 Total other comprehensive 
  income                                                                        -           -            -              -           39,920         -          39,920            -           39,920 
 Total comprehensive 
  income for the 
  year                                                                          -           -            -          (820,681)       39,920         -         (780,761)       108,000       (672,761) 

  New Share Issues    -    -    -    5,502   -   -   5,502   -   5,502 
                      ---  ---  ---  ------          ------      ------    1,461,347       -            -              -              -           -         1,461,347          -          1,461,347 
  Balance at 31 
   December 2016                                                            6,823,838    896,111        -         (7,785,081)     1,005,522     170,560     1,110,950          -          1,110,950 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2016

 
                                                          2016           2015 
                                                                        restated 
                                                           GBP            GBP 
 Cash Flows from Operating 
  Activities 
 Loss before income tax from 
  continuing activities                              (1,343,037)      (1,645,617) 
 Profit/(loss) before income 
  tax from discontinued activities                     573,800          262,431 
    Adjustments for: 
    Amortisation of intangible 
     assets                                            158,333          165,165 
    Depreciation of property, plant 
     and equipment                                     77,579           150,016 
    Impairment of goodwill                                -             404,352 
    Impairment of intangible assets                    150,000          495,648 
    Loss on disposal of plant and 
     equipment                                         43,533            9,920 
    Non-cash elements of profit                       (308,082)            - 
     on discontinued activities 
    Interest expense                                   61,919            43,747 
    Others                                                -               965 
                                                      (585,955)        (113,373) 
    Changes in working capital: 
    Receivables                                        120,356         (137,221) 
    Payables                                          (817,411)         (63,954) 
    Inventories                                         3,424           (2,424) 
    Related parties and associated 
     companies                                         683,662          632,497 
                                                      (595,924)         315,525 
    Taxation                                            7,797           (24,867) 
  Net cash used from operating activities             (588,127)         290,658 
 
 Cash Flows from Investing Activities 
    Interest received                                       -              - 
    Dividends received 
     Purchases of property, plant and                       -              - 
     equipment                                           (45,899)       (90,649) 
    Purchase of trademarks and licences                     -              - 
  Net cash used in investing activities                 (45,899)       (90,649) 
 
 Cash Flows from Financing Activities 
 
 
 
    Interest paid                                    (61,919)         (43,747) 
      Repayment of term loan                            -             (37,204) 
       Finance leases                                (9,605)          (38,964) 
        Unclaimed dividends returned                     -              5,502 
        New Share Issues                              428,992             - 
  Net cash generated by/(used in) 
   financing activities                              357,468         (114,413) 
  Effect of foreign exchange rate 
   changes on 
   consolidation                                      (23,169)         (30,074) 
  Net decrease in cash and cash equivalents         (299,727)          55,522 
 Cash and cash equivalents at the 
  beginning of the 
  Year                                                416,268          360,746 
  Cash and cash equivalents at the 
   end of the year                                   116,541          416,268 
 
 

NOTES

   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 Witan Gate House, 500-600 Witan Gate West, Milton Keynes MK9 1SH and its principal place of business is in Singapore. The registration number of the Company is 05174452.

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. The specific principal activities of the subsidiary companies are set out in note 12 to the financial statements. There have been no significant changes in the nature of these activities during the year.

   2.   Segmental Information 

All revenue and profit before taxation arises from operations in the education sector. Reportable segments are based on the geographical area where operations are based comprising Europe (UK and Cyprus) and South East Asia/Middle East (Malaysia and Singapore). These segments represent the respective sub-groups of Malvern House Group Limited (Europe) and Malvern Singapore (South East Asia/Middle East).

The segmental analysis is as follows:

 
 
                                         Europe         Asia          Total 
 2016                                     GBP           GBP           GBP 
 Revenue from external customers       1,314,904     2,677,677     3,992,581 
 Depreciation, write offs 
  and amortisation                     (92,852)      (293,060)     (385,912) 
 Loss before taxation                  (528,355)     (814,682)    (1,343,037) 
 Taxation charge                           -         (30,373)      (30,373) 
 Profit on discontinued activities      573,800          -          573,800 
 Loss for the year                      45,445       (845,055)     (799,610) 
 
 Segmental assets                      1,018,926     2,577,972     3,596,898 
 Segmental liabilities                (1,022,332)   (1,463,617)   (2,485,948) 
 Additions to non-current 
  assets                                 3,653        42,246        45,899 
 
          2015-restated 
 Revenue from external customers       2,446,734     2,347,434     4,794,168 
 Depreciation, write offs 
  and amortisation                    (1,044,024)    (122,384)    (1,166,408) 
 Loss before taxation                 (1,548,300)    (97,317)     (1,645,617) 
 Taxation charge                        (1,100)      (23,046)      (24,146) 
 Profit on discontinued activities      262,431          -          262,431 
 Loss for the year                    (1,286,969)    (120,363)    (1,407,332) 
 
 Segmental assets                      1,988,438     2,764,344     4,752,782 
 Segmental liabilities                (3,178,018)   (1,252,400)   (4,430,418) 
 Additions to non-current 
  assets                                17,120           -          17,120 
 

Note that the Segmental liabilities figure for South East Asia and the Middle East is shown as a net asset due to the treatment of the amount due from Europe to South East Asia for funding being shown as a liability in the former and an asset in the latter.

   3.   Earnings/(Loss) Per Share 

The basic and diluted earnings/(loss) per share on continuing activities was based on the loss attributable to shareholders of GBP1,373,410 (2015-restated: loss of GBP1,787,857) and the weighted average number of ordinary shares in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).

The basic and diluted earnings/(loss) per share on discontinued activities was based on the profit attributable to shareholders of GBP573,800 (2015-restated: GBP262,431) and the weighted average number of ordinary shares in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).

There were no outstanding options in 2016.

   4.   Annual Report 

The Annual Report will be sent to shareholders by close of business on or around 6 June 2017. Additional copies will be available to the public, free of charge, from the Company's website www.malverninternational.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

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