Half-year Report

RNS Number : 5117Z

Malvern International PLC

15 September 2022

 

15 September 2022

Malvern International PLC

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

Interim results for the six months ended 30 June 20 22

Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces its interim results for the six months ended 30 June 2022 ("H1 2022").

H1 2022 results

· Revenues from continuing operations increased 62% to £2.3m (H1 2021: £1.4m)

· Operating loss (before depreciation, amortisation and finance charges) of £0.34m (H1 2021: profit £9k)

· Loss before tax on continuing operations increased to £0.68m (H1 2021: loss £0.35m), largely due to an increase in strategic investment in the Company's current, new and targeted revenue streams including new geographies such as India and Nepal, China business development staff, key senior management positions and a Chinese website.

· Loss per share on continuing activities of 0.03p (H1 2021: loss 0.02p).

· Cash as at 30 June 2022 was £0.88m (FY 2021: £0.40m and H1 2021: £1.28m).

· Successfully restructured the Company's £2.6m debt facility with BOOST&CO ("BOOST"), to free up working capital and support growth.

Operating highlights

· University Pathways applications increased significantly in H1 2022 for the 2022/23 academic year versus H1 2021.

· Entered a five-year collaborative partnership with UEL to be the preferred supplier of student recruitment services in mainland China.

· English Language Training ("ELT") centre revenues were ahead of the 2019 pre-pandemic level during the peak summer period .

· Junior summer camps successfully returned at the end of H1 for the first time since 2019. A total of 976 students signed up for our 2022 summer camps, providing a very encouraging base for an expected increase in 2023.

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

" The Company is seeing the benefits of its strategic investment over the last two years in its brand, sales and marketing, management team, processes, partnerships, products and student offering. The Board believes this investment puts Malvern in a strong position to grow its market share for the remainder of 2022 and beyond. Pre-booked and delivered revenues for H2 2022 are showing a three-fold increase on H2 2021 and are ahead of like-for-like pre-pandemic levels of H2 2019. Pre-bookings indicate that the Group can expect further growth in revenues in 2023 ."

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

For further information please contact:

Malvern International Plc Richard Mace - Chief Executive Officer	www.malverninternational.com Via Communications Portfolio
NOMAD and Broker WH Ireland Limited Mike Coe / Sarah Mather	www.whirelandcb.com [phone]

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 old students.

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

Chief Executive ' s review

Malvern has seen a significant improvement in student numbers and business pipeline in H1 2022 with revenues up 62% at £2.3m (H1 2021: £1.4m).

The ELT industry has returned after international borders reopened following two years of travel restrictions. This is evidenced through revenues across the Group's three ELT centres during the Company's busiest summer period, coming in ahead of the pre-pandemic level in 2019.

University Pathways starters for the 2021/22 academic year were lower than expectations due to the impact of global travel restrictions. As a result, revenue recognition for our Pathways division was down in H1 2022. However, momentum is building in the Pathways division and the South Asian market. This is a key region for Malvern and our partners and is recovering strongly. The bounce back, combined with strategic improvements and investment in the operational structure that underpins the division, has significantly increased the number of student applications passing through our sales and conversion pipeline.

In addition, the successful return of our Junior summer camps at the end of H1 2022, has resulted in  the full range of Malvern's revenue streams returning operation ally in a very positive way. Developing momentum across these respective streams is encouraging.  Under difficult circumstances, the Juniors division was able to generate revenues of c.£1.35m, following two years of no activity.

Financial performance

Revenues from continuing operations for H1 2022 were £ 2.3m (H1 2021: £1.4m). The loss before tax was £0.68m (H1 2021: loss £0.35m). The loss per share on continuing activities was 0.03p (H1 2021: loss 0.02p).

Overall revenue in H1 2022 was still suppressed by the impact of Covid. Despite this, revenues in H1 2022 were up £0.88m on the comparison period. This was largely driven by the encouraging return of ELT, and to a lesser extent, our summer camps. Summer camp revenue is predominately recognised in July and August 2022. The deferred income for summer camps in 2022 (£0.87m) sits within contract liabilities on the balance sheet.

The increased operating loss in H1 2022 against the comparator period is driven by a number of factors and is largely due to increased investment to build our targeted revenue streams. This strategic expenditure included; additional sales resource and a new website in China, the return of travel to key markets around the world for sales activities and further investment in our sales and management teams. The investment has already started to bear fruit for the Company, most notably in UEL student numbers, and the encouraging levels of students from MENA in our ELT centres during the summer months. The launch of NCUK in H2 2021 during the height of Covid has also had an impact on our cost of delivery in the Pathways division (the cost of delivery is higher for smaller class sizes). NCUK student numbers and class sizes are expected to be higher in the 2022/23 academic year. Finally, we received less other income (£0.12m) in H1 2022 due to a drop in Covid grants. 

Cost control and cash flow management continues to be a focus for the Group. In March 2022 the Company announced the successful negotiation to restructure its £2.6m debt facility, following constructive discussions with BOOST the fund manager acting on behalf of the Company's debtholder IL2 2018. Following the debt restructure, the Board remains in regular contact with BOOST, the fund manager acting on behalf of the Company's debtholder. BOOST has reiterated its commitment to provide ongoing financial support to Malvern for its short-term working capital requirements should it become necessary.

Cash balances as at 30 June 2022 were £ 0.88m (31 December 2021: £0.34m and 30 June 2021: £ 1.3m).

Current trading and outlook

The Board is confident in the outlook for ELT in 2023 and beyond. Malvern is currently working with the biggest agencies in Brazil, Saudi Arabia, Kuwait and Italy, and the pipeline of bookings is strong. The focus for the remainder of 2022 is to capitalise on the Group's momentum, to continue to foster good relations and build Malvern's agent network across other key regions 

The MENA market was the first big market to return. This was helped by the Government's announcement in early May 2022 that Saudi Arabia and Bahrain nationals can apply to travel to the UK for tourism, business, study or medical treatment for up to six months with an electronic visa waiver from 1 June 2022. The initiative has made it easier for visitors from the Gulf to enter the UK and is intended to deepen the UK's partnership with these countries, enhance diplomatic ties and economic prosperity.

Pleasingly, with travel restrictions removed in most key markets the 2022/23 Pathways academic year is shaping up to deliver a significant increase on previous years, with 230 UEL students booked for September 2022 vs. 46 new starters in the prior year). The increase is the result of the expansion of the international sales team, improved processes to manage and convert the student recruitment pipeline, and significant recruitment travel to key feeder markets including joint marketing trips to India and Nepal with UEL. Approximately one third of the income from the 2022/23 academic year will be recognised in Q4 2022.  The remaining two thirds will be recognised in H1 2023. The growth of the NCUK business is expected to move at a greater pace when the Chinese market fully re-opens. It is expected that there will be approximately 15 new starters in the September 2022 intake, with more expected to join in January 2023.

Overall student numbers across our Pathways division in the academic year 2022/23 are currently projected to be more than double the previous academic year.

In H1 2022 the Company announced the award of a five-year contract to be the preferred supplier to recruit students from China for UEL. The primary aim of the partnership is to rapidly increase the volume of Chinese students who will enrol onto Pre-Sessional English, Pathways, Undergraduate and Postgraduate degree programmes at UEL's three London campuses.

This is aligned with the Company's continued strategic, and considered, investment in China and represents a growth of our University Partnerships division. Some of this investment is being delayed due to operating constraints caused by Covid lockdowns and travel restrictions in that region. Malvern's first Chinese students are expected in January 2023 as part of the 2022/23 Pathways cohort, with growth projected for September 2023 after a full student recruitment campaign.

The Board believes the continued investment in the business puts Malvern a strong position to grow market share for the remainder of 2022 and beyond. Pre-booked and delivered revenues for H2 2022 are showing a three-fold increase on H2 2021 and are ahead of like-for-like pre-pandemic levels of H2 2019. Pre-bookings for 2023 are also healthy.  This positive momentum and strong indicators of a return to a pre-pandemic operating environment gives the Board confidence in the Company ' s outlook.

Richard Mace

Chief Executive Officer

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2022

		Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
		£'000	£'000	£'000
	Note	Unaudited	Unaudited	Audited
Revenue		2,308	1,424	2,418
Cost of services sold & operating expenses		(2,687)	(1,573)	(3,557)
Other Income		39	158	224
Operating profit / (loss)		(340)	9	(915)
Finance costs		(148)	(147)	(270)
Depreciation & amortisation		(188)	(207)	(409)
Loss before taxation		(676)	(345)	(1,594)
Income tax charge			-	-
Loss for the period / year from continuing operations 1		(676)	(345)	(1,594)
Discontinued operations 1		-	(21)	449
Loss for the period / year		(676)	(366)	(1,145)
Loss attributable to equity holders		(676)	(366)	(1,145)
Loss for the period / year		(676)	(366)	(1,145)
Translation movement		-	(5)	-
Total comprehensive loss for the period / year		(676)	(371)	(1,145)
Continuing operations		(676)	(345)	(1,594)
Discontinued operations		-	(26)	449
Total loss attributed to equity holders		(676)	(371)	(1,145)
Loss per share on continuing activities		Pence	Pence	Pence
Basic 2	4	(0.03)	(0.02)	(0.08)
Diluted 2	4	(0.03)	(0.02)	(0.08)
1 The final two Singapore entities were put into liquidation in H1 2022.
2 Calculated at the weighted average number of shares in issue during the period at 2,138,199,951 (H1 2021: 1,648,655,085).

UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022

	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
	£'000	£'000	£'000
	Unaudited	Unaudited	Audited
Non-current assets
Property, plant & equipment	39	66	50
Goodwill	1,419	1,419	1,419
Right-of-use assets	2,384	2,426	2,554
	3,842	3,911	4,023
Current assets
Debtors	945	542	782
Prepayments	224	133	213
Cash at bank and in hand	881	1,276	377
	2,050	1,951	1,372
Assets classified for disposal		10	-
Total Assets	5,892	5,872	5,395
Non-current liabilities
Term loan	2,583	2,547	1,792
Warrants	225	64	73
Deferred tax liability	10	10	10
Convertible loan notes	-	224	-
Lease liabilities	2,891	2,313	3,076
	5,709	5,158	4,951
Current liabilities
Trade payables	346	408	413
Contract liabilities	1,812	221	899
Other payables and accruals	852	1,190	577
Convertible loan notes	227	100	276
Provision for income tax	5	31	21
Lease Liabilities	386	354	279
Term Loan	11	19	809
	3,639	2,323	3,274
Liabilities directly associated with assets classified for disposal	-	211	-
Total Liabilities	9,348	7,692	8,225
Equity
Share capital	11,252	11,193	11,217
Share premium	6,619	6,575	6,604
Reserves	(21,327)	(19,588)	(20,651)
	(3,456)	(1,820)	(2,830)
Total Equity and Liabilities	5,892	5,872	5,395

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022

	Share Capital	Share Premium	Retained Earnings	Translation Reserve	Capital Reserve	Convertible Loan Reserve	Total Reserves	Attributable to Equity Holders of the Company
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2021	10,310	5,782	(19,704)	288	171	28	(19,217)	(3,125)
Total comprehensive income for the period	-	-	(366)	(5)	-	-	(371)	(371)
Direct costs relating to issue of shares	-	(90)	-	-	-	-	-	(90)
New share issue	883	883	-	-	-	-	-	1,766
Balance at 30 June 2021	11,193	6,575	(20,070)	283	171	28	(19,588)	(1,820)
Total comprehensive income for the period	-	-	(780)	(283)	-	-	(1,063)	(1,063)
Transfer of Capital reserve related to Singapore	-	-	171	-	(171)	-	-	-
New Shared from EMI Options	3	-	-	-	-	-	-	3
New share issue	21	29	-	-	-	-	-	50
Balance at 31 December 2021 / 1 January 2022	11,217	6,604	(20,679)	-	-	28	(20,651)	(2,830)
Total comprehensive income for the period	-	-	(676)	-	-	-	(676)	(676)
New share issue	35	15	-	-	-	-	-	50
Balance at 30 June 2022	11,252	6,619	(21,355)	-	-	28	(21,327)	(3,456)

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022

	Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
	£'000	£'000	£'000
	Unaudited	Unaudited	Audited
Cash flows from operating activities
(Loss) / profit after tax from
Continuing activities	(676)	(345)	(1,594)
Discontinued activities	-	(21)	449
Adjustments for:
Depreciation & amortisation	188	207	409
Fair value movement on warrants	-	-	17
Fair value movement on convertible loan reserve	-	-	-
Share based payments	-	-	3
Loss on disposal of discontinued operations	-	(20)	(503)
Loss on disposal of tangible assets	-	-	2
Impairment of trade receivables	-	-	311
Finance cost	148	147	270
Interest paid	(13)	(54)	(60)
Tax paid	(16)	-	-
	(369)	(86)	(696)
Changes in working capital
Decrease / (increase) in debtors & prepayments	(175)	520	(111)
Increase / (decrease) in creditors	1,118	(848)	(348)
Decrease in related parties	-	(40)	(40)
Net cash used in operating activities	574	(454)	(1,195)
Cash flows from investing activities
Purchase of property, plant and equipment	(8)	(5)	(11)
Investment in Intangible Assets	-	-	-
Net cash used in investing activities	(8)	(5)	(11)
Cash flows from financing activities
Decrease in finance lease liabilities	(176)	(18)	(162)
New share issue	-	1,651	1,651
Term loan - Net	114	(2)	(10)
Net cash used in financing activities	(62)	1,631	1,479
Net increase in cash and cash equivalents	504	1,172	273
Effect of foreign exchange rate changes on consolidation	-	-	-
Cash and cash equivalents at beginning of period / year	377	104	104
Cash and cash equivalents at end of period / year	881	1,276	377

NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2022

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 WA14 2DT and its principal place of business is in the UK. 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 period

2.  Significant accounting policies

Basis of preparation

The accounting policies adopted are consistent with those of the previous financial year.

This interim consolidated financial information for the six months ended 30 June 2022 has been prepared in accordance with IAS 34, 'Interim financial reporting'. This interim consolidated financial information is unaudited and is not the Group's statutory financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2021, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified, but did include, without qualifying their report, references to which the auditors drew attention by way of material uncertainty in respect of the preparation of the financial statements on a going concern basis. 

The interim consolidated financial information for the six months ended 30 June 2022 is unaudited. In the opinion of the Directors, the interim consolidated financial information presents fairly the financial position, and results from operations and cash flows for the period. Comparative numbers for the six months ended 30 June 2021 are unaudited.

This interim consolidated financial information is presented in £ sterling, rounded to the nearest thousand.

3.  Dividend

No interim dividend for this financial year is proposed.

4.  Loss per share

The basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period. The weighted average number of shares in issue during the period was 2,138,199,951 (H1 2021: 1,648,655,085).

The diluted loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period diluted for the effect of share options and warrants in existence at the relevant period. The weighted average number of shares in issue diluted for the effect of share options and warrants in existence during the period was 2,138,199,951 (H1 2021: 1,648,655,085).

5.  Share capital

On 3 February 2022 the Company announced the conversion of £50,000 convertible loan notes to shares at 0.142 pence per share adding 35,211,724 new shares. As at 30 June 2022, the total number of Ordinary Shares held in the Company was 2,144,230,688 (30 June 2020: 2,087,467,240).

6.  Subsequent events

In August 2022, the Company announced that it has allotted 50,000,000 new ordinary shares of 0.1p each pursuant to the conversion of £50,000 of the loan notes at a conversion price of 0.1 pence per share (being the average price of the five business days prior to the conversion date) that were otherwise redeemable on 31 July 2022. Following the loan note conversion, a further £178,102 Loan Notes remain outstanding which is the final balance redeemable or convertible on 31 December 2022.

 

END

 

 

IR FLFEDARISLIF