Final Results

RNS Number : 1845K

Malvern International PLC

04 May 2022

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

04 May 2022

Malvern International plc

("Malvern", the "Company" or the "Group" )

Final results for the year ended 31 December 2021

Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces its preliminary results for the year ended 31 December 2021.

Results

· Revenues increased 27 per cent. to £2.42m (2020: £1.90m). The operating loss for the year was £1.32m (2020: loss £1.33m) reflecting strong cost control measures coupled with increased investment in our sales and marketing team to ramp-up student recruitment efforts in key territories.

· The loss for the year from continuing operations was £1.59m (2020 loss: £1.66m), resulting in a loss per share on continuing operations of 0.08 pence (2020 loss: 0.23 pence).

· The total loss including discontinued operations was £1.15m (2020 loss: £2.14m).

· As at 31 December 2021, the cash position was £0.4m and net debt was £5.85m. Net debt includes £3.35m of lease liabilities.

Operational highlights

· Executive management team appointments: CFO and Director of University Partnerships

· Reached 80 per cent. of pre-pandemic levels of students in Q4 2021

· All language schools now approved by the Kuwaiti Cultural Office

· Expanded sales team expansion to target key student recruitment geographies

· Pathway student numbers impacted by pandemic but positioned to grow significantly in 2022

· £2.6m loan restructured over six years (post year end)

Commenting on the results and prospects, Richard Mace, Chief Executive Officer, said:  

"Student numbers were rebuilding throughout 2021 and by Q4 we had reached 80 per cent. of pre-pandemic levels, although ongoing international travel restrictions impacted higher education starts for the 2021/22 academic year.  We have made strong progress in building our sales and marketing team to target key territories such as China and Middle East and North Africa ("MENA"). All our language schools are now approved by the Kuwaiti Cultural Office which presents a significant opportunity to attract a consistent number of students and recurring income streams. 

Since the year end, we successfully renegotiated the Company's £2.6m debt facility which is now payable over six years up to 2028.

We expect student numbers to reach pre-pandemic levels during this year and, with fewer international student providers today than two years ago due to M&A activity and closures, we believe we are well placed to build the business in 2022 and beyond ."

For further information please contact:
Malvern International Plc	www.malverninternational.com
Mark Elliott - Chairman	Via our website
Richard Mace - Chief Executive Officer
WH Ireland (NOMAD & Broker)	www.whirelandcb.com
Mike Coe / Sarah Mather	0207 220 1666

Notes to Editors:

Malvern International is a learning and language skills development partner, offering international students essential academic and English language skills, cultural experiences and the support they need to thrive in their academic studies, daily life and career development.

University Pathways  - on and off-campus university pathway programmes helping students progress to a range of universities, as well as in-sessional and pre-sessional courses.

Malvern House Schools  - British Council accredited English Language Training at English UK registered schools in London, Brighton and Manchester.

Malvern Online Academy  - British Council accredited online school, offering supported tuition to students from around the world in English language, higher education, and professional education.

Juniors and summer camps  - fully-immersive summer residential English language camps and bespoke group programmes for 13 to 18 year olds.

For further investor information go to  www.malverninternational.com .

 

CHAIRMAN'S STATEMENT

Introduction

Student numbers were rebuilding throughout 2021 as we were able to reopen schools and offer in-class teaching. However the dynamic situation around international travel affected student applications and bookings during crucial windows, particularly for higher education students for the start of the 2021/22 academic year. English Language Training ("ELT") student numbers reached 80 per cent. of pre-pandemic levels in Q4 2021.

Revenues increased 27 per cent. to £2.42m (2020: £1.90m). The operating loss for the year was £1.32m (2020: loss £1.33m) reflecting strong cost control measures coupled with increased investment in our sales and marketing team to ramp-up student recruitment efforts in key territories.

The loss for the year from continuing operations was £1.59m (2020 loss: £1.66m), resulting in a loss per share on continuing operations of 0.08 pence (2020 loss: 0.23 pence).

The total loss including discontinued operations was £1.15m (2020 loss: £2.14m).

As at 31 December 2021, the cash position was £0.4m and net debt was £5.85m. Net debt includes £3.35m of lease liabilities.

Financing and debt restructure

To ensure we had the cash resources to trade through the continued difficulties caused by Covid-19 and to build on the very significant progress made, the Company raised £1.70 million in an oversubscribed fundraising in April 2021.

Since the year end, the management successfully renegotiated its £2.6m debt facility with BOOST&Co., providing for a 12-month payment and interest holiday to March 2023, with revised interest terms and no early repayment penalties. Full details of the new debt structure can be found in the announcement of 4 March 2022. 

Board appointment

We were delighted to appoint Daniel Fisher in 6 December 2021 to the Board of the Company as an Executive Director and Chief Financial Officer. Daniel joined the Board having acted as the Company's head of finance since January 2021. Daniel has a wealth of experience in financial leadership roles.

Share option scheme

The Company continued to offer an EMI share option scheme to retain, incentivise and align the interests of employees with certain performance targets and strategic goals. A total of 146,000,000 ordinary shares of 0.1 pence each were granted in 2020 and 2021 to Directors and staff in three tranches, representing 6.9 per cent of the existing issued share capital of the Company. The EMI options will vest three years after the date they were granted, once defined share price targets have been attained.

Staff and staff appointments

Malvern has made a few strategic appointments to the sales and marketing team to support the growth in student numbers and target key territories, including China, South East Asia and MENA. I would like to take this opportunity to thank all our colleagues for their continued dedication in delivering quality education to our students. 

Governance

We continue to make improvements to our corporate governance systems. Following the appointment of a dedicated, group-wide HR Manager we have reviewed and updated our internal policies, making them available to staff and suppliers as appropriate.

The role of Company Secretary has been taken on by our Chief Financial Officer, Daniel Fisher, with the support of external advisors, Oakwood Corporate Services Limited. 

During the year we also carried out an internal review and audit to ensure that we continue to comply with the Quoted Companies Alliance Corporate Governance Code 2018. We also updated our website to ensure continued compliance with the AIM rules.

Outlook

The easing of travel restrictions is attracting international students back into the UK.

We are making significant investment in expanding our global sales operations and agency network, including China for the first time, with the expectation that this investment will greatly benefit our partnerships with University of East London, NCUK, Wrexham Glyndwr University and other future university partnerships.

The ELT market has continued to consolidate with fewer providers today than two years ago due to M&A activity and closures. We are growing relationships with existing customers such as the Kuwaiti Cultural Office and investing in our lead-management system to have industry leading capability to generate and respond to enquiries efficiently. These factors are enabling us to build student numbers at our Brighton centre in its first full year of operations and are supporting our expectations to reach pre-pandemic levels in London and Manchester during 2022, ahead of overall sector expectations.

As a business, we are well positioned to take advantage of the expected growth in overseas student numbers over the coming years. We are confident that we are well placed to build the business in 2022 and beyond, whilst recognising that some uncertainty with Covid-19 and the war in Ukraine remain.

Mark Elliott

Chairman

OPERATING REVIEW

English language training ("ELT")

The English language schools provided a mixture in-class, online and blended learning throughout 2021, with Malvern Online Academy ("MOA") supporting students with supplementary and hybrid learning where required.

In Q4 2021, all three schools had grown their student bodies back to around 80 per cent. of pre-pandemic levels.  With fewer international students the proportion of UK-based students increased as a result of a concerted sales and marketing effort, including upgrading our website. This audience will remain important to us going forward.

All our schools are now approved by the Kuwait Cultural Office ("KCO") which allow us to accept sponsored students into all our schools as well as our NCUK programme. With an average of 8,000 sponsored students per year studying for an average of 36 weeks, the KCO approval presents a significant opportunity for us to attract a consistent number of students and recurring income streams.

The focus to make profitable language schools is to have a student acquisition model that balances agency and embassy students combined with students recruited directly via digital methods. With our investment in systems and people, we are well placed with this model for 2022 and beyond. 

University Pathways

A total of 144 students enrolled in University Pathways courses for the 2021/22 academic year compared to 170 students in the previous year.  Of these, 16 students are part of our first ever NCUK cohort based out of our London Kings Cross school, a number on which we can build for the next academic year. NCUK, a consortium of leading universities dedicated to giving international students guaranteed access to universities worldwide

The lower overall figures are the result of the traffic light system on international travel extending into the autumn of 2021 which coincided with application deadlines for key geographies. However an increased intake in January 2022 of 80 students compared to 45 students in January 2021 is indicative of gradual return of international students to the UK.

University of East London ("UEL")Since the year end, the governance of our partnership with UEL has been enhanced with the formation of a joint Strategic Management Group, which met for the first time in March 2022.  Within the centre, an experienced Academic Director has been appointed with primary responsibility for the quality of all aspects of our learning and teaching, building on structural and staffing changes made within the study centre in 2021.  Increased numbers of students were recruited for the January cohort, and the centre is now well placed to support the projected significant growth in student numbers for the 2022/23 academic year.

NCUK
2021 saw the launch of our NCUK International Foundation Year programme, and we welcomed a cohort of 16 students. For 2022/23 academic year we are growing our NCUK portfolio by offering Science and Engineering routes, in parallel with our Business oriented programme, and look forward to welcoming students looking to progress to high quality universities in our London centre.

Malvern Juniors

Due to Covid-19, all of our Junior language camps were postponed into 2022. There remains strong demand from Italian students with three camps running in the summer of 2022.  Hungarian groups will resume in 2023.

In parallel, we have been building our sales and marketing teams, targeting Junior students from China and South East Asia in particular. We expect this to reflect in significant growth in student numbers for 2023.

Central services

The Group continued to make improvements to its central shared services, which includes both back-office and sales and marketing. More positions have been brought into the head office function in Manchester to strengthen the executive management team and supporting team including a CFO, Management Accountant, Deputy Head of Sales, Marketing Manager, Group HR Manager.  The transactional support team in Nepal has expanded to support post-pandemic growth in admissions. Our continued investment in the development of our HubSpot CRM has seen a tighter control of all enquiries and management of service level agreements. Further development, process controls and automation is planned for 2022.

We have continued to build our sales and marketing capability. In China - the biggest international student market to the UK for Higher Education and Junior summer camps - we appointed two Regional Sales Managers based in Chengdu and Beijing and launched a Chinese website. In addition we appointed a Sales Manager based in Indonesia and a Regional Director for MENA and Turkey. We are in late stages of appointing an international recruitment advisor in India and one in Nepal. Both are growth markets for Higher Education student recruitment. We are expecting the new recruits to drive the growth of a global partner network and in turn our student numbers across University Pathways and ELT adult and junior programmes.

Richard Mace

Chief Executive Officer

 

FINANCIAL REVIEW

The trading landscape presented many challenges for the Group in 2021 due to the impacts of the pandemic. Despite these challenges, significant progress was made in 2021 to stabilise our balance sheet. We continued to demonstrate effective cash management under very challenging trading conditions.  

In the past twelve months, we forged strong relationships with key suppliers and customers. All historical debt was moved successfully onto long term payment plans, and in some cases, large arrears have been waived or discounted. Strategic and operational meetings have been established with key customers. In addition to drastically improving student recruitment and enrolment conditions, these more frequent interactions have enabled us to increase the efficiency of the collection of receivables. 

Revenues during the year increased 27 per cent. to £2.42m (2020: £1.90m). The operating loss for the year was £1.32m (2020: loss £1.33m) reflecting strong cost control measures coupled with increased investment in our sales and marketing team to ramp up student recruitment efforts in key territories. 

Cost control continues to be a focus across the Group. New systems and policies befitting a PLC were implemented in 2021 to aid the control and tracking of our spending. Our shared services function based in Nepal has also been expanded, which benefits the Group through lower staffing costs, and helps us to achieve required synergies as the Group continues to scale up. Additional smarter spending strategies include our more targeted digital approach to marketing, which will continue to bring down customer acquisition costs. This approach is accompanied by an increase in travel costs as our sales staff return to key markets to build the Group's brands, and to enhance our relationships with key agents. 

The disposal of the main operating entity in Singapore significantly reduced the expenditure in that region and is another step towards a much healthier balance sheet. 

We continued to work closely with BOOST&Co., the Group's largest debt provider, to ensure that the Group had sufficient working capital to operate through periods of very difficult trading in 2021. In March 2021, BOOST&Co. invested in the Group as part of a wider £1.70m fundraise that we undertook. This investment was an indicator of BOOST&Co.'s confidence in the management and prospects for the business. As described in the strategic report and the going concern statement, BOOST&Co. has committed to supporting the Group in 2022 and beyond. 

Looking forward, we will continue to invest strategically for the future with the expectation of higher revenue growth accompanied by increased costs from our growing sales and marketing team, along with continued investment in our new Chinese student recruitment function and a resumption in staff travel. This critical investment accelerates the Group's drive towards profitability. 

Daniel Fisher

Chief Financial Officer

 

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021

	Note	2021	2020
		£	£
Revenue
Sale of services	5	2,417,524	1,901,307
Total revenue		2,417,524	1,901,307
Cost of services sold		(1,071,679)	(1,016,393)
Gross profit		1,345,845	884,914
Other income		223,989	418,363
Salaries and employees' benefits		(1,346,486)	(1,095,012)
Share based payments	12	(3,128)	(169,278)
Depreciation of property, plant and equipment		(409,271)	(414,349)
Other operating expenses	7]	(1,135,149)	(950,745)
Operating loss		(1,324,200)	(1,326,107)
Finance costs	6	(270,190)	(302,066)
Loss before tax		(1,594,390)	(1,628,173)
Income tax charge		-	(31,300)
Loss for the year from continuing operations		(1,594,390)	(1,659,473)
Profit / (loss) from discontinued operation		448,741	(480,092)
Loss for the year		(1,145,649)	(2,139,565)
Attributable to:
Equity holders of the Company		(1,145,649)	(2,139,565)

 

		2021	2020
		£	£
Loss for the year		(1,145,649)	(2,139,565)
Items that may be reclassified subsequently to profit or loss:  Foreign currency translation movements		-	15,575
Total comprehensive income/(expense) for the year		(1,145,649)	(2,123,990)
Continuing operations		(1,594,390)	(1,659,473)
Discontinued operations		448,741	(464,517)
Attributable to:
Equity holders of the parent		(1,145,649)	(2,123,990)

		2021	2020
Loss per share from continuing operations attributed to equity holders of the Company (in pence)
Basic		(0.08)	(0.23)
Diluted		(0.08)	(0.23)
Profit/(loss) per share from discontinued operations attributed to equity holders (in pence)
Basic and diluted		0.02	(0.06)

 

Consolidated Statement of Financial Position
as at 31 December 2021

		Note	2021		2020
			£		£
TOTAL ASSETS
Non-current assets
Property, plant, and  equipment			50,427		80,781
Goodwill			1,419,350		1,419,350
Investment in subsidiaries			-		-
Right-of-use assets			2,553,726		2,612,614
Total non-current assets			4,023,503		4,112,745
Current assets
Trade receivables			705,271		1,033,105
Other receivables and  prepayments			289,607		162,093
Amounts due from subsidiaries			-		-
Cash and cash equivalents			377,170		103,609
Total current assets			1,372,048		1,298,807
Assets classified for disposal			-		1,846
Total assets			5,395,551		5,413,398
			2021		2020
			£		£
EQUITY AND LIABILITIES
Non-current liabilities
Term loan			1,791,952		2,532,115
Warrants			72,801		63,701
Convertible loan notes		11	-		272,817
Lease liabilities			3,075,517		2,491,486
Deferred tax liabilities			10,279		10,279
Total non-current liabilities			4,950,549		5,370,398
Current liabilities
Trade payables			413,297		603,631
Contract liabilities			899,137		676,287
Other payables and accruals			598,253		1,229,743
Amounts due to subsidiary			-		-
Amounts due to related parties			-		40,000
Convertible loan notes		11	275,885		50,000
Lease liabilities			278,961		350,829
Term loan			808,869		-
Total current liabilities			3,274,402		2,950,490
Liabilities directly associated with assets classified for disposal			-		216,737
Total liabilities			8,224,951		8,537,625

Equity attributable to equity  holders of the Company
Share capital		11,216,991		10,309,811
Share premium		6,603,839		5,782,394
Retained earnings		(20,679,052)		(19,703,963)
Translation reserve		-		288,149
Capital reserve		-		170,560
Convertible loan reserve		28,822		28,822
Total equity		(2,829,400)		(3,124,227)
Total equity and liabilities		5,395,551		5,413,398

The loss for the year as per the financial statements of the parent company at 31 December 2021 was £1,103,278 (2020: Loss £896,815). 

Consolidated Statement of Changes in Equity
for the year ended 31 December 2021

	Share   capital	Share   premium	Retained   earnings	Translation   reserve	Capital   reserve	Convertible loan reserve	Attributable   to equity   holders of the Company	Total
	£	£	£	£	£	£	£	£
Balance at 1 January 2020	9,363,236	5,431,449	(17,564,398)	272,574	170,560	28,822	(2,297,757)	(2,297,757)
Direct costs relating to issue of shares	-	(122,250)	-	-	-	-	(122,250)	(122,250)
Total comprehensive income for the year	-	-	(2,139,565)	15,575	-	-	(2,123,990)	(2,123,990)
New share issue	833,333	416,667	-	-	-	-	1,250,000	1,250,000
Share based payments (inc EMI options)	113,242	56,528	-	-	-	-	169,770	169,770
Balance at 31 December 2020	10,309,811	5,782,394	(19,703,963)	288,149	170,560	28,822	(3,124,227)	(3,124,227)
Direct costs relating to issue of shares	-	(89,503)	-	-	-	-	(89,503)	(89,503)
Capital reserve transferred to retained earnings on disposal of Singapore	-	-	170,560	-	(170,560)	-	-	-
Translation reserve transferred to retained earnings on disposal of Singapore	-	-	-	(288,149)	-	-	(288,149)	(288,149)
Total comprehensive income for the year	-	-	(1,145,649)	-	-	-	(1,145,649)	(1,145,649)
New share issue	891,702	898,598	-	-	-	-	1,790,300	1,790,300
Share based payments (EMI options)	15,478	12,350	-	-	-	-	27,828	27,828
Balance at 31 December 2021	11,216,991	6,603,839	(20,679,052)	-	-	28,822	(2,829,400)	(2,829,400)

Consolidated Statement of Cash Flows
for the year ended 31 December 2021

	2021	2020
	£	£
Cash flows from operating activities
Loss after income tax from
Continuing activities	(1,594,390)	(1,659,473)
Discontinued activities	448,741	(480,092)
Adjustments for:
Depreciation of tangible assets	409,271	414,349
Fair value movement on warrants	16,755	(61,939)
Share based payments	3,128	175,278
Disposal of tangible assets	2,400	(115,587)
Loss on disposal of discontinued operations	(503,040)	-
Impairment of trade receivables	311,102	123,690
Finance cost	270,190	302,066
Adjustments for deferred tax	-	-
Interest paid	(59,526)	(51,583)
Tax paid	-	-
	(695,369)	(1,353,291)
Changes in working capital:
Decrease in stocks	-	6,153
(Increase)/decrease in receivables	(110,781)	94,657
Increase/(decrease) in payables	(348,043)	218,561
Decrease in amounts due to related parties	(40,000)	(6,646)
Net cash flows used in operating  activities	(1,194,193)	(1,040,566)
Cash flows from investing activities
Purchases of property, plant, and equipment	(11,280)	-
Net cash used in investing activities	(11,280)	-
Cash flows from financing activities
Repayment of lease liabilities	(161,475)	(194,801)
New equity issued	1,650,797	1,155,712
Term loan	(10,288)	100,000
Net cash generated by financing activities	1,479,034	1,060,911
Net change in cash and cash equivalents	273,561	20,345
Cash and cash equivalents at the beginning of the year	103,609	83,264
Exchange losses on cash and cash equivalents	-	-
Cash and cash equivalent at the end of the year	377,170	103,609

NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2021

1.  General information

Malvern International plc (the "Company") is a public limited liability company incorporated in England and Wales on 8 July 2004. The Company was admitted to AIM on 10 December 2004. Its registered office is 3rd Floor 1 Ashley Road, Altrincham, Cheshire, United Kingdom, WA14 2DT and its principal place of business is in the UK. The registration number of the Company is 05174452. The Company head office is Murray House, 85 Piccadilly, Manchester, M1 2DA.

The principal activities of the Company are that of investment holding and provision of educational consultancy services.  The principal activity of the group is to provide an educational offering that is broad and geared principally towards preparing students to meet the demands of business and management. There have been no significant changes in the nature of these activities during the period

2.  Significant accounting policies

Basis of preparation

The Financial Statements of the Group and Company are prepared on a going concern basis, under the historical cost convention (with the exception of goodwill) and in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) and adopted by the United Kingdom, in accordance with the Companies Act 2006.

The Parent Company's Financial Statements have also been prepared in accordance with IFRS and the Companies Act 2006. The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 

Going concern

The financial statements have been prepared on a going concern basis. The Directors consider the going concern basis to be appropriate having paid due regard to the Group and Company's projected results during the twelve months from the date the financial statements are approved and the anticipated cash flows, availability of loan facilities, and mitigating actions that can be taken during that period.

In March 2022, successful negotiations were finalised with BOOST&Co. (the Group's fund manager, acting on behalf of the Company's debtholder IL2 (2018) Sarl) to restructure the Group's £2.6m debt facility. Under the original agreement monthly payments were due to commence in April 2022 over a 24-month period. The new agreement provides for a twelve-month payment and interest holiday with monthly payments commencing from March 2023, over a five-year period.

BOOST&Co., acting on behalf of IL2 (2018) Sarl, have also provided a letter of comfort to provide ongoing financial support to the Group for any short-term working capital requirement should that become necessary. It is the present policy of BOOST&Co. to ensure that the Group has adequate financial resources to meet their obligations and to enable it to continue as a going concern for a period of at least twelve months from the date of the signing of the financial statements.

In making their assessment of going concern the Group's Directors have considered the impact on the business of the Covid-19 pandemic. Whilst this has been very disruptive to the Group's operations, the business was able to adapt its service offering through online learning. The Government announcement to remove testing for fully vaccinated arrivals into the UK, provides the Directors with confidence that student numbers will return to pre-pandemic levels in 2022.

In Q4 of 2021, the number of students across the Groups English language schools grew back to approximately 80% of 2019 levels. In Q1 2022, this figure increased, which supports the Directors' 2022 recovery assumptions.

Pathway numbers in January 2022 also indicate an encouraging recovery from the impact of Covid-19, with a 55% increase in students year on year for one of the Group's key partners. In addition, Malvern Juniors will return in the summer of 2022.

Profit and cash flow projections for the Group assume profitable growth in its key operating entities once operations return to normal. A large part of this assumed growth is driven by the more profitable pathways division of the Group.

The global pandemic continues to create uncertainty in the profit and cash flow projections for the Group. The provision of the letter of comfort from the Group's lenders referred to above provides confidence to the Group with respect to future funding. However, there still remains a material uncertainty with respect to going concern of the Group.

The above factors provide the Directors with confidence that it is appropriate to prepare the accounts on a going concern basis, albeit there continues to be a material uncertainty as set out above.

3.  Lessee accounting

The Group's leases primarily relate to properties and office equipment. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Property leases will often include extension and termination options, open market rent reviews, and uplifts.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the individual lessee company's incremental borrowing rate considering the duration of the lease.

The lease liability is subsequently measured at amortised cost using the effective interest method, with the finance cost charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. It is remeasured when there is a change in future lease payments arising from a change in index or rate, or if the Group changes its assessment of whether it will exercise an extension or termination option. The lease liability is recalculated using a revised discount rate if the lease term changes as a result of a modification or re-assessment of an extension or termination option.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. The right-of-use asset is typically depreciated on a straight line basis over the lease terms.

Amounts recognised in the statement of comprehensive income:

	2021	2020
	£	£
Interest expense and similar charges
Interest expense	162,935	184,897
Interest expense on disposed right-of-use assets	-	103,302
Operating and administrative expenses
Depreciation of right-of-use assets	370,036	374,149
Depreciation of disposed right-of-use assets	-	283,353
Total expensed to statement of comprehensive income	532,971	945,701

Right-of-use assets

	At 31 December 2021	At 31 December 2020
	£	£
Balance as at the beginning of the year	2,612,614	4,912,511
Net disposals	-	(1,605,429)
Adjustment to operating balance of depreciation	33,614	-
Depreciation of right-of-use assets	(370,036)	(374,149)
Depreciation of disposed right-of-use assets	-	(283,353)
Changes from lease revaluations	277,534	-
FX movement	-	(36,966)
Balance as at the end of the year	2,553,726	2,612,614

Lease liabilities

	At 31 December 2021	At 31 December 2020
	£	£
Current liability	278,961	350,829
Non-current liability	3,075,517	2,491,486
Total liability	3,354,478	2,842,315

Lease payments

	At 31 December 2021	At 31 December 2020
	£	£
Total lease rent amount (Excl. VAT)	536,365	519,501
Amount paid during the year (Excl. VAT)	(161,475)	(194,801)
Rent free amount (Excl. VAT)	(72,495)	(84,598)
Balance amount at end of the year	302,395	240,102

In October 2020, the Group disposed of the lease relating to the office of the Singapore operations.  

4.  (a) Segmental Information 

The Group organises its operations based on geographical locations, as the services provided are similar in each jurisdiction with both educational and language courses offered.

	UK	Discontinued Operations*	Total
2021	£	£	£
Revenue from external customers	2,417,524	-	2,417,524
Depreciation and amortization	409,271	-	409,271
Loss before taxation	(1,594,390)	(38,447)	(1,632,837)
Profit on disposal	-	487,188	487,188
Taxation charge	-	-	-
Profit/(Loss) for the year	(1,594,390)	448,741	(1,145,649)
Segmental assets	5,395,551	-	5,395,551
Segmental liabilities	8,224,951	-	8,224,951
2020	£	£	£
Revenue from external customers	1,901,307	648,167	2,549,474
Depreciation and amortisation	(414,349)	(349,164)	(763,513)
Loss before taxation	(1,659,473)	(480,092)	(2,139,565)
Taxation charge	-	-	-
Loss for the year	(1,659,473)	(480,092)	(2,139,565)
Segmental assets	5,411,552	1,846	5,413,398
Segmental liabilities	8,320,888	216,737	8,537,625

^{*Following the closure of the Singapore operations, 2021 figures have been presented as discontinued operations. SAA Global Education Center filed an application for an inability to continue business operations on 09 April 2021, and liquidation commenced on 12 April 2021. Malvern International Academy's application for liquidation is currently with the liquidators, all activities ceased on 31 December 2021.}

 (b) Discontinued Operations

On 4 August 2020, the group announced closure of Singapore operations and is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal is set out below.

i)   Financial performance of discontinued operations.

The financial performance and cash flow of the discontinued operations are presented as the consolidated Singapore entities, for the year ended 31 December 2021. The Singapore entities presented include; Malvern International Academy (MIA), which ceased operating on 31 December 2021, and SAA Global Education Center (SAAGE), which ceased operating on 9 April 2021 (SAAGE entered formal liquidation on 12 April).

	2021	2020
	£	£
	Singapore	Singapore
Revenue	-	648,167
Other Income	-	118,279
Expenses	(38,447)	(1,246,538)
Profit/(Loss) before tax	(38,447)	(480,092)
Income tax expenses	-	-
Profit/(Loss) after income tax of discontinued operation	(38,447)	(480,092)
Profit on disposal of subsidiary	487,188	-
Profit/(Loss) from discontinued operations	448,741	(480,092)
Exchange differences on translation of discontinued operations	-	15,575
Other comprehensive income from discontinued operations	-	15,575
Net cash flow from operating activities	(54,299)	(24,299)
Net cash flow from investing activities	-	-
Net cash flow from financing activities	-	-
Net cash generated by subsidiary	16,994	(24,299)

ii)  Details of the consideration on disposal of the subsidiaries
 

	2021	2020
	£	£
Consideration received or receivable:
Fair value of consideration	-
Carrying amount of net liabilities disposed of	196,678	-
Profit on sale of subsidiary before income tax and reclassification of foreign currency translation reserve	196,678	-
Reclassification of foreign currency translation reserve	290,510	-
Profit on disposal of subsidiary	487,188	-

iii)  The details of assets and liabilities of disposed subsidiary

The carrying amounts of assets and liabilities of Singapore operations as of 09 April 2021 for SAAGE and 31 Dec 2021 for MIA.

	2021	2020
	£	£
Property, plant and equipment	-	546
Cash & cash equivalents	18,049	1,300
Total assets	18,049	1,846
Trade creditors	(147,396)	(161,254)
Other payables	(67,331)	(55,483)
Total liabilities	(214,727)	(216,737)
Net liabilities	(196,678)	214,891)

5.  Sale of Services 

	2021	2020
	£	£
Course fees	2,189,651	1,659,601
Accommodation fees	162,106	192,643
Application fees, registration and examination fees	50,264	28,470
Training fees, course materials and others	15,503	20,593
	2,417,524	1,901,307

6.  Finance Costs 

	2021	2020
	£	£
Interest on leases (IFRS 16)	162,935	184,897
Interest on term loan	80,845	90,125
Interest on convertible loan notes	21,503	24,766
Other finance costs	4,097	2,278
	270,190	302,066

7.  Operating Expenses 

	2021	2020
	£	£
Auditors' remuneration:
Fees payable to the Group's auditors for statutory audit	30,500	27,500
Fees payable to the Group's auditors and associates for statutory audit of subsidiary Companies	31,425	40,000
Administrative and marketing expenses	745,367	821,494
Expected credit losses - trade receivables	311,102	123,690
Fair value movements	16,755	(61,939)
	1,135,149	950,745

8.  Earnings/(Loss) Per Share 

The basic and diluted earnings/(loss) per share attributable to equity holders of the Company was based on the loss attributable to shareholders of £1,145,649 (2020: loss of £2,139,565) and the weighted average number of ordinary shares in issue during the year of 1,878,898,511 shares (2020: 735,661,044 shares). The loss per share (in pence) attributed to shareholders is 0.06 (2020: loss per share of 0.23).

Calculations for dilutive EPS have not been made in respect of the convertible loan notes (note 11) on the basis the impact would be anti-dilutive. 

9.  Financial Liabilities 

	Group		Company
	2021	2020	2021	2020
	£	£	£	£
Non-current liabilities
Convertible Loan Notes	-	272,817	-	272,817
Term Loan	1,791,952	2,532,115	1,723,537	2,432,115
Warrants	72,801	63,701	72,801	63,701
Lease liabilities	3,075,517	2,491,486	-	-
	4,940,270	5,360,119	1,796,338	2,768,633
Current liabilities
Convertible Loan Notes	275,885	50,000	275,885	50,000
Term Loan	808,869	-	675,251	-
Lease liabilities	278,961	350,829	-	-
Trade and other payables	1,011,550	1,833,374	140,191	322,493
Related parties	-	40,000	-	40,000
	2,375,265	2,274,203	1,091,327	412,493
Total	7,315,535	7,634,322	2,887,665	3,181,126

Convertible Loan Notes

At 31 December 2021, the Group has an obligation for £275,885 (See note 11).

Term Loan

In August 2019, Malvern received a Term Loan from BOOST&Co. for £2,600,000. This loan originally carried an interest rate as the higher of (a) 10% per annum, or (b) 8% per annum plus LIBOR. The loan was restructured in April 2022, the new terms includes a twelve-month payment and interest holiday with monthly payments commencing from March 2023 over a five-year period, with the interest being set at 7% for the first two years and 10% for the subsequent three years. There are no early repayment penalties on this facility.

During 2020, the Group took advantage of the Government-backed Bounce Back Loan Scheme ("BBLS"), benefitting from a total of £100,000 to be repaid over a six-year period with a 2.5% fixed rate of interest. The first twelve months of this lending facility are free of any obligation to pay capital or interest. The balance outstanding at 31 December 2021 is £89,872 (2020: £100,000).

Warrants

As part of the term loan, BOOST&Co. was issued warrants over 45,500,464 shares. These warrants are exercisable at the Strike Price at any time over the following ten years since the inception of term loan in August 2019.

As at the date of financial position, the Group has fair valued these warrants at £72,801. The following estimates were used to calculate this fair value:

· Annualised volatility of 109% and 154% at the inception of term loan and at the year end respectively, calculated using share price volatility over a preceding three-year period

· Maturity of ten years applied, reflecting the duration over which BOOST&Co. could exercise these warrants

· Risk free rate of 0.50%, being the Yield on UK ten-year Government bonds

· Strike price of £0.0015, being the 28-day average share price preceding the date (i.e. 27 Aug 2019) of drawdown

10.  Subsequent events

The Directors are reporting the following subsequent events to the Statement of Financial Position which are significant to these financial statements.

In March 2022, successful negotiations were finalised with BOOST&Co. (the Group's fund manager, acting on behalf of the Company's debtholder IL2 2018) to restructure the Group's £2.6m debt facility.

Under the original agreement monthly payments were due to commence in April 2022 over a 24-month period at an interest rate of 7 to 10%, dependent on quarterly revenues. The new agreement provides for a twelve-month payment and interest holiday with monthly payments commencing from March 2023 over a five-year period, with the interest being set at 7% for the first two years and 10% for the subsequent three years. There are no early repayment penalties on this facility.

In return, BOOST&Co. will receive warrants over 127,010,834 ordinary shares at an exercise price of 0.106 pence per share, being 20% below the average market price. In addition, BOOST&Co. will receive additional warrants, fully diluted, with the same exercise price, if the loan is not repaid by 1 March 2024.

Furthermore, it has been agreed that the exercise price of BOOST&Co.'s existing warrants over an aggregate of 45,500,464shares be adjusted from 0.15 pence per share to 0.1 pence.

11.  Convertible Loan Notes 

  The Company issued the following loan notes in 2017.

In November 2020, Convertible Loan Note holders agreed a variation of the redemption date from 16 November 2020 to 31 December 2022.

Convertible Loan Notes
Issue Name	Convertible Unsecured Loan Notes 2020
Date of Issue	17 November 2017
Date of Redemption	31 December 2022
Interest Payable	1 Jan 2018-31 Dec 2018	3%
	1 Jan 2019-31 Dec 2019	4%
	1 Jan 2020-31 Dec 2020	5%
	1 Jan 2021-31 Dec 2022	6%
Total Issued	£1,200,000
Amount converted in 2017	(£100,000)
Balance at 31/12/2017	£1,100,000
Amount converted in 2018	(£771,898)
Fair value adjustment	(£28,822)
Balance at 31/12/2018	£299,280
Fair value adjustment	£17,307
Balance at 31/12/2019	£316,587
Unwinding Interest	£6,230
Balance at 31/12/2020	£322,817
Unwinding interest	£3,068
Share Conversion at 31/07/2021	(£50,000)
Balance at 31/12/2021	£275,885

12.  Share based payments and share options

The Company has an Enterprise Management Incentive share   option scheme for certain Directors and employees. Under the scheme, participants have been awarded options to acquire up to a prescribed level of shares following a three-year vesting period if the Company's share price has met the pre-determined target conditions. There are two market-based conditions, each accounting for 50% of the share options awarded to the employee. In addition, the mid-market share price of the Company on the AIM Market of the London Stock Exchange, must stay at or above the exercise price, for 40 consecutive business days.

The Group has chosen to use the Black Scholes valuation framework. The options have also been valued using the Monte Carlo valuation method. The results of which are not considered materially different from the valuation methodology described in this note.

The inputs into the Black Scholes model as at 31 December 2021 are as follows.

Grant date	EMI options	Exercise price (pence)	Strike price on grant date (pence)	Vesting period (years)	Expected volatility	Risk free rate	Fair value	Deemed probability of achieving market condition
02/12/2020	33,625,000	0.5	0.15	3	12.30%	0.35%	0.34	5.02%
02/12/2020	33,625,000	0.9	0.15	3	12.30%	0.35%	0.74	0.37%
07/01/2021	5,000,000	0.5	0.15	3	11.98%	0.35%	0.35	5.30%
07/01/2021	5,000,000	0.9	0.15	3	11.98%	0.35%	0.75	0.37%
18/01/2021	6,000,000	0.5	0.15	3	11.98%	0.35%	0.35	5.30%
18/01/2021	6,000,000	0.9	0.15	3	11.98%	0.35%	0.75	0.37%
01/09/2021	28,375,000	0.6	0.22	3	10.45%	0.26%	0.38	1.10%
01/09/2021	28,375,000	1.1	0.22	3	10.45%	0.26%	0.87	0.00%

As with options containing performance-based market targets, the probability of achieving the set condition is factored into the determination of the value. These will not be re-measured at subsequent reporting dates. The vesting probabilities presented are products of lognormal distribution modelling over a 3-year period to determine the likelihood of the vesting condition being reached, based off the scaled mean and standard deviation from a prior 365-day period.

Year ended 31 December 2021

		Number of options	Weighted average s trike price
Outstanding at 1 January 2021		69,500,000*	0.15p
Granted during the year		90,000,000	0.19p
Exercised during the year		-	-
Forfeited during the year		13,500,000	-
Outstanding at 31 December 2021		146,000,000	0.17p
Exercisable		-	-

^{*The number of options outstanding at 31 December 2020 was incorrectly presented as 34,750,000 in the 2020 Group accounts. This did not impact on the financial statements.}

Of the options outstanding at 31 December 2021, 89,250,000 (2020: 69,500,000) options have an exercise price of 0.15pence and 56,750,000 (2020: nil) options have an exercise price of 0.22 pence.

The aggregate charge for share options recognised in the Group financial statements in the year was £3,128(2020:£184).

During 2020, the Company also made an equity settled share-based payment in lieu of fees to certain employees, directors and a creditor. A total of 100,262,947 ordinary shares were issued at 0.15p per share. No vesting conditions were attached to this share issue. The fair value at the grant date has been calculated as the total of the fees owing for services provided. The cost recognised for 2020 in respect of these share-based payments is, £144,394 for continuing operations, and £6,000 for discontinued operations.

In addition, a bonus was also awarded to certain directors as compensation for an additional and significant time commitment during a change in Chief Executive Officer during the year. The bonus was not paid until 2021, therefore an accrual was recognised through liabilities in 2020. The cost recognised for 2020 in respect of these share-based payments was, £24,700 (restated 2019: £19,192). The bonus was paid in 2021 when a total of 12,350,000 ordinary shares were issued at 0.20p per share (2019: 12,794,667 ordinary shares at 0.15p per share). No vesting conditions were attached to this share issue. The fair value at the grant date has been calculated as the total cash value of the bonus awarded.

The annual report and accounts together with the notice of AGM to be held on 8 June 2022, are expected to be uploaded to the Company's website later today and posted to shareholders shortly.

 

END

 

 

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