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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Malvern International Plc | LSE:MLVN | London | Ordinary Share | GB00BNBVJZ07 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 20.00 | 19.00 | 21.00 | 20.00 | 19.25 | 20.00 | 0.00 | 08:00:14 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Schools & Education Svcs,nec | 6.6M | -1.08M | -0.0443 | -4.51 | 4.89M |
From Apr 2021 to Apr 2024
TIDMMLVN
RNS Number : 5142C
Malvern International PLC
21 June 2021
21 June 2021
Malvern International PLC
("Malvern", the "Company" or the "Group" )
Preliminary results for the year ended 31 December 2020
Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces its preliminary results for the year ended 31 December 2020.
Results
2020 was undoubtedly a very challenging year for Malvern with long periods of school closures, and social distancing and global travel restrictions impacting student numbers, bookings and course delivery. The unprecedented events had a profound impact on revenues and cash flow.
-- Revenues reduced 60% to GBP1.90m from continuing operations (2019 restated: GBP4.70m).*
-- Strong cost control measures were put in place to minimise losses and ensure the continuity of the business.
-- Operating loss before impairments of GBP1.33m from continuing operations (2019 restated: Loss GBP1.18m) and a total operating loss of GBP1.33m (2019 restated: Loss GBP3.86m).
-- The total loss for the year from continuing operations GBP1.66m (2019 restated: GBP4.33m). This resulted in a loss per share of 0.23 pence (2019 restated: Loss 1.69 pence).
*In August 2020, the Group announced closure of Singapore operations. This is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of the closure is set out in note 4(b) of the financial statements.
Operational highlights
-- Language schools closed for long periods in 2020 due to Covid-19 and international travel restrictions, affecting forward sales bookings.
-- Courses for existing students delivered online through Malvern Online Academy.
-- Grew and strengthened relationship with UEL, and doubled student numbers on previous year and added new courses.
-- Awarded NCUK delivery centre status in December 2020. -- All Malvern Junior camps cancelled in 2020.
Commenting on the results and prospects, Richard Mace, Chief Executive Officer, said:
"The results in 2020 were a product of unforeseen circumstances, and as stated in our trading update in March, there remains strong demand for our education products. The performance of the University Pathways division in the last quarter of 2020 gives us confidence in our ability to grow this area of the business, and we have continued to strengthen our relationships with our partners and develop new courses. The continued rollout of the UK vaccination programme makes us hopeful that the UK will be greenlighted by other nations to allow international travel to the UK to reopen. On this basis, we expect the language business division to continue to build during the course of the year and return to pre-pandemic levels in 2022. For these reasons, combined with a significantly stronger and experienced management team in place, we remain positive about the outlook for the Company."
This announcement contains information which, prior to its disclosure by this announcement, was inside information for the purposes of the Market Abuse Regulation
For further information please contact:
Malvern International Plc www.malverninternational.com Richard Mace - Chief Executive Via Communications Portfolio Officer NOMAD & Broker www.whirelandcb.com WH Ireland Limited Mike Coe / Chris Savidge +44 (0) 207 220 1666 Media enquiries Communications Portfolio ariane.comstive@communications-portfolio.co.uk Ariane Comstive +44 7785 922 354
Notes to Editors:
Malvern International is a learning and language skills development partner. Courses are delivered on sites in London, Brighton, and Manchester, at partner campuses, and online through the Malvern Online Academy.
Courses include:
-- Language: English language teaching, -- Pathways: pre-University programs, -- Junior: Summer language camps for secondary school students, and -- Online: language and higher education.
Established in the 1980s and admitted to AIM in 2004, Malvern employs 65 people and delivers a wide range of courses. For further investor information go to www.malverninternational.com .
CHAIRMAN'S STATEMENT
Introduction
2020 was undoubtedly a very challenging year for Malvern with long periods of school closures, and social distancing and global travel restrictions impacting student numbers, bookings and course delivery. The unprecedented events had a profound impact on revenues and cash flow.
Revenues reduced 60% to GBP1.90m from continuing operations (2019 restated: GBP4.70m). Strong cost control measures were put in place to minimise losses and ensure the continuity of the business. The impact of these decisions resulted in an operating loss before impairments of GBP1.33m (2019 restated: loss GBP1.18m) and a total operating loss of GBP1.33m (2019 restated: loss GBP3.86m).
The total loss for the year after discontinued operations was GBP2.14m (2019: GBP8.37m). This resulted in a loss per share of 0.29 pence (2019: loss 3.26 pence).
Financing
The prolonged situation necessitated the Company to seek additional funding to provide sufficient cash resources to trade through the year, while building on the opportunities being created by the new management team in the second half .
The Company raised GBP1.15m (net) by way of a placing and subscription in June 2020 and at the same time agreed the restructuring of its existing debt facility with Boost & Co., providing a two year capital repayment holiday and interest free period subject to certain performance conditions. Since the year end Malvern raised a further GBP1.60m after expenses by way of placing and subscription.
Staff
I would like to take this opportunity to thank every one of our members of staff and the teaching faculty who have risen to the challenges of adapting to remote teaching and continuing to deliver quality education to our student body. We were able to limit redundancies largely to support staff working in our schools by taking advantage of government support schemes where possible.
To retain, incentivise and align the interests of employees with certain performance targets and strategic goals, the Company introduced an EMI share option scheme in 2020. The EMI Options represented 8.5% of the existing share capital of the Company at the time that they were granted to key members of staff and will vest after three years once defined share price levels have been attained for 40 consecutive business days .
Board and executive management
Richard Mace was appointed as CEO of the Company in June 2020 having previously founded Communicate English School Limited which was acquired by Malvern in 2018. The Board currently comprises of one Executive Director, Richard Mace, and two independent Non-Executive Directors, Mark Elliott and Alan Carroll.
Since joining the Company, Richard Mace has made a number of appointments at senior level to strengthen the executive management team and introduce the skills and experience needed to develop sales and strengthen operations. New appointments include a Group Head of Finance, Head of Global Sales and Marketing and a new role of UEL Centre and Development Director, to reflect the strong growth in that area of the business. More information can be found in the operational review.
Company reorganisation
In August 2020, the Group announced closure of Singapore operations and this is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of the closure is set out in note 4(b).
Malvern's operations are now based solely in the UK. The business comprises three language schools, delivering on-site pre-university and in-sessional courses on behalf of university partners, and summer language camps for juniors in a variety of settings. In addition, the Company has expanded on its online offering, providing a range of stand-alone remote and hybrid learning experiences as well as providing teaching remotely when required to existing in-class students. The divisions share back-office administrative, finance, sales and marketing resources.
The Board has reviewed its strategy and has identified the significant opportunities that are available in the growth of English Language training ("ELT") and in supporting international students into higher education in the UK.
Governance
The Group recognises the importance that environmental, social and governance matters contribute to the long-term sustainability of the business. Given its size, Malvern is not required to disclose its GHG emissions and carbon data at present. However, the management team is currently in the process of assessing ways it can capture the data required to report on its carbon footprint and set targets for reducing its energy consumption and energy intensity.
The Company is incorporated in the UK and governed by the Companies Act 2006. Where considered appropriate the Company follows the Quoted Companies Alliance Corporate Governance Code 2018 (the 'QCA Code') and the Board recognises the importance of maintaining a good level of corporate governance, which together with the requirements to comply with the AIM Rules ensures that the interests of the Company's stakeholders are safeguarded.
Outlook
We now have an excellent management team in place who are ensuring we are well prepared for the return of international travel.
There is a significant backlog of demand for face-to-face language tuition in the UK and it is important that safe travel is available by the early autumn to facilitate this. We are expecting the number of university students to grow substantially post pandemic, however online tuition may continue into the 2021-2022 academic year.
The worldwide handling of the pandemic presents evolving scenarios to us and so we will provide updates when meaningful developments occur. An update will also be provided on the morning of the AGM. In the meantime, we continue to build a resilient structure to enable foreign language students worldwide to benefit from the training we are able to provide to them in the UK.
Mark Elliott
Chairman
OPERATING REVIEW
University Pathways
Despite the uncertainty surrounding course start dates, the University Pathways division made considerable progress in 2020. In total, students for the 2020-21 academic year at University of East London (UEL) and Wrexham Glyndwr were double the previous year at around 170 students, and approximately 25% above management expectations, driven largely by UEL.
The partnership with UEL was strengthened with increasing student numbers, two new courses validated and the appointment of an experienced centre director. The two new courses, International Year One in Computer Science and International year One in Hospitality Management, will be introduced from September 2021.
The successful application to become a NCUK accredited delivery centre from our London Kings Cross school is a significant achievement for Malvern. A consortium of leading universities dedicated to giving international students guaranteed access to universities worldwide, NCUK prepares international students for undergraduate study at a UK university and guaranteed progression options to over 20 leading partner universities in the UK, as well as established universities in USA, Canada, Australia and New Zealand. From September 2021, Malvern will accept international and EU students on their nine month NCUK International foundation programme, providing a valuable new revenue stream.
English language schools
The English language schools remained closed for extended periods in 2020, significantly affecting our performance during the year. Around 80% of existing students received online tuition in a mix of remote and live-streamed classes, with balance choosing to postpone their courses until such time that face to face teaching resumed.
The Manchester, London and Brighton schools reopened in March 2021, with sales, whilst international travel remains restricted, focused on students already in the UK. At present we are expecting student numbers to return to former pandemic levels in 2022.
To support student numbers and sales margins, the Company is adopting the proven recruitment model used by our Communicate Manchester centre, to increase the number of Middle Eastern students and direct sales.
Malvern Juniors
Due to Covid-19, all of our Junior language camps were cancelled in 2020.
We maintained regular dialogue with our Italian cohorts, which were postponed into 2021 and began developing new sales channels. In addition we had over GBP1.0m in pre-booking from the Hungarian government English language scholarship scheme, Tempus. This programme will now be running for five years from 2022 to 2027 and our sales and marketing team are in the process of building bookings.
We recognise that the biggest source of Junior students are Italy and China, together holding 45% of the UK market share in total. While we have strong success with the Italian market, we identified opportunities to build on sales coming from China.
In line with the investment in a sales team in China detailed below, and market recovery, Malvern Juniors intends to run four summer centres in 2022, and in 2023 seven summer centres and one low season centre.
Malvern Online Academy (MOA)
Online education remains a key part of Malvern's diversification plan. During 2020, online teaching was refocused towards teaching English language students that were unable to attend in-class study. In order to preserve student numbers in the event of further lock-downs, all new student contracts now include a provision for online learning in the event that schools are forced to close.
With this shift in focus in 2020 to meet the immediate needs of the business, further development of MOA was put on hold. The addition of new courses, market positioning, pricing and the business model is currently being reviewed in the context of developments in the last 18 months and a greater acceptance and adoption of online learning.
Central services
The Company continued to make improvements to its central shared services, which includes both back-office and sales and marketing. We have appointed a new Head of Finance, are seeking to appoint a Head of Operations, and have reorganised our internal functions to establish clear reporting structures and areas of responsibility.
Sales and marketing
The Company has restructured the sales and marketing team and adopted the student sales model used by its Manchester school for all centres. The model focuses on a combination of B2B and B2C recruitment models. B2C sales are generated by well-trained front office staff and investment in SEO, AdWords and targeted social media spend. The B2B sales focuses on agencies and relationships with embassies focused on geographies that provide profitable growth opportunities. Direct sales is supported by strong branding and visibility on agency and association websites.
To drive the sales and marketing function, we have appointed a new Head of Sales and Marketing. This is supported by refreshed Company branding that is more modern and appealing to our target audiences.
Going forward we will be increasing our sales focus on the Chinese market, establishing a Chinese sales team to take advantage of the significant opportunity this market presents across all areas of the business, but in particular University Pathways and Malvern Juniors.
Richard Mace
Chief Executive Officer
FINANCIAL REVIEW
Performance and discontinued operations
In August 2020, the Group announced closure of Singapore operations. This is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of the closure is set out in note 4(b).
Revenues reduced 60% to GBP1.90m from continuing operations (2019 restated: GBP4.70m). Strong cost control measures were put in place to minimise losses and ensure the continuity of the business. The impact of these decisions resulted in an operating loss of GBP1.33m (2019 restated: loss GBP1.18m) and a total operating loss of GBP1.33m (2019 restated: loss GBP3.86m).
The total loss for the year from continuing operations is GBP1.66m (2019 restated: GBP4.33m). This resulted in a loss per share of 0.23 pence (2019 restated: loss 1.69 pence).
Financial position
As a result of the decision to cease trading in Singapore during the year, GBP1.9m in right of use assets were disposed of. Cash and cash balances as at 31 December 2020 were GBP103,609 (2019: GBP83,264).
Financing
In order to provide sufficient working capital to support Malvern's operations, the Company came to an agreement to restructure the loan repayments on a GBP2.60m borrowing provided by Boost & Co. granting a capital and interest repayment holiday, in exchange for the issue of warrants over 33,333,333 New Ordinary Shares.
At the same time, the Company raised a further GBP1.15m (net) by way of a placing and subscription to strengthen the balance sheet and to provide working capital to support Malvern's planned operations through the Covid period as it was then anticipated to be.
Subsequent events
To ensure Malvern has the cash resources to trade through the continuing difficulties caused by Covid-19 and to build on the very significant progress that it has made in many areas of its business since the June 2020, the Company raised a further GBP1.60m (net) by way of Placing and Subscription in April 2021.
The closure of the Singapore school was completed in August 2020 and all operations in the territory have now ceased (liquidation commenced in April 2021). Malvern is now entirely focused on the UK international education market, where the Directors believe there is ample opportunity grow the business and take advantage of the long-term market growth prospects.
EMI scheme
To retain, incentivise and align the interests of employees with certain performance targets and strategic goals, the Company introduced an EMI share option scheme in 2020. The EMI Options represented 8.5% of the existing share capital of the Company at the time they were granted to key members of staff and will vest after three years once defined share price levels have been attained for 40 consecutive business days . More detail can be found in note 12 of the financial statements.
Going concern
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above.
In assessing the Group's ability to continue as a going concern, the Board reviews and approves the annual budget and longer-term strategic plan, including forecasts of cash flows.
The Board also reviews the Group's sources of available funds and the level of headroom available against its committed borrowing facilities and associated covenants.
Whilst there remain significant uncertainties, current trading and the future prospects gives the Board confidence that it is appropriate to prepare the accounts on a going concern basis, as outlined in note 2(ii) of the financial statements.
While University Pathways courses went ahead from September 2020, and English language schools reopened fully from March 2021, there is no guarantee that the Covid-19 pandemic will not continue to persist and how quickly business will return to normal levels. The Board continues to manage all major creditors via deferral agreements where possible and maintains tight cost control.
Daniel Fisher
Group Head of Finance
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
Hot Features
Premium
2019
Note 2020 RESTATED*
GBP GBP
Revenue
Sale of services 5 1,901,307 4,703,864
Total Revenue 1,901,307 4,703,864
Cost of services sold (1,016,393) (3,020,949)
Gross Profit 884,914 1,682,915
Other Income 418,363 85,504
Salaries and employees' benefits (1,095,012) (1,117,978)
Share based payments 12 (169,278) (19,192)
Amortisation - (232,939)
Depreciation of plant and equipment (414,349) (424,026)
Other operating expenses 7 (950,745) (1,153,097)
Impairment of intangible asset
& goodwill - (2,685,679)
Operating Loss (1,326,107) (3,864,492)
Finance costs 6 (302,066) (280,003)
Loss before tax (1,628,173) (4,144,495)
Income tax charge (31,300) (190,000)
Loss for the year from continuing
operations (1,659,473) (4,334,495)
Loss from Discontinued Operation (480,092) (4,033,806)
Loss for the year (2,139,565) (8,368,301)
Attributable to:
Equity holders of the Company (2,139,565) (8,368,301)
*2019 comparatives have been restated to exclude Singapore operations following the closure in 2020.
2020 2019
RESTATED
GBP GBP
Loss for the year (2,139,565) (8,368,301)
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation movements 15,575 (316,716)
Total comprehensive income for the
year (2,123,990) (8,685,017)
Continuing operations (1,659,473) (4,334,495)
Discontinued operations (464,517) (4,350,522)
Attributable to:
Equity holders of the parent (2,123,990) (8,685,017)
Non-controlling interest - -
2020 2019
RESTATED*
Loss per share from continuing operations
attributed to equity holders of the
Company (in pence)
Basic (0.23) (1.69)
Diluted (0.23) (1.69)
Loss per share from discontinued operations
attributed to equity holders (in pence)
Basic and diluted (0.06) (1.57)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2020 2019
GBP GBP
TOTAL ASSETS
Non-Current Assets
Property, plant, and
equipment 80,781 367,999
Goodwill 1,419,350 1,419,350
Right-of-use assets 2,612,614 4,912,511
Total non-current assets 4,112,745 6,699,860
Current Assets
Inventories - 6,154
Trade receivables 1,033,105 751,333
Other receivables and
prepayments 162,093 665,035
Cash and cash equivalents 103,609 83,264
Total current assets 1,298,807 1,505,786
Assets classified for 1,846 -
disposal
Total Assets 5,413,398 8,205,646
EQUITY AND LIABILITIES
Non-Current Liabilities
Term loan 2,532,115 2,438,573
Warrants 63,701 75,640
Convertible loan notes 11 272,817 -
Lease liabilities 2,491,486 4,580,165
Total non-current
liabilities 5,360,119 7,094,378
Current Liabilities
Trade payables 603,631 985,056
Contract liabilities 676,287 756,425
Other payables and accruals 1,229,743 689,169
Amounts due to related
parties 40,000 46,646
Convertible loan notes 11 50,000 316,587
Provision for income tax 10,279 10,279
Lease liabilities 350,829 604,863
Total current liabilities 2,960,769 3,409,025
Liabilities directly 216,737 -
associated
with assets classified for
disposal
Total Liabilities 8,537,625 10,503,403
Equity attributable to
equity
holders of the Company
Share capital 10,309,811 9,363,236
Share premium 5,782,394 5,431,449
Retained earnings (19,703,963) (17,564,398)
Translation reserve 288,149 272,574
Capital reserve 170,560 170,560
Convertible loan reserve 28,822 28,822
Total equity (3,124,227) (2,297,757)
Total Equity and
Liabilities 5,413,398 8,205,646
The loss for the year as per the financial statements of the parent company at 31 December 2020 was GBP896,815 (2019: Loss GBP12,660,341).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable
to
Convertible Equity
Share Share Retained Translation Capital Loan Holders of
Capital Premium Earnings Reserve Reserve Reserve the Company Total
GBP GBP GBP GBP GBP GBP GBP GBP
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
Balance at 1
January
2019 9,211,736 5,016,849 (9,196,097) 589,290 170,560 28,822 5,821,160 5,821,160
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
Direct costs
relating
to issue of shares (39,900) (39,900) (39,900)
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
Total comprehensive
income for the
year (8,368,301) (316,716) (8,685,017) (8,685,017)
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
New Share Issue 151,500 454,500 606,000 606,000
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
Balance at 31
December
2019 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)
---------- --------- ------------ ----------- ------- ----------- ------------ -----------
*The total of share-based payments taken to equity during the year excludes the director's bonus accrual (GBP24,700) which was recognised as a liability in 2020. The accrual was moved to equity in 2021 when the bonus was paid in shares.
CONSOLIDATED STATEMENT OF CASH FLOWS
2020 2019
GBP GBP
Cash Flows from Operating Activities
Loss after income tax from
Continuing activities (1,659,473) (5,885,513)
Discontinued activities (480,092) (2,482,788)
Adjustments for:
Amortisation of intangible assets - 324,261
Depreciation of tangible assets 414,349 848,070
Impairment of intangible assets - 2,876,257
Fair value movement on warrants (61,939) (197,640)
Fair value movement on convertible
loan reserve - 17,307
Share based payments 175,278 -
Disposal of tangible assets (115,587) 21,180
Loss on disposal of discontinued
operations - 1,133,034
Impairment of other receivables - 517,344
Impairment of trade receivables 123,690 189,990
Finance cost 302,066 422,005
Adjustments for deferred tax - 190,000
Interest paid (51,583) (404,715)
Tax paid - (81,946)
(1,353,291) (2,513,154)
Changes in working capital:
Decrease in stocks 6,153 71
Increase in receivables 94,657 (411,801)
Increase/(decrease) in payables 218,561 1,127,843
Decrease in amounts due to related
parties (6,646) (508,048)
Net cash flows used in operating
activities (1,040,566) (2,305,089)
Cash Flows from Investing Activities
Purchase of intangible asset - (245,112)
Purchases of property, plant, and
equipment - (72,040)
Acquisition of Subsidiary, net of - -
cash acquired
Net cash used in investing activities - (317,152)
Cash Flows from Financing Activities
Finance leases (194,801) (502,584)
New equity issued 1,155,712 566,100
Term Loan 100,000 2,537,706
Net cash generated by financing
activities 1,060,911 2,601,222
Net Change in cash and cash equivalents 20,345 (21,019)
Cash and cash equivalents at the
beginning of the year 83,264 105,380
Exchange losses on cash and cash
equivalents - (1,097)
Cash and cash equivalent at the
end of the year 103,609 83,264
NOTES TO THE FINANCIAL STATEMENTS
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 100 Avebury Boulevard, Milton Keynes, MK9 1FH. 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. There have been no significant changes in the nature of these activities during the year.
2. Significant accounting policies
i. 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 European Union, 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.
ii. Going concern
The financial statements have been prepared on a going concern basis. The Board 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 making their assessment of going concern the directors have considered the current and developing impact on the business as a result of the Covid-19 pandemic. Whilst this has been very disruptive to the Company's operations, including the closure of its schools for a large part of 2020, the business was able to adapt its service offering through on-line learning. However, there is no certainty as to how long the Covid-19 will persist and how quickly business will return to normal levels.
The directors have taken a range of mitigating actions to protect and manage the short, medium and long-term interests of the business, its employees and students during this pandemic. Specifically, the directors have considered the following in the preparation of the financial statements on a going concern basis:
Profitability
-- In August 2020, due to difficult trading conditions and substantial financial resources the business required, a decision was made to discontinue the Group's loss-making operations in Singapore, with the aim being to improve the Group's future profitability.
-- The Group has now refocused its activity on the UK operations having reduced its operational presence and financial obligations overseas.
-- Following the closure of the UK schools for large parts of 2020, operations reopened in March 2021. As a result of the success of the UK's vaccination program, the government is gradually opening up internationally travel.
-- A number of embassy sponsored students from the Middle East are currently attending face-to-face classes in each of the Group's centres. The advanced vaccine rollout in some areas of the Middle East is expected to result in more students being able to travel in the short to medium term.
-- 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, which now includes the newly acquired partnership with NCUK.
-- The Group is working on the assumption that student numbers will increase throughout the second half of 2021, before returning to normal business in 2022.
Cash flow
-- The Group's main source of funds are internally generated funds and new capital injections. It is possible that the Group may continue to require further funding and capital injections in the future and there will be some reliance placed on their ability to do so, if required.
-- The Group undertook a Placing and Subscription in June 2020, raising GBP1.15m (net). The proceeds of this Fundraising were used to supplement the Company's working capital resources and strengthen the Company's balance sheet. The Group undertook a further Placing and Subscription in March 2021, raising GBP1.58m (net). The proceeds of this fundraise will provide sufficient liquidity and flexibility to allow the Company to manage through the period of expected disruption caused by Covid-19, and to contribute to planned growth initiatives.
-- In May 2020, the existing debt with Boost & Co. has been restructured providing for a two-year capital repayment holiday and interest free period. As part of the restructuring agreement, the option of the second tranche of up to GBP4.0m, which was available to fund potential permitted acquisitions, was cancelled.
-- The Board has sought deferral agreement with all major creditors and has been pleased with the support received.
The above factors, combined with the continued risk of Covid-19, highlight a material uncertainty as to the company's ability to continue as a going concern. Whilst these material uncertainties exist, current trading has given the Board confidence that it is appropriate to prepare the accounts on a going concern basis. The financial statements do not include any adjustments that may be required in the event that the company could not continue as a going concern.
3. Lessee accounting
From January 2019, the Company implemented IFRS 16 Leases, recognising right-of-use assets and the corresponding lease liabilities by recording them on the balance sheet.
The Company'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 income statement
2020 2019
GBP GBP
-------- ----------
Interest expense and similar charges
-------- ----------
Interest expense 184,897 301,363
-------- ----------
Interest expense on disposed right-of-use
assets 103,302 -
-------- ----------
Operating and administrative expenses
-------- ----------
Depreciation of right-of-use assets 374,149 716,583
-------- ----------
Depreciation of disposed right-of-use
assets 283,353 -
-------- ----------
Total expensed to income statement 945,701 1,017,946
-------- ----------
Amounts recognised on the balance sheet
At 31 December At 31 December
Right-of-use assets 2020 2019
Balance as at the beginning of the
year 4,912,511 5,623,656
--------------- ---------------
Disposals (1,605,429) -
--------------- ---------------
Depreciation of right-of-use assets (374,149) 716,583
--------------- ---------------
Depreciation of disposed right-of-use
assets (283,353)
--------------- ---------------
FX movement (36,966) (5,438)
--------------- ---------------
Balance as at the end of the year 2,612,614 4,912,511
--------------- ---------------
At 31 December At 31 December
Lease liabilities 2020 2019
GBP GBP
--------------- ---------------
Current liability 350,829 604,863
--------------- ---------------
Non-current liability 2,491,486 4,580,165
--------------- ---------------
Total liability 2,842,315 5,185,028
--------------- ---------------
At 31 December At 31 December
Lease Payments 2020 2019
GBP GBP
--------------- ---------------
Total lease rent amount 519,501 479,223
--------------- ---------------
Amount paid during the year (194,801) (328,140)
--------------- ---------------
Rent free amount (84,598) (151,083)
--------------- ---------------
Balance amount at end of the year 240,102 -
--------------- ---------------
In October 2020, the Company 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
2020 GBP GBP GBP
--------------- -------------------------- -----------
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
--------------- -------------------------- -----------
2019 GBP GBP GBP
--------------- -------------------------- -----------
Revenue from external
customers 4,703,864 2,311,223 7,015,087
--------------- -------------------------- -----------
Depreciation and amortisation 656,964 515,367 1,172,331
--------------- -------------------------- -----------
Impairment of Intangibles 2,211,471 2,116,097 4,327,568
--------------- -------------------------- -----------
Loss before taxation (4,144,495) (4,033,806) (8,178,301)
--------------- -------------------------- -----------
Taxation charge (190,000) - (190,000)
--------------- -------------------------- -----------
Loss for the year (4,334,495) (4,033,806) (8,368,301)
--------------- -------------------------- -----------
Segmental assets 4,007,083 2,779,211 6,786,294
--------------- -------------------------- -----------
Segmental liabilities 7,094,348 3,409,055 10,503,403
--------------- -------------------------- -----------
Additions to non-current
assets 2,541,092 1,736,851 4,277,943
--------------- -------------------------- -----------
*Following the announcement of closure of Singapore operations, 2020 figures have been presented as discontinued operations .
The 2019 figures for Singapore are now restated to discontinued operations with Malaysia in Table 4(a). Revenue of 2019 for UK & Singapore were GBP4.70m and GBP1.81m (in total GBP6.51). The Operating loss of 2019 for UK & Singapore were GBP3.86m and GBP1.41m (in total GBP5.27m). The reported loss for the year 2019 for UK & Singapore were GBP4.33m and GBP1.55m (in total GBP5.89m).
(b) Discontinued Operations
On 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 of the discontinued operations presented are for the year ended 31 December 2020 and 31 December 2019
2020 2019 2019
GBP GBP GBP
------------ ------------ ---------------------
Singapore Singapore Singapore & Malaysia
------------ ------------ ---------------------
Revenue 648,167 1,802,451 2,311,223
------------ ------------ ---------------------
Other Income 118,279 91,920 125,145
------------ ------------ ---------------------
Expenses (1,246,538) (3,445,389) (4,638,194)
------------ ------------ ---------------------
Loss before tax (480,092) (1,551,018) (2,201,826)
------------ ------------ ---------------------
Income tax expenses - - (5,399)
------------ ------------ ---------------------
Loss after income tax of discontinued operation (480,092) (1,551,018) (2,207,225)
------------ ------------ ---------------------
Loss on disposal of subsidiary - - (375,270)
------------ ------------ ---------------------
(1,551,018) (2,582,495)
------------ ------------ ---------------------
Impairment of brand value and licenses - - (1,451,311)
------------ ------------ ---------------------
Loss from discontinued operations (480,092) (1,551,018) (4,033,806)
------------ ------------ ---------------------
Exchange differences on translation of discontinued operations 15,575 272,574 589,290
------------ ------------ ---------------------
Other comprehensive income from discontinued operations 15,575 272,574 589,290
------------ ------------ ---------------------
Net cash flow from operating activities (24,299) (72,981) (462,317)
------------ ------------ ---------------------
Net cash flow from investing activities - (13,023) (13,023)
------------ ------------ ---------------------
Net cash flow from financing activities - 85,594 85,594
------------ ------------ ---------------------
Net cash generated by subsidiary (24,299) (410) (389,746)
------------ ------------ ---------------------
ii) Details of the disposal of the subsidiaries
2020 2019
GBP GBP
------ ----------
Consideration received or receivable:
------ ----------
Fair value of consideration - -
------ ----------
Carrying amount of net liabilities disposed
of - 10,330
------ ----------
Profit on sale of subsidiary before income
tax and reclassification of foreign currency
translation reserve - 10,330
------ ----------
Reclassification of foreign currency translation
reserve - (385,660)
------ ----------
Loss on disposal of subsidiary - (375,270)
------ ----------
iii) The details of disposal of the subsidiaries
The carrying amounts of assets and liabilities as at the yearend (31 December 2020)
2020 2019
GBP GBP
------ ----------
Property, plant and equipment - 54,901
------ ----------
Cash & cash equivalents - 225,864
------ ----------
Total assets - 280,765
------ ----------
Trade creditors - (291,095)
------ ----------
Total liabilities - (291,095)
------ ----------
Net assets - (10,330)
------ ----------
iv) Assets and Liabilities of disposal entities classified for disposal
The following assets and liabilities were reclassified as held for disposal in relation to the discontinued operation as at 31 December 2020
2020 2019
GBP GBP
---------- -----
Assets classified for disposal
---------- -----
Other Receivable 546 -
---------- -----
Cash and cash equivalent 1,300 -
---------- -----
Total assets of entities for disposal 1,846 -
---------- -----
Liabilities directly associated with assets
classified for disposal
---------- -----
Trade Creditors (161,254) -
---------- -----
Other payables (55,483) -
---------- -----
Total liabilities of entities for disposal (216,737) -
---------- -----
5. Sale of services
2020 2019
RESTATED
GBP GBP
--------- ---------
Course fees 1,659,601 3,266,301
--------- ---------
Accommodation fees 192,643 1,207,926
--------- ---------
Application fees, registration and examination
fees 28,470 39,746
--------- ---------
Training fees, course materials and others 20,593 189,891
--------- ---------
1,901,307 4,703,864
--------- ---------
6. Finance Costs
2020 2019
RESTATED
GBP GBP
------- ---------
Interest on leases (IFRS 16) 184,897 159,361
------- ---------
Interest on term loan* 90,125 107,518
------- ---------
Interest on convertible loan notes 24,766 13,124
------- ---------
Other finance costs 2,278 -
------- ---------
302,066 280,003
------- ---------
*An interest free period was negotiated with the lender part-way through 2020. All interest disclosed above relates to interest pre-dating this agreement, alongside the unwinding of interest accrued during the period of cash flow deferral.
7. Operating Expenses
2020 2019
RESTATED
GBP GBP
-------------------- ---------------
Auditors' remuneration:
-------------------- ---------------
Fees payable to the Company's auditors
for statutory audit* 27,500 35,000
-------------------- ---------------
Fees payable to the Company's auditors
and associates for statutory audit of
subsidiary Companies* 40,000 35,000
-------------------- ---------------
Administrative and marketing expenses 821,494 1,168,634
-------------------- ---------------
Expected credit losses - trade receivables 123,690 94,796
-------------------- ---------------
Fair value movement on warrants (61,939) (197,640)
-------------------- ---------------
Fair value movement on convertible loan
notes - 17,307
-------------------- ---------------
950,745 1,153,097
-------------------- ---------------
* Fees payable to company's auditors for 2019 and 2020 are to Crowe UK and Cooper Parry respectively.
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 GBP2,139,565 (2019: loss of GBP8,368,301) and the weighted average number of ordinary shares in issue during the year of 735,661,044 shares (2019: 256,453,628 shares).
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
2020 2019 2020 2019
--------- --------- --------- ---------
GBP GBP GBP GBP
--------- --------- --------- ---------
Non-current liabilities
--------- --------- --------- ---------
Convertible Loan Notes 272,817 - 272,817 -
--------- --------- --------- ---------
Term Loan 2,532,115 2,438,573 2,432,115 2,438,573
--------- --------- --------- ---------
Warrants 63,701 75,640 63,701 75,640
--------- --------- --------- ---------
Lease liabilities 2,491,486 4,580,165 - -
--------- --------- --------- ---------
5,360,119 7,094,378 2,768,633 2,514,213
--------- --------- --------- ---------
Current liabilities
--------- --------- --------- ---------
Convertible Loan Notes 50,000 316,587 50,000 316,587
--------- --------- --------- ---------
Lease liabilities 350,829 604,863 - -
--------- --------- --------- ---------
Trade and other payables 1,833,374 1,674,225 322,493 292,815
--------- --------- --------- ---------
Related parties 40,000 46,646 40,000 32,691
--------- --------- --------- ---------
2,274,203 2,642,321 412,493 642,093
--------- --------- --------- ---------
Total 7,634,322 9,736,699 3,181,126 3,156,306
--------- --------- --------- ---------
Convertible Loan Notes
At 31 December 2020, the Group has an obligation for GBP322,817. (See Note 11).
Term Loan
In August 2019, Malvern received a Term Loan from Boost & Co for GBP2,600,000. This loan carries an interest rate as the higher of (a) 10% per annum, or (b) 8% per annum plus LIBOR. The loan will be repaid over 60 months on a fixed monthly instalment basis. However, as part of fundraising in June 2020, the Company has agreed a restructuring of its existing debt with Boost & Co. which provides for a two-year capital repayment holiday and interest free period subject to performance conditions.
As part of the transaction around the disposal of Malaysia operations, the company retained half of loan with AmBank, whereas the other half of the loan was taken over by the purchaser. The loan is to be repaid over the length of the loan term ending Dec 2024, with repayment starting from Jan 2021. The value of half of the loan, together with interest capitalisation is GBP80,009.
During 2020, the Group took advantage of the Government-backed Bounce Back Loan Scheme (BBLS), benefitting from a total of GBP100,000. This will 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.
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 10 years since the inception of term loan in August 2019.
As at the date of financial position, the Company has fair valued these warrants at GBP63,701. The following estimates were used to calculate this fair value:
-- Annualised volatility of 109% and 85% at the inception of term loan and at the year-end respectively, calculated using share price volatility over a preceding 3 year period.
-- Maturity of 10 years applied, reflecting the duration over which Boost & Co could exercise these warrants.
-- Risk free rate of 0.50%, being the Yield on UK 10 year Government bonds.
-- Strike price of GBP0.0256, being the 28 day average share price preceding the date (ie 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 January 2021, the Company arranged a bridging loan facility with financing partner Boost & Co. to ensure the availability of working capital pending the payment of a significant trade debtor. This facility was drawn in full with interest charged at 11.25% per annum. The bridging loan facility was repaid with interest in March 2021, following receipt of the trade debtor.
In addition, the Groups Chief Executive Officer agreed to lend the Company GBP30,000 by way of an unsecured loan. This loan was repayable on or before 30 April 2021, attracting interest at 5.0% per annum. The unsecured loan was repaid to the Chief Executive Officer in March 2021 via an equity settled transaction. The full value of the loan (GBP30,000) was converted into shares, at the issue price of 0.20p, equating to 15,000,000 shares.
With the Company experiencing the prolonged impacts of Covid-19, a decision was made in March 2021 to undertake a fundraise. The proceeds of this fundraise would provide sufficient liquidity and flexibility to allow the Company to manage through the period of expected disruption caused by Covid-19, and to contribute to planned growth initiatives.
The Fundraising raised gross proceeds of GBP1.70 million through the placing of 620,150,000 New Ordinary Shares and a subscription to the Company of 230,000,000 New Ordinary Shares all at a price of 0.2 pence per share. In aggregate 850,150,000 New Ordinary Shares were issued pursuant to the Placing and Subscription.
Following the announcement made in the 2019 accounts that the Group's Singapore operations would be closed, the main operating entity in Singapore officially entered liquidation in April 2021.
11. Convertible Loan Notes
In 2017 the company issued loan notes, as described in the table below.
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 16 November 2020
--------------------------------- --------
Interest Payable 1 Jan 2018-31 Dec 2018 3%
--------------------------------- --------
1 Jan 2019-31 Dec 2019 4%
----------------------------------------------------------- --------
1 Jan 2020-31 Dec 2020 5%
----------------------------------------------------------- --------
1 Jan 2021-31 Dec 2022 6%
----------------------------------------------------------- --------
Total Issued GBP1,200,000
--------------------------------- --------
Amount converted in 2017 (GBP100,000)
--------------------------------- --------
Balance at 31/12/2017 GBP1,100,000
--------------------------------- --------
Amount converted in 2018 (GBP771,898)
--------------------------------- --------
Fair value adjustment (GBP28,822)
--------------------------------- --------
Balance at 31/12/2018 GBP299,280
--------------------------------- --------
Fair value adjustment GBP17,307
--------------------------------- --------
Balance at 31/12/2019 GBP316,587
--------------------------------- --------
Unwinding Interest GBP6,230
--------------------------------- --------
Balance at 31/12/2020 GBP322,817
--------------------------------- --------
12. Share-based payments and share options
The Company has an Enterprise Management Incentive (EMI) 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, these are:
-- Mid-market share price of the Company on the AIM Market of the London Stock Exchange stays at 0.5p or more for 40 consecutive business days.
-- Mid-market share price of the Company on the AIM Market of the London Stock Exchange stays at 0.9p or more for 40 consecutive business days.
The cost recognised for 2020 in respect of these options is, GBP184. The following methodology was used to calculate the amount chargeable in respect of these options:
-- Fair values of 0.3448p and 0.7406p. These have been derived using the following criteria within the Black Scholes valuation framework:
-- Grant Date - 2(nd) December 2020
-- Stock price of 0.15p, as at the grant date, with exercise prices of 0.5p and 0.9p respectively.
-- Risk free rate of 0.35%, being the yield on UK 10-year Government bonds at the grant date.
-- Volatility of 12.3% representing the standard deviation of inter-day returns over the prior 365-day period.
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 Company has deemed the vesting probabilities at 5.02% and 0.37%. These 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.
1. Condition - 0.5p or more for 40 consecutive business days
Share Options in circulation 34,750,000
Exercise Price (p) 0.5
-----------
Fair Value (p) 0.3448
-----------
Deemed probability of achieving market
condition 5.02%
-----------
Expensed over scheme duration GBP6,015
-----------
2. Condition - 0.9p or more for 40 consecutive business days
Share Options in circulation 34,750,000
Exercise Price (p) 0.9
-----------
Fair Value (p) 0.7406
-----------
Deemed probability of achieving market
condition 0.37%
-----------
Expensed over scheme duration GBP952
-----------
Year ended 31 December 2020
Weighted average exercise
Number of options price
Outstanding
at 1 January
2020 - -
Granted
during the
year 34,750,000 0.15p
Exercised
during the
year - -
Outstanding
at 31
December
2020 34,750,000 0.15p
Exercisable - -
During the year, 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, GBP144,394 for continuing operations, and GBP6,000 for discontinued operations.
In addition, a bonus was also awarded to certain directors as a 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 is, GBP24,700 (restated 2019: GBP19,192). 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 prior year bonus of GBP19,192, awarded in 2019, was originally accrued to liabilities. In 2020 when then bonus was paid in shares, the accrual was transferred to equity.
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