2016
MALVERN INTERNATIONAL PLC
Annual Report
FOR THE YEAR ENDED
31 DECEMBER 2016
Company No 05174452
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Contents
CHAIRMAN’S STATEMENT ............................................................................................ 1
STRATEGIC REPORT ...................................................................................................... 4
DIRECTORS’ REPORT .................................................................................................... 7
CORPORATE GOVERNANCE ........................................................................................ 10
STATEMENT OF DIRECTORS’ RESPONSIBILITIES .......................................................... 12
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF MALVERN
INTERNATIONAL PLC .................................................................................................. 13
CONSOLIDATED INCOME STATEMENT ........................................................................ 15
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...................................... 16
STATEMENTS OF FINANCIAL POSITION ...................................................................... 17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................ 19
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................... 20
COMPANY STATEMENT OF CHANGES IN EQUITY ........................................................ 21
COMPANY STATEMENT OF CASH FLOWS ................................................................... 22
NOTES TO THE FINANCIAL STATEMENTS .................................................................... 23
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
CHAIRMAN’S STATEMENT
Overview
2016 was both challenging and exciting. The company responded to the challenges which included severe
competition, uncertainties created by Brexit in Britain and changing policies in other markets in three ways. First
the two largest shareholders, namely KSP and CG Group made available substantial funding, without interest for
the present to strengthen the balance sheet. Second, we recruited a dynamic young educationist from New Zealand
Dr. Sam Malafeh, as the Deputy CEO of the Group in charge of operations. He has also invested GBP 450,000 to
indicate his commitment to the company. Third, with new funding and new management we revamped our offerings
and now stand poised to launch IT related subjects including courses related to cyber security and analytics in
partnership with specialists in these areas.
As part of the new strategy, the name of the Company was changed from AEC Education Plc to Malvern
International Plc on 13th September 2016. This was to link the parent company to its subsidiaries which have been
operating under Malvern name. The Mission of the group is to be a Global Learning and Skills Development Partner
to those who come to us to improve their employable opportunities.
The new management team has also set up fresh guidelines on quality assurance to take Malvern International Plc
to a higher international level that not only complies with the relevant territory’s regulatory requirements but also
exceeds consumer and market expectation. The quality improvement plan started in late 2016 and continues into
2017 with series of internal audits taking place to assure the improvement.
Malvern International has also as mentioned earlier set up a new learning technology division to offer technology
based products to other education providers looking for new ways of teaching/learning methods and products. This
is being done in collaboration with Playware Studios in Singapore, which has patented digital learning technology
that has won several awards globally. At the same time, we are also developing a number of other new programmes
and these will be announced as and when they are finalised for introduction to the market in 2017 and 2018. The
new products are expected to bring additional returns to Malvern in 2017 and the years ahead.
The implementation of the new strategy takes time and requires investment towards improvement of the quality of
the service provided in different countries; this would involve a change in management and operations, developing
new programmes and new technology products, and establishing a larger and stronger international marketing team.
Hence the performance of the Group for the year 2016 was not much different from that in 2015. However, the
Board is confident that going forward we are on the right track and the performance of the Group in 2017 onwards
should show significant improvement.
In July 2016, the Group disposed of its Dublin subsidiary in which it had 55% interest for €660,000 (equivalent to
£554,909) to enable the Group to focus on its 100% owned UK operation. The activities for Dublin have been
classified as a discontinued activity for the year ended 31 December 2016 and the comparatives have been restated
accordingly. The 50/50 partnership contract with Cyprus ended in August 2016 and this was not renewed.
Financial results and business review
Group
In 2016 the total revenue for the continuing operations of the Group was £3,992,581. This was 17% less than the
Group revenue from continuing operations in 2015 of £4,794,168. The fall was mainly due to the fall of revenue in
UK of £1.1m which was partially offset by the increase in revenue from Asia of £0.3m. As mentioned in previous
reports, UK continued to be impacted by restrictions of working hours allowed under student visas, the terror threat
and the uncertainty of the possible effects of Brexit.
As a result of the decrease in revenue for the 2016 financial year, the Group incurred a loss after tax of £1,373,410
on the continuing business as compared to the loss of £1,669,763 in 2015 which included impairment charges of
£900,000 made against goodwill and intangible assets. In FY 2016, the impairment was at £150,000
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However, after taking the gain on the sale of shares in Dublin operations and the six-month operating profit for
Dublin totalling £573,800, the Group comprehensive loss after tax in 2016 was £820,681 (2015 - £1,718,798).
Hence net loss per share for the year on a continuing basis for 2016 was 1.84p compared to 2.84p for 2015 and the
net cash at the end of the year stood at £0.12m ( 2015 - £0.42m).
During 2016, the Board has undertaken an impairment review of the carrying value of its goodwill and intangible
assets within the consolidated financial statements of the investments held within the Group in accordance to the
process set out in 2015, which takes into consideration our business plan and growth strategies for the Group going
forward. Based on this review, an impairment provision of £150,000 was made for the year 2016.
Subsidiaries
With the sale of shares in Dublin and the discontinued business arrangement in Cyprus, the European Sector now
comprises only the UK operations. The Southeast East Asia/Middle East sector comprises Singapore and Malaysia.
Brief summary of these two sectors is set out below:
United Kingdom (Malvern House)
The revenue of the United Kingdom operations in 2016 was down by 45% to £1.3m compared to the revenue of
£2.4m in 2015. Despite this sharp drop in sales, UK was able to contain its operating losses before tax to £433k
which was only worse than the operating losses in 2015 of £384k by £49k . This was achieved through cost cutting
measures that were undertaken during the past couple of years.
Despite the poor performance of the UK operations in 2016 and in the past years, the Board is still very positive
about its potential going forward. It recognises that UK and especially London will continue to be a popular
destination for education. Although the student numbers coming to UK have been falling because of the reasons
already mentioned earlier in this and past statements, they can be increased again if the courses offered are widened
to include skills development programmes This will attract not only overseas students but also UK residents. Hence
the main thrust of the Strategic Plan mentioned earlier is to widen the scope of the programmes offered and
strengthen the marketing network with strong management control and supervision.
Southeast Asia comprises Singapore and Malaysian operations.
The total revenue for Southeast Asian operations in 2016 was £2.7m compared to £2.3m in 2015. This was an
increase of 14%. However, despite this increase in revenue the sector incurred an operating loss of £311K as
compared to the operating loss for the 2015 financial year of £80k due to higher operating costs in Malaysia and
further provisions for bad debts. The Malaysian operations made a marginal operating profit of £20K and the rest
of the losses came from Singapore operations.
The Group has invested heavily in Singapore to prepare for the re-application of Edu Trust Certification which
enables the operation not only to enrol overseas students but also to offer overseas diploma and degree programmes.
The application for this certification has now been made and the inspection is expected to take place soon. Once
this certification is obtained Singapore will be able to drive up its revenue by offering a wide range of programmes
that have been developed or are in the process of being developed both to attract students in Singapore and from
other countries.
The Malaysian operation is progressing well and is expected to continue to be profitable going forward. The
Malaysia operation has also been through some changes to create a more sustainable business aligned with the new
strategy of the group. The Board is also looking at the possibility of further expansion of the operations to the
different states in Malaysia.
Dividend
The Board does not propose the payment of a final dividend for the year ended 31 December 2016 (2015: nil).
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Prospects
The past few years have been difficult years for the Group. However, the Board is confident that with the
reorganised management and marketing teams and proper and gradual implementation of the New Strategic Plan
(which covers development and marketing of new and wider range of programmes), the impact on the performance
of the Group will be positive going forward and bring the Group to profitability within a year or two.
Acknowledgements
On behalf of the Board I would like to thank all staff members for their continued dedication, commitment, and
cooperation during what has been a very difficult period. We look forward to their continuing support going forward
in implementing the new plans to bring back the Group to profitability in the years ahead.
We also would like to extend our appreciation and thanks to all our business partners, students, associates and
valued shareholders for their support throughout the year and look forward to the same in the years ahead.
Finally, I would like to personally thank all members of the Board for their time and guidance at the Board level
and the various committee levels in which they serve.
Gopinath Pillai
Chairman
Date: 5 June 2017
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
STRATEGIC REPORT
Principal Activities
The principal activity of the Group is to provide an educational offering that is broad and geared principally
towards preparing students to meet the demands of business and management.
The principal activities of the Company are those of investment holding and the provision of educational
consultancy services.
There have been no significant changes in the nature of these activities during the year.
Organization Overview
The Group’s business is directed by the Board and managed by a senior management team, comprising the Chief
Executive, Deputy Chief Executive, Chief Financial Officer and Senior Executives from each business unit, who
are responsible for the Operations, Human Resources and Development.
Strategy and Business Plan
During 2016, an extended amount of the Group’s resources was utilized to manage the orderly disposal of Ireland,
restructure the operations in London and Singapore and realign the overall Group’s business plan to include
traditional and non-traditional products and services, including the viability of introducing e-learning structured
courses.
We expect to see the results of our efforts to flow through by the middle of 2017 for all operating units.
In July 2016, we disposed of all shares in our Dublin subsidiary and anticipated the signing of a license arrangement
for a royalty income stream to the group arising from this disposal but this was cancelled by the buyer after a
prolonged discussion in December 2016.
Financial Review
The year ended 31 December 2016 was another challenging year in terms of trading for the Group.
The activities for Dublin have been classified as a discontinued activity for the year ended 31 December 2016 and
the comparatives have been restated accordingly.
In 2016 the total revenue of the Group from continuing operations was £3,992,581. This was 17% less than the
Group revenue from continuing operations in 2015 of £4,794,168 The fall was mainly due to the fall of revenue in
UK of £1.1m which was partially offset by the increase in revenue from Asia of £0.3m. As a result of the decrease
in revenue for the 2016 financial year, the Group incurred a loss after tax of £1,373,410 on the continuing business
as compared to the loss of £1,669,763 in 2015 which included impairment charges of £900,000 made against
goodwill and intangible assets (FY 2016: £150,000). However after taking the gain on the sale of shares in Dublin
operations and the 6-month operating profit for Dublin totalling £573,800, the Group comprehensive losses after
tax in 2016 was £820,681(2015 - £1,718,798).
Principal Risks and Uncertainties Facing the Group
There are three main types of risks faced by the Group:
1) Regulatory risks such as changes in government policy on education, work through visa and immigration
restrictions, funding changes and continued accreditation;
2) Financial exposures such as credit risk, liquidity risk, unfavourable exchange rate fluctuations and
operational cost increases; and
3) Changes to consumer demand and competition.
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The Board meets regularly to assess these risks, determine the likelihood of material exposures and formulate
strategy to protect the future trading prospects of the Group. A summary of the Board’s findings on risk is set out
below.
The Group is subject to regulatory and other changes which might impact on its ability to operate profitably in
certain territories.
Over the last few years, the Group has witnessed regulatory changes and enforcement which have had serious
implications to the Group through diminished student enrolments in London and Singapore. The Board is ever
mindful of the impact of regulatory changes and regularly assesses the exposures in each territory in which it
operates.
With regard to accreditation, the Board is mindful that its partners can potentially withdraw accreditation and
ensures that the Group regularly reviews the standards required for each accreditation and maintains professional
relationships with the various accrediting bodies. The Board also reviews its options for potential replacements in
the event that accreditation is withdrawn by any partner.
The major licences to operate in key territories are perpetual and therefore the risks of loss of accreditation are
much lower.
The Group faces financial risks which might impact on its future profitability
The Group’s future operations could potentially be impacted by a number of financial risks. The Board regularly
reviews these.
The impact of liquidity and credit risks are monitored but the Group had significant shareholder support in the past
with new cash in 2016 (zero interest rates and unsecured). For 2017, we are looking at further capital injections by
shareholders and through internal generated funds through the approved 2017 Plan.
The Board does monitor options available to the Group to access borrowing facilities. These might be attractive in
certain circumstances such as to underpin expansion plans or provide hedges for specific currency risks.
As it is listed on the Alternative Investment Market of the London Stock Exchange, the company reports in UK
Sterling. In 2016, only the operations of Malvern House International Limited are located in the UK and critically
had the majority of their income and expenses denominated in Sterling. In the results for the financial period under
review, this covers about 33% of the Group’s turnover.
For the majority of the territories that the Group operates in, costs are generally defrayed in the same currency as
income and hence there is a natural hedge in the income statement. The Board has considered the net asset exposures
arising on conversion at each year end and determined at this time not to hedge these.
The Board remains vigilant regarding exchange rate movements and published information on trends. If the Board
concluded that forward buying or selling of a currency or other financial instruments would protect its trading
results, then it would sanction hedging but to date has concluded that there is no cost effective financial protection
that it can execute and that the risks arising from fluctuations in foreign currency exchange rates are unlikely to be
significant.
The Group faces competition or commercial changes that may impact on its market share
Given the size of the worldwide market for educational courses and the key centres in which the Group operates, it
is not perceived by the Board that there is any abnormal risk from the dominance of competitors.
Due to the percentage of the Group’s revenue derived from English language and professional qualifications which
are consistently demanded for employment in international businesses, there is less volatility than for courses which
are subject to issues of taste. The Board regularly assesses the portfolio of products available in each territory and
its exposure to changes in consumer demands. To date the results of the Board’s assessment is that the vast majority
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of its courses offered globally are not subject to any volatility in consumer tastes and that this stability allows for
gradual transition in the event of any changes in consumer requirements.
Also, the Group could potentially diversify into new areas of education without any large capital outlay in the event
that it finds that demand for any aspect of its current portfolio is being impacted by competition or consumer tastes.
Capital Management
The Company’s capital consists wholly of ordinary shares. There are no other categories of shares in issue and the
Company does not use any other financial instruments as capital substitutes and quasi capital. The Company
manages its issued share capital by considering future capital requirements which are largely dictated by its plans
to acquire new companies or assist is subsidiaries in financing expansions in their own businesses.
There are no externally imposed capital requirements on the Company.
Key Performance Indicators
Financial
Revenue from continuing operations
(Decrease)/growth
Operating loss
Loss/profit before Taxation-continuing operations
2016
2015
restated
£3,992,581
(17%)
(£1,454,854)
(£1,343,037)
£4,794,168
(30%)
(£1,609,622)
(£1,645,617)
Loss per share-continuing operations
(1.84 pence)
(2.84 pence)
From FY2016, the Board is also tracking non-financial indicators as per below:
non-Financial
Number of Courses offered
Students attending
2016
22
6,301
Gopinath Pillai
DIRECTOR
Date: 5 June 2017
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements of Malvern International plc (the “Company”)
for the year ended 31 December 2016.
Annual General Meeting
The Annual General Meeting will be held at 24 Martin Lane, London, EC4R 0DR on June 2016 at 09.00.
Dividends
The Directors do not recommend the payment of a dividend for the year ended 31 December 2016 (2015: £nil).
Directors
The names of the Directors who held office during the year and to date were:
Gopinath Pillai (Chairman)
William Joseph Swords (resigned on 19 October 2016)
Ramasamy Jayapal
Sithawalla Haider Mohamedally
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee (appointed on 19 October 2016)
Navin Khattar (appointed on 19 October 2016)
Sam Malafeh (appointed on 19 October 2016)
Director’s Interest
The Directors holding office at the end of the financial year and their interests in the share capital of the Company
and its related corporations as recorded in the register of directors’ shareholdings were as follows:
Name of Company and Director
Malvern International plc
Direct interests:
Gopinath Pillai (Chairman)
Ramasamy Jayapal
Sithawalla Haider Mohamedally
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee
Navin Khattar
Sam Malafeh
Indirect Interests:
Gopinath Pillai (Chairman)
Ramasamy Jayapal
Sithawalla Haider Mohamedally
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee
Navin Khattar
Sam Malafeh
At beginning of the Year/
At date of Appointment
Shares of £0.05 each
At end of the Year
Share of £0.05 each
-
633,131
-
-
-
-
-
-
25,000
-
19,000
-
-
-
-
-
-
633,131
-
-
-
-
-
4,000,000
25,000
-
19,000
-
-
-
-
-
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
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There were no share options granted to any Directors of the Company.
Indemnity Provision
Directors’ and officers’ insurance is in place to indemnify the Directors against liabilities arising from the
discharge of their duties as directors of the Company.
Substantial Shareholdings
At 30 May 2017, notification had been received of the following holdings of more than 3% of the issued share
capital of the Company. Apart from these, the Directors are not aware of any individual interests or group of
interests held by persons acting together, which exceeds 3% of the Company’s issued share capital.
Shares of £0.05 each
C G Corp
KSP Investments Pte Ltd
Vidacos Nominees Limited Des:FGN
Sam Malafeh
31,391,122
29,883,117
15,107,294
9,000,000
%
(note)
29.46
28.04
14.18
8.45
Note: As a percentage of the issued share capital of the Company, comprising 106,557,983 shares.
Controlling Party
There is no controlling party for this Company.
Going Concern
The Board has considered the preparation of the financial statements on the basis that the Company and Group are
going concerns. The Group has good visibility on the three operations and have identified those operations that
have exposure to funding requirements with those that are self-funding based on their ability to generate positive
operating cash.
The Group’s main source of funds are internally generated funds and new capital injections. .In making this
assessment to prepare the financial statements on a going concern basis, the Board have additionally
considered a number of factors including:
• Profit and cash flow projections for the group and its key operating entities based upon their assessment
and plans for the operating entities in each of the key jurisdictions
• Evaluation of the working capital requirements of the business and its ability to meet liabilities as and
when they fall due
• The agreement reached in October 2016 with certain shareholders to convert certain loans from them into
ordinary shares in the company
• Plans for future raising of funds, through the issue of equity, to fund the growth and strategic plans for the
business
• Further cash injections and share issues since the year end as outlined in note 30.
• The pursuing of new franchise agreements within the Asia Pacific region.
The Directors have confidence in the committed 2017 planned performance from the Plc and local operating
unit management and they believe that the funds generated would sustain the going concern requirements of
the Group within the next 12 months. For this reason, they consider it appropriate to prepare the financial
statements on the going concern basis but recognise that the reliance on future growth and funding, which is
not guaranteed, represents a material uncertainty.
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Principal risks and uncertainties
A review of the principal risks and uncertainties facing the Group is set out in the section entitled Business and
Financial Information contained in the Strategic Report.
Business Review
The review of the business of the Company and its subsidiaries, their principal activities and the description of the
principal risks and uncertainties facing the Company and its subsidiaries are set out in the section entitled Strategic
Report.
Subsequent Events
The key subsequent events that have arisen are as follows:
• On 19 January 2017, a new capital injection was recorded totalling £100,000.
• On 7 February 2017, the group has agreed with a shareholder that loans from them amounting in aggregate to
£38,000 shall be converted into ordinary shares in the company. Further, on the same date, new capital
injections totalling £206,000 were registered.
• On 30 March 2017, the group has agreed with a shareholder that loans from them amounting in aggregate to
£80,000 shall be converted into ordinary shares in the company. Further, on the same date, new capital
injections totalling £290,000 were registered.
More details of these material events subsequent to the 31 December 2016 are given in Note 30 to the Financial
Statements.
Auditor
The Auditor, Crowe Clark Whitehall LLP, has indicated their willingness to continue in office and a resolution for
its re-appointment as auditor of the Company will be submitted to the Annual General Meeting.
Statement of disclosure to the Independent Auditor
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
•
•
so far as that director is aware, there is no relevant audit information of which the Company and the Group's
auditor is unaware, and
that director has taken all the steps that ought to have been taken as a director in order to be aware of any
relevant audit information and to establish that the Company and the Group's auditor is aware of that
information.
ON BEHALF OF THE BOARD
Gopinath Pillai
DIRECTOR
Date: 5 June 2017
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CORPORATE GOVERNANCE
As Malvern International plc is an AIM listed company, it is not required to comply with Code of Best Practice
published by the Committee on the Financial Aspects of Corporate Governance (“the UK Corporate Governance
Code”). However, the Directors do place a high degree of importance on ensuring that high standards of corporate
governance are maintained. As a result, many of the relevant principles set out in the UK Corporate Governance
Code have been adopted during the year.
The Board and Directors
The Board is responsible for creating value for shareholders, determining strategy, investment and acquisition
policy, approving significant items of expenditure and for the consideration of significant financing and legal
matters. The Group is currently led and controlled by a Board, chaired by Mr. Gopinath Pillai and comprising of
the Chairman, and two Executive Directors – Mr. Haider M. Sithawalla, CEO and Dr. Sam Malafeh, Deputy CEO,
and 5 Non-Executive Directors.
The Board considers that the Non-Executive Directors each have specific expertise and experience, materially
enhancing knowledge and judgment to contribute to the overall performance of the Board.
The Group and Company supports the concept of an effective Board leading and controlling the Group and
Company. The Board is responsible for approving the Group and Company’s policies and strategies. On a timely
basis, the Board receives and reviews financial and operating information appropriate to being able to discharge its
duties. Directors are free to seek any further information they consider necessary. All directors submit themselves
for re-election every three years by rotation in accordance with the Articles of Association. Given the size of the
Group and Company, it is not considered appropriate that there should be a separate nominations committee. It is
the view of the Board that the appointments of new directors should be a matter of consideration by the Board as a
whole. All appointments to the Board are subject to confirmation by shareholders at the following Annual General
Meeting.
Audit & Risk Management Committee
The Group and Company has established an audit and risk management committee comprised of the Chairman and
the three non-executive directors. The purpose of the Audit & Risk Management Committee, which is chaired by
Mr. Wee Heck Wee, is to provide formal and transparent arrangements for considering how to apply the financial
report and internal control principles set out in the Combined Code, and to maintain an appropriate relationship
with the Company’s auditors. The key terms are as follows:
•
•
•
•
to monitor the integrity of the financial statements of the Company and any formal announcement relating
to the Company's performance
to monitor the effectiveness of the external audit process and make recommendations to the Board in
relation to the appointment, re-appointment and remuneration of the external auditors
to keep under review the relationship with the external auditors including, but not limited to, their
independence and objectivity
to keep under review the effectiveness of the Company's financial reporting and internal control policies
and systems and to review, at least annually, the need for an internal audit function
As noted above, the committee members are also responsible for the Group and Company’s system of internal
financial control and for identifying the major business risks faced by the Group and Company. The system of
internal financial control is designed to provide reasonable, but not absolute, assurance against material
misstatement or loss. In fulfilling these responsibilities, the Board has reviewed the effectiveness of the system of
internal financial control. The Directors have established procedures for planning, budgeting and for monitoring,
on a regular basis, the performance of the Group and Company and for determining the appropriate course of action
to manage any major business risks. The Board has considered the need for an internal audit function and have
decided to create this function in 2017.
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Remuneration Committee
The Group and Company has established a remuneration committee comprised of the Chairman and the two non-
executive directors.
The purpose of the Remuneration Committee, which is chaired by Mr. Navin Khattar, is to establish a formal and
transparent procedure for developing policy on executive remuneration and to set the remuneration packages of
individual Non-Executive Directors. The key terms are as follows:
•
•
•
•
to determine and agree with the Board the framework or broad policy for the remuneration of the full-time
Executive Directors
to determine the total individual remuneration package of each full-time Executive Director including,
where appropriate, bonuses, incentive payments and share options
to determine targets for any performance-related pay schemes and
to determine the policy for and scope of pension arrangements for Non-Executive Directors
Details of the Directors’ emoluments are set out in the financial statements. It is the Group and Company’s policy
that the remuneration of directors should be commensurate with the services provided by them to the Group and
Company, their experience and should be competitive to attract appropriate individuals.
Relations with Shareholders
The Company values the views of its shareholders and recognises their interest in the Company’s and Group’s
strategy and performance. The Board is available to discuss current events with its institutional and private
shareholders and positively encourages attendance at general meetings.
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare consolidated and parent Company financial statements for each
financial year. Under that law, the Directors have elected to prepare the Group and parent Company financial
statements in accordance with International Financial Reporting Standards (as adopted by the EU) and applicable
law. Under company law, the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and parent Company and of the profit or loss of the
Group for that period. In preparing these financial statements, the Directors are required to:
a) select suitable accounting policies and then apply them consistently
b) make judgements and accounting estimates that are reasonable and prudent
c) state whether applicable Accounting Standards have been followed, subject to any material departures disclosed
and explained in the Group and parent Company financial statements
d) prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group
and parent Company will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
ON BEHALF OF THE BOARD
Gopinath Pillai
DIRECTOR
Date: 5 June 2017
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Independent Auditors’ Report to the Shareholders of Malvern
International plc
We have audited the Group and Parent Company Financial Statements of Malvern International plc for the year
ended 31 December 2016 (the “Financial Statements”), which comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial
Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent
Company Statements of Cash Flows, together with the related notes, numbers 1 to 32.
The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company
Financial Statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Group's members, as a body, in accordance with Part 3 of Chapter 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those
matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Group's members as
a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
As explained more fully under ‘Statement of Directors’ Responsibilities’ on page 16, the Directors are responsible
for the preparation of the Financial Statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB) Ethical Standards for auditors.
Scope of the audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at www.frc.org.uk/auditscopeukprivate.
Opinion on the Financial Statements
In our opinion:
•
the Financial Statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs
as at 31 December 2016 and of the Group’s loss for the year then ended;
the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Parent Company Financial Statements have been properly prepared in accordance with the IFRSs as adopted
by the European Union as applied in accordance with the provisions of the Companies Act 2006; and
the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
•
•
•
Emphasis of Matter – Going Concern
In forming our opinion on the financial statements, which is not qualified, we have considered the recent trading
performance of the group and the net current liability position of the group and company as at 31 December 2016
together with the adequacy of the disclosure made in note 2(iv) ‘Basis of preparation’ in relation to ‘Going Concern’.
Notwithstanding the disclosure in note 2(iv) and that the directors believe it is appropriate to produce these accounts
on a going concern basis, these conditions highlight a material uncertainty relating to the future outcome of trading
performance and plans for future raising of funds, probably through the issue of equity, to fund the growth and
strategic plans of the business. The financial statements do not include the adjustments that would result if the group
or company was unable to continue as a going concern.
P a g e 13 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit:
•
the information given in the Strategic Report and the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Directors’ Report and Strategic report have been prepared in accordance with applicable legal requirements.
•
Matters on which we are required to report by exception
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the Parent Company Financial Statements are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Nigel Bostock
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Chartered Accountants
Statutory Auditor
St Brides House
10 Salisbury Square
London
EC4Y 8EH
Date: 6 June 2017
P a g e 14 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
Note
2016
Revenue
Sale of services
Other income
Cost of services sold
Salaries and employees’ benefits
Amortisation of brand, licences and trademarks
Depreciation of plant and equipment
Other operating expenses
Impairment of goodwill
Impairment of intangible assets
Operating loss
Share of results of associated companies and joint ventures
Finance costs
Loss before income tax
Income tax charge
Loss for the year from continuing activities
Profit for the year from discontinued activities
Loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interest
Loss per share on continuing activities (in pence)
Basic
Diluted
Profit /(loss) per share on discontinued activities (in pence)
Basic
Diluted
Loss per share attributable to equity holders of the Company
(in pence)
Basic
Diluted
4
5
6
14
11
15
14
13
7
9
10
10
10
2015
restated
£
4,794,168
261,467
5,055,635
2,418,647
1,292,034
165,165
101,244
1,788,167
404,352
495,648
(1,609,622)
965
(36,960)
(1,645,617)
(24,146)
(1,669,763)
262,431
(1,407,332)
£
3,992,581
52,104
4,044,685
2,210,611
1,158,797
158,333
77,579
1,744,219
-
150,000
(1,454,854)
49,898
61,919
(1,343,037)
(30,373)
(1,373,410)
573,800
(799,610)
(799,610)
-
(799,610)
(1,525,426)
118,094
(1,407,332)
2016
(1.84)
(1.84)
0.77
0.77
2015
restated
(2.84)
(2.84)
0.42
0.42
(1.07)
(1.07)
(2.42)
(2.42)
P a g e 15 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Loss for the year
Foreign currency translation movements
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive income for the year
2016
2015
£
(799,610)
(21,071)
(820,681)
(820,681)
-
(820,681)
£
(1,407,332)
(311,466)
(1,718,798)
(1,857,769)
138,971
(1,718,798)
P a g e 16 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
STATEMENTS OF FINANCIAL POSITION
Note
2016
2015
2016
2015
Group
Company
£
£
£
£
TOTAL ASSETS
Non-Current Assets
Property, plant and equipment
Investment in subsidiary
companies
Investment in joint ventures
Intangible assets
Development Expenditure
Goodwill
Deferred tax asset
Current Assets
Inventories
Trade receivables
Other receivables and
prepayments
Tax recoverable
Amounts due from subsidiary
companies
Amounts due from joint ventures
Amounts due from related parties
Cash and cash equivalents
Total Assets
11
12
13
14
15
9
16
17
18
19
20
188,835
-
-
2,144,264
1,505
1,312
-
2,335,916
3,129
460,939
619,993
32,539
-
27,841
-
116,541
1,260,982
3,596,898
348,251
-
-
4,208,564
-
3,657,585
89,675
2,445,611
-
1,312
17,120
2,901,969
9,142
575,952
804,003
13,020
-
32,428
-
416,268
1,850,813
4,752,782
-
-
-
-
-
4,208,564
-
-
12,993
32,539
817,353
-
-
851
863,736
5,072,300
-
-
-
-
-
3,657,585
-
41,985
111,022
13,020
622,442
-
-
5,235
793,704
4,451,289
P a g e 17 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
STATEMENTS OF FINANCIAL POSITION (Continued)
Note
2016
2015
2016
2015
Group
Company
EQUITY AND LIABILITIES
Non-Current Liabilities
Financial liabilities
Deferred taxation liability
Current Liabilities
Trade payables
Deferred income
Other payables and accruals
Amounts due to a subsidiary
Amounts due to related parties
Financial liabilities
Provision for income tax
Total liabilities
25
9
21
22
23
24
25
£
£
24,447
-
24,447
170,675
243,297
809,824
-
1,223,256
4,823
9,626
2,461,501
2,485,948
7,492
3,323
10,815
535,940
756,282
1,487,997
-
1,589,052
31,383
18,949
4,419,603
4,430,418
£
-
-
-
-
-
285,753
35,055
1,159,253
-
-
1,480,061
1,480,061
£
-
-
-
-
-
239,686
60,039
1,492,430
-
-
1,792,155
1,792,155
Equity attributable to equity
holders of the Company
Share capital
Share premium
Retained earnings
Translation reserve
Capital reserve
26
27 (i)
27 (iii)
27 (iv)
27 (v)
Non-controlling interests
Total equity
Total Equity and Liabilities
6,823,838
896,111
(7,785,081)
1,005,522
170,560
1,110,950
-
1,110,950
3,596,898
5,362,491
896,111
(6,964,400)
965,602
170,560
430,364
(108,000)
322,364
4,752,782
6,823,838
896,111
(4,127,710)
-
-
3,592,239
-
3,592,239
5,072,300
5,362,491
896,111
(3,599,468)
-
-
2,659,134
-
2,659,134
4,451,289
The loss for the financial year dealt with in the financial statements of the parent Company was £528,242
(2015: loss £1,695,910).
The financial statements were approved by the Board of Directors on 5 June 2017 and were signed on its
behalf by:
Gopinath Pillai
Company-registration-number:0517445
Chairman
P a g e 18 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Share
Capital
Share
Premium
Share-Based
Payment
Reserve
Retained
Earnings
Translation
Reserve
Capital
Reserve
Balance at 1 January 2015
5,362,491
896,111
£
£
Loss for the year
Total other comprehensive
income
Total comprehensive income
for the year
Unclaimed dividends
-
-
-
-
-
-
-
-
Balance at 31 December
2015/ 1 January 2016
5,362,491
896,111
Loss for the year
Total other comprehensive
income
Total comprehensive income
for the year
New Share Issues
-
-
-
1,461,347
-
-
-
-
-
-
-
Balance at 31 December 2016
6,823,838
896,111
£
-
-
-
-
-
-
-
-
-
-
-
Attributable
To Equity
Holders of the
Company
£
Non-
controlling
Interests
Total
£
£
£
£
£
(5,444,476)
1,297,945
170,560
2,282,631
(246,971)
2,035,660
(1,525,426)
-
-
(332,343)
(1,525,426)
(332,343)
5,502
-
-
-
-
-
(1,525,426)
118,094
(1,407,332)
(332,343)
20,877
(311,466)
(1,857,769)
138,971
(1,718,798)
5,502
-
5,502
(6,964,400)
965,602
170,560
430,364
(108,000)
322,364
(820,681)
-
-
39,920
(820,681)
-
5,502
39,920
-
-
-
-
-
-
-
(820,681)
108,000
(712,681)
39,920
-
39,920
(780,761)
1,461,347
5,502
108,000
-
-
(672,761)
1,461,347
5,502
(7,785,081)
1,005,522
170,560
1,110,950
-
1,110,950
P a g e 19 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash Flows from Operating Activities
Loss before income tax from continuing activities
Profit/(loss) before income tax from discontinued activities
Adjustments for:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Impairment of goodwill
Impairment of intangible assets
Loss on disposal of plant and equipment
Non-cash elements of profit on discontinued activities
Interest expense
Others
Changes in working capital:
Receivables
Payables
Inventories
Related parties and associated companies
Taxation
Net cash used from operating activities
Cash Flows from Investing Activities
Interest received
Dividends received
Purchases of property, plant and equipment
Purchase of trademarks and licences
Net cash used in investing activities
Cash Flows from Financing Activities
Interest paid
Repayment of term loan
Finance leases
Unclaimed dividends returned
New Share Issues1
Net cash generated by/(used in) financing activities
Effect of foreign exchange rate changes on
consolidation
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the
Year
Cash and cash equivalents at the end of the year
2016
£
2015
restated
£
(1,343,037)
573,800
(1,645,617)
262,431
158,333
77,579
-
150,000
43,533
(308,082)
61,919
-
(585,955)
120,356
(817,411)
3,424
683,662
(595,924)
7,797
(588,127)
-
-
(45,899)
-
(45,899)
(61,919)
-
(9,605)
-
428,992
357,468
(23,169)
(299,727)
416,268
116,541
165,165
150,016
404,352
495,648
9,920
-
43,747
965
(113,373)
(137,221)
(63,954)
(2,424)
632,497
315,525
(24,867)
290,658
-
-
(90,649)
-
(90,649)
(43,747)
(37,204)
(38,964)
5,502
-
(114,413)
(30,074)
55,522
360,746
416,268
1 This includes the cash portion of the capital injection. An amount of £1,032,355 was capitalized from shareholder loans.
P a g e 20 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Share
Capital
£
Share
Premium
£
Retained
Earnings
£
Total of other
Reserves
£
Total
£
5,362,491
-
896,111
-
(1,909,060)
(1,695,910)
(1,909,060)
(1,695,910)
4,349,542
(1,695,910)
-
-
-
-
-
-
(1,695,910)
(1,695,910)
(1,695,910)
5,502
5,502
5,502
5,502
5,502
5,502
5,362,491
896,111
(3,599,468)
(3,599,468)
2,659,134
-
-
1,461,347
1,461,347
-
-
-
-
(528,242)
(528,242)
(528,242)
(528,242)
(528,242)
(528,242)
-
-
-
-
1,461,347
1,461,347
6,823,838
896,111
(4,127,710)
(4,127,710)
3,592,239
Balance at 1
January 2015
Loss for the year
Total comprehensive
income for the year
Unclaimed
Dividends
Total transactions
with owners
Balance at 31
December 2015/
1 January 2016
Loss for the year
Total
comprehensive
income for the year
New Share Issues
Total transactions
with owners
Balance at 31
December 2016
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its
own income statement.
P a g e 21 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash Outflows from Operating Activities
Loss before income tax
Adjustments for:
Interest expense
Impairment of investment in subsidiary
Impairment of investment in joint venture
Change in working capital
Receivables
Payables
Related parties
Net cash used in operating activities
Cash Flows from Financing Activities
Unclaimed dividends returned
New Share Issues
Net cash used in financing activities
Cash Flows from Investing Activities
Interest expense
Interest income
Acquisition of non-controlling interest
Net cash generated from investing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2016
£
2015
£
(528,242)
(1,695,911)
-
176,187
-
(352,055)
(606,672)
745,245
(219,894)
(433,376)
-
428,992
428,992
-
-
-
-
(4,384)
5,235
851
14,026
1,602,522
-
(79,363)
(67,965)
67,116
79,155
(1,057)
5,502
5,502
(14,026)
-
-
(14,026)
(9,581)
14,816
5,235
P a g e 22 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1. General Information
Malvern International plc (the “Company”) is a public limited liability company incorporated in England and Wales
on 8 July 2004. The Company was admitted to AIM on 10 December 2004. Its registered office is Witan Gate House,
500-600 Witan Gate West, Milton Keynes MK9 1SH and its principal place of business is in Singapore. The
registration number of the Company is 05174452.
The principal activities of the Company are that of investment holding and provision of educational consultancy
services. The principal activity of the group is to provide an educational offering that is broad and geared principally
towards preparing students to meet the demands of business and management. The specific principal activities of
the subsidiary companies are set out in note 12 to the financial statements. There have been no significant changes
in the nature of these activities during the year.
2. Significant Accounting Policies
Basis of Preparation
(i)
These Financial Statements of the Group and Company are prepared on a going concern basis, under the historical
cost convention (with the exception of share based payments and 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.
The activities for Dublin have been classified as a discontinued activity for the year ended 31 December 2016 and
the comparatives have been restated accordingly. There is no impact on the net assets of the group or parent company
at the beginning or end of the prior year.
Basis of consolidation
(ii)
The Group financial statements consolidate the accounts of Malvern International plc and all of its subsidiary
undertakings made up to 31 December 2016. The Consolidated Statement of Comprehensive Income includes the
results of all subsidiary undertakings for the period from the date on which control passes. Control is achieved where
the Company (or one of its subsidiary undertakings) obtains the power to govern the financial and operating policies
of an investee entity so as to derive benefits from its activities.
(iii)
Adoption of new and revised International Financial Reporting Standards
No new IFRS standards, amendments or interpretations became effective in 2016 which had a material effect on
these Financial Statements.
At the date of approval of these Financial Statements, the directors have considered IFRS Standards and
Interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective. The
Group has not early adopted these and are undertaking an ongoing evaluation of the potential impact of IFRS9 in
respect of the impact of the expected loss model on the impairment of receivables, IFRS15 in respect of the revenue
recognition for revenues and IFRS16 in respect of leases. Whilst this exercise is not concluded, the Directors but do
P a g e 23 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
not presently anticipate that the adoption of these standards and interpretations will have a material impact on the
Group’s Financial Statements in the periods of initial application
Standards applied
New accounting standards that have become effective for the current year have not had a material impact on the
classification or measurement of the Group’s assets and liabilities, nor have they resulted in any additional disclosures.
Going concern
(iv)
The financial statements have been prepared on a going concern basis under the historical cost convention, except
that certain financial instruments are accounted for at fair values. In making this assessment to prepare the financial
statements on a going concern basis, the Board have additionally considered a number of factors including:
• Profit and cash flow projections for the group and its key operating entities based upon their assessment
and plans for the operating entities in each of the key jurisdictions
• Evaluation of the working capital requirements of the business and its ability to meet liabilities as and when
they fall due
• The agreement reached in October 2016 with certain shareholders to convert certain loans from them into
ordinary shares in the company
• Plans for future raising of funds, through the issue of equity, to fund the growth and strategic plans for the
business
• Further cash injections and share issues since the year end as outlined in note 30.
• The pursuing of new franchise agreements within the Asia Pacific region.
The Directors recognise the need to raise further funding and they believe and anticipate that this will be
achieved within the next 12 months. For this reason, they consider it appropriate to prepare the financial
statements on the going concern basis but recognise that the reliance on future funding, which is not guaranteed,
represents a material uncertainty.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
(v)
In the process of applying the Group’s accounting policies above, management necessarily make judgements and
estimates that have a significant effect on the amounts recognised in the financial statements. Changes in the
assumptions underlying the estimates could result in a significant impact to the financial statements. The most critical
of these accounting judgement and estimation areas are as follows:
Estimated Impairment of Brands, Licences and Trademarks
The Group evaluates whether there is any indication that their brands, licences and trademarks have suffered any
impairment, in accordance with their stated accounting policy. The recoverable amount of brands, licences and
trademarks is determined from value in use calculations. The key assumptions for the value in use calculation are
those regarding expected discounted future cash flows.
Estimated Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with their stated accounting
policy. The recoverable amount of goodwill is determined from value in use calculations. The key assumptions for
the value in use calculation are those regarding expected discounted future cash flows.
Impairment of Assets other than Brands, Licences, Trademarks, and Goodwill
The Group reviews the carrying amounts of assets as at each net asset statement date to determine whether there is
any indication of impairment in accordance with their stated accounting policy. If any such indication exists, the
assets’ recoverable amount or value in use is estimated. Determining the value in use of property, plant and equipment,
which requires the determination of future cash flows expected to be generated from the continued use and ultimate
disposal of the asset, requires the Company to make estimates and assumptions that can materially affect the financial
statements. Any resulting impairment loss could have a material adverse impact on the Group’s financial position
and results of operations.
P a g e 24 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Income Taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the
capital allowance, deductibility of certain expenses and taxability of certain income during the estimation of the
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities based on estimates of whether
additional taxes will be due. Where the final tax outcome is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred income tax provisions in the period in which such
determination is made.
Evaluation of deferred income
The Group reviews the fees raised at the end of relevant periods to evaluate those amounts that cover the future
provision of education not yet delivered to evaluate the amount of deferred income to be recognised in a future period
Basis of Combination
(vi)
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee
if all three of the following elements are present: power over the investee, exposure to variable returns from the
investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that they may be a change in any of these elements of control.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired
is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets
acquired (i.e. discount on acquisition) is credited to the Consolidated Income Statement in the period of acquisition.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by the Group. All significant intra-group transactions, balances, income and expenses
are eliminated on consolidation.
Subsidiary Company
(vii)
Investment in subsidiaries is stated in the financial statements of the Company at cost less any provision for
impairment losses. The financial statements of subsidiaries acquired are consolidated in the financial statements of
the Group from the date that control commences until the date control ceases, using the acquisition method of
accounting.
Joint Ventures
(viii)
Joint ventures are formal arrangements where the jointly controlling parties have structured their involvement through
a distinct vehicle which is responsible for its own contractual arrangements and derives the benefits and meets
liabilities of these.
The consolidated financial statements include the Group’s share of the total recognised gains and losses of these joint
ventures on an equity accounting basis, from the date joint control commences until the date that joint control ceases.
In the Company’s net asset statement, investments in joint ventures are stated at cost less any provision for
impairment losses. The impairment review compares the net carrying value with the recoverable amount based on
the present value of the Group’s share of the joint venture’s cash flow or its fair market value.
Dividend income from investments in joint ventures is recognised when the shareholders’ rights to receive payment
have been established.
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Non-controlling Interests
(ix)
Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to
interests which are not owned directly or indirectly by the Group. It is measured at the minorities’ share of the fair
value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition by the Group and the minorities’
share of changes in equity since the date of acquisition.
Functional and Presentational Currency
(x)
The consolidated financial statements have been presented with United Kingdom Sterling as the presentational
currency, as the Company is incorporated in England and Wales with Sterling denominated shares which are traded
on the Alternative Investment Market (AIM).
Items included in the financial statements of each subsidiary of the Group are measured using the currency of the
primary economic environment in which the subsidiary operates (“the functional currency”). The primary functional
currencies of Group companies are Singapore Dollars, Euro, Malaysian Ringgit and UK Sterling.
Foreign Currency Translation
(xi)
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Foreign currency
monetary assets and liabilities are translated using the exchange rate prevailing at the date of the Statement of
Financial Position. Non-monetary assets and liabilities are measured using the exchange rates prevailing at the
transaction dates, or in the case of the items carried at fair value, the exchange rates ruling when the values were
determined. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and
translation of foreign currency denominated assets and liabilities are recognised in the income statement.
Assets and liabilities of the entities having functional currency other than the presentational currency are translated
into sterling equivalents at exchange rates ruling at the net asset statement date. Revenues and expenses are translated
at average exchange rates for the year, which approximates the exchange rates at the dates of transactions. All
resultant differences are taken directly to equity. On disposal of a foreign entity, accumulated exchange differences
are recognised in the income statement as part of the gain or loss on disposal.
The following rates of exchange have been applied:
2015
2016
1 Pound Sterling to Singapore Dollar
Closing rate
Average rate
1 Pound Sterling to Malaysian Ringgit
Closing rate
Average rate
1 Pound Sterling to Euro
Closing rate
Average rate
5.572
5.590
1.794
1.877
1.185
1.221
2.114
2.100
6.432
5.391
1.379
1.377
Property, Plant and Equipment
(xii)
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.
Depreciation policy, useful lives and residual values are reviewed at least annually, for all asset classes to ensure that
the current method is the most appropriate.
Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and
maintenance is charged to the income statement. Expenditure for additions, improvements and renewals is capitalised
when it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits
expected to be realised from the use of the items of property, plant and equipment beyond their originally assessed
standard of performance.
Depreciation is calculated based on the straight-line method to write off the cost of property, plant and equipment
less their estimated residual value over their estimated useful economic lives as follows:
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2016
Leasehold property and improvements
Classroom and office equipment
Motor vehicle
-
-
-
Over lease term
3 - 10 years
5 years
Property, plant and equipment held under finance leases are depreciated over their estimated useful lives on the same
basis as owned assets or, where shorter, the term of the relevant leases.
Computer systems and software are classified as a tangible fixed asset rather than an intangible asset.
(xiii)
Intangible fixed assets
An intangible asset with indefinite useful life is tested for impairment annually and whenever there is an indication
that the asset may be impaired.
Licence fees with a definite life are amortised using a straight-line method over a period of 2 to 5 years. Brands with
a definite life are amortised using a straight-line method over a period of 25 years.
Impairment of tangible and intangible assets excluding goodwill
(xiv)
An assessment is made at each net asset statement date of whether there is any indication of impairment of any asset,
or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no
longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An
asset’s recoverable amount is calculated as the higher of the asset’s value in use or its fair value less costs to sell.
Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset
and from its disposal at the end of its useful life.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An
impairment loss is charged to the income statement in the period in which it arises unless the relevant asset is carried
at a revalued amount in which case the impairment loss is treated as a revaluation decrease.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine
the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been
determined (net of any depreciation) had no impairment loss been recognised for the asset in prior years.
A reversal of an impairment loss is credited to the income statement in the period in which it arises unless the relevant
asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation increase.
(xv) Goodwill
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised. After initial recognition, goodwill is measured at cost less accumulated impairment
losses, if any.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating sub-groups
expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in subsequent periods.
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2016
(xvi) Financial assets, loans and receivables
Financial assets
Financial assets are recognised on the net asset statement when the Group becomes a party to the contractual
provisions of the instrument. Financial assets are initially recognised at fair value plus, in the case of financial assets
not at fair value through profit or loss, directly attributable transaction costs. Financial assets are derecognised when
the contractual rights to the cash flows from the financial assets have expired or have been transferred. On
derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that has been recognised directly in equity is recognised in
the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention
of trading the receivable. They are included in current assets, except those maturing more than 12 months after the
net asset statement date which are classified as non-current assets. Loans and receivables are presented as trade and
other receivables (including amounts due from subsidiaries, associated companies, related companies and related
parties), fixed deposits and cash and bank balances on the net asset statement.
At subsequent reporting dates, loan and receivables are measured at amortised cost using the effective interest rate
method.
Impairment of financial assets
(xvii)
The Group assesses at each net asset statement date whether there is any objective evidence that a financial asset or
group of financial assets is impaired and recognise the impairment loss when such evidence exists. Financial assets
are carried at amortised cost.
An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired,
and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is
reduced through the use of an allowance account.
Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be
related objectively to an event occurring after the impairment was recognised to the extent that the carrying amount
of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the income
statement.
(xviii) Revenue Recognition
Revenue is recognised on the following basis:
• Course fees and examination fees are recognised as income based on classes or examinations conducted during
the year.
• Accommodation fees are recognised as income based upon occupancy of act a point in time.
• Publication sales are recognised upon sale of study guides.
• Registration fees are recognised upon approval of respective applications.
• Revenues from support services are recognised when services are rendered.
• All other course fees in respect of courses offered with no obligation to impart lessons are recognised when the
students register for the course and collect the study materials.
Deferred income relates to course and accommodation fees received in advance and is recognised in the income
statement based on classes conducted and accommodation provided.
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2016
(xix) Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand and bank deposits with an initial maturity of less than three months.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included
as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Trade and Other Receivables
(xx)
Trade and other receivables, which generally have 30 to 90 days terms, are initially measured at fair value, and
subsequently measured at amortised cost, using the effective interest method, less allowance for impairment. An
allowance for impairment of trade receivables is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original term of the receivables. The amount of the allowance is
the difference between the asset’s carrying amount and the present value of the estimated cash flows discounted at
the original effective interest rate. The amount of the allowance is recognised in the income statement.
Inventories
(xxi)
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out
method. Allowance for impairment is made for obsolete, slow moving and defective stocks.
(xxii) Trade and Other Payables
Trade and other payables, which are normally settled on 30 to 90 days term, are initially measured at fair value, and
subsequently measured at amortised cost, using the effective interest method.
(xxiii) Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax movements.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using
tax rates and tax laws that have been enacted or substantively enacted in countries where the Company and its
subsidiaries operate by the net asset statement date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
net asset statement liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associated companies, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each net asset statement date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised based on tax rates and tax laws that have been enacted or substantially enacted by the net asset statement
date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
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2016
(xxiv) Leases
A finance lease which effectively transfers to the Group substantially all the risks and benefits to ownership of the
leased item is capitalised at the lower of the fair value of the leased item and the present value of the minimum lease
payments at the inception of the lease term and disclosed as property, plant and equipment. Lease payments are
apportioned between the finance charges and reduction of the leased liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly to the income statement.
Capitalised lease assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
A lease where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items is
classified as an operating lease. Operating lease payments are recognised as an expense in the income statement on
a straight-line basis over the lease term.
Where an incentive to sign the lease has been taken, the incentive is spread on a straight-line basis over the lease
term.
(xxv) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation. Provisions are reviewed regularly and adjusted to
reflect the current best estimate. Where the effect of the time value of money is material, the amount of provision is
the present value of the expenditures expected to be required to settle the obligation.
(xxvi) Employees’ Benefits
Defined contribution plans
Contributions to defined contribution plans are recognised as an expense in the income statement as incurred.
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees up to the net asset statement date.
Share-based compensation
The Group operates an equity-settled, share-based payment plan. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense in the Income Statement with a corresponding
increase in the share based payment reserve over the vesting period.
(xxvii) Intra-group Financial Guarantees
Financial guarantees are financial instruments issued by the Group that require the issuer to make specified payments
to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance
with the original or modified terms of a debt instrument.
Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to
initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative
amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When
financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees
is transferred to the income statement.
(xxviii) Equity instruments
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares
are deducted against share premium.
Equity instruments issued by the Company are recorded at the proceeds received except where those proceeds appear to
be less than the fair value of the equity instruments issued, in which case the equity instruments are recorded at fair
value. The difference between the proceeds received and the fair value is reflected in the share based payments reserve.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
The costs of issuing new equity are charged against the share premium account.
Where ordinary shares will be issued as part of deferred purchase consideration then:
• where the number of shares to be issued has been fixed, then such deferred consideration will be classified as
equity
• where the number of shares to be issued is dependent on certain performance criteria being met, then such
deferred consideration will be classified as liability until such time as the number of shares to be issued is
determined.
(xxix) Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payments.
The Group issues equity-settled based payments to directors and certain employees of the Group. Equity-settled
share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the number of shares that will eventually vest.
Fair value is measured by use of a Black Scholes model. The expected life used in the model has been adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
(xxx) Borrowing Costs
Borrowing costs incurred to finance the development of property, plant and equipment are capitalised during the
period of time that is required to complete and prepare the asset for its intended use. The capitalised costs are
depreciated over the useful life of the property, plant and equipment.
Other borrowing costs, including interest cost and foreign exchange differences, on short term borrowings are
recognised on a time-apportioned basis in the income statement using the effective interest method.
(xxxi) Segmental reporting
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating results are regularly reviewed by the Board to make decisions
about resources to be allocated to the segment and assess its performance, and for which discrete financial
information is available.
Segmental results are reported to the Board and include items directly attributable to the segment as well as those
that can be allocated on a reasonable basis.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
3. Segmental Information
All revenue and profit before taxation arises from operations in the education sector. Reportable segments are
based on the geographical area where operations are based comprising Europe (UK and Cyprus) and South East
Asia/Middle East (Malaysia and Singapore). These segments represent the respective sub-groups of Malvern
House Group Limited (Europe) and Malvern Singapore (South East Asia/Middle East).
The segmental analysis is as follows:
2016
Revenue from external customers
Depreciation, write offs and amortisation
Loss before taxation
Taxation charge
Profit on discontinued activities
Loss for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
2015-restated
Revenue from external customers
Depreciation, write offs and amortisation
Loss before taxation
Taxation charge
Profit on discontinued activities
Loss for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
Europe
£
1,314,904
(92,852)
(528,355)
-
573,800
45,445
Asia
£
2,677,677
(293,060)
(814,682)
(30,373)
-
(845,055)
Total
£
3,992,581
(385,912)
(1,343,037)
(30,373)
573,800
(799,610)
1,018,926
(1,022,332)
3,653
2,577,972
(1,463,617)
42,246
3,596,898
(2,485,948)
45,899
2,446,734
(1,044,024)
(1,548,300)
(1,100)
262,431
(1,286,969)
2,347,434
(122,384)
(97,317)
(23,046)
-
(120,363)
4,794,168
(1,166,408)
(1,645,617)
(24,146)
262,431
(1,407,332)
1,988,438
(3,178,018)
17,120
2,764,344
(1,252,400)
-
4,752,782
(4,430,418)
17,120
Note that the Segmental liabilities figure for South East Asia and the Middle East is shown as a net asset due to the
treatment of the amount due from Europe to South East Asia for funding being shown as a liability in the former
and an asset in the latter.
4. Sale of Services
Course fees
Accommodation fees
Application fees, registration and examination fees
Training fees and other sales
2016
£
3,395,083
454,129
60,669
82,700
3,992,581
2015 restated
£
3,730,266
812,888
106,410
144,604
4,794,168
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
5. Other Income
Legal Settlement
Interest income
Rental and related income
Miscellaneous income
Write back of Accruals/Debts
6. Salaries and Employees’ Benefits
Staff salaries and related costs
Social security costs – staff
Directors’ remuneration
Directors’ fees
Social security costs – directors
Others
Less : reported as cost of services sold
Highest paid director
Remuneration and benefits
Average number of employees
Lecturers
Marketing staff
Operational and administration staff
2016
£
2015-restated
£
-
-
37,218
-
14,886
52,104
150,000
121
20,707
90,639
-
261,467
2016
£
1,179,884
172,188
59,000
40,288
-
-
1,451,360
(292,563)
1,158,797
2015-restated
£
1,312,184
262,858
84,366
90,712
217
10,368
1,760,705
(468,671)
1,292,034
35,000
48,000
Number
31
14
64
109
Number
34
17
54
105
The average number of employees is calculated based on the number of full or part time employees on the payroll
each month. In the years ended 31 December 2015 and 31 December 2016 no pension payments were paid or
accrued.
7. Finance Costs
Interest payable to related parties
Interest on finance leases
Bank overdraft
Other Charges
2016
£
(64,999)
-
-
3,080
(61,919)
2015-restated
£
36,333
527
-
100
36,960
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
8. Operating Loss
Auditors’ remuneration:
- Fees payable to the Company’s auditors* for statutory audit
- Fees payable to the Company’s auditors** for statutory
audit of subsidiary company
- (Over)/under provision of fees payable to the Company’s
auditors for statutory audit in prior year
- Fees payable to the other auditors for statutory audits
- Fees payable to the other auditors for taxation services
Exchange loss/(gain)
Impairment for trade receivables charge
Office and equipment rental
9. Income Tax
Tax credit/(expense) attributable to the results is made up of:
Current income tax
PY income tax adjustment
Current year tax
Deferred taxation
2016
£
2015-restated
£
38,100
29,000
39,832
34,092
12,000
3,648
8,412
101,922
(21,390)
110,023
768,547
5,000
3,410
1,375
72,877
(161,418)
23,213
750,839
2016
£
2015-restated
£
(33,696)
-
(33,696)
3,323
(30,373)
(33,258)
1,075
(32,183)
8,037
(24,146)
The reconciliation of the current year tax expense and the product of accounting profit multiplied by the Singapore
(where the group company is resident) statutory tax rate is as follows:
Loss before income tax
Income tax at the statutory rate of 17%
Effect of different tax rate in foreign
Jurisdictions
Non-deductible income and expenses
Singapore statutory stepped income
Exemption
Adjustments of income tax in respect of
prior years
Deferred tax asset not recognised
(Over)/under-provision for prior year deferred tax
Other effects not separately identified
2016
£
(1,343,038)
228,316
-
%
17.0
-
%
2015-restated
£
(1,645,616)
279,755
-
17.0
0.0
(21,366)
(1.6)
(259,054)
(15.7)
-
-
30,189
1.8
-
(237,324)
-
-
(30,373)
-
(17.7)
-
-
(2.3)
1,073
(77,209)
-
1,100
(24,146)
0.1
(4.7)
0.0
0.1
(1.5)
The Group’s income tax liability is subject to agreement by the tax authorities of the respective countries in
which the companies in the Group operate. Temporary differences arising from investment in subsidiary and
associated companies are considered as insignificant to the Group.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Composition of deferred taxation:
On the excess of the net book value over tax written down value of plant and
equipment
2016
£
2015-restated
£
-
13,797
Analysis of provision for deferred taxation:
Balance at the beginning of the year
Deferred taxation for the year
Sale of Subsidiary
Currency realignment
Balance at the end of the year
Deferred tax asset
Deferred tax liability
Balance at the end of the year
13,797
3,323
(17,120)
-
-
-
-
-
(12,674)
25,187
-
1,284
13,797
17,120
(3,323)
13,797
The amount of temporary differences for which no deferred tax asset has been recognised in the Statements
of Financial Position is as follows:
Un-utilised capital allowance c/f
Un-utilised tax losses
2016
£
82,146
3,628,440
3,710,586
2015
£
297,691
3,182,865
3,480,556
Deferred tax assets have not been recognised in respect of some subsidiaries’ tax losses as it is not sufficiently certain
that taxable profit will be available against which these available tax losses can be utilised in the future. The
utilisation of these unutilised tax losses is subject to the agreement of the tax authorities and compliance with certain
provisions of the tax legislation of the respective countries in which the companies in the Group operate. Subject to
those constraints, it is believed that these tax losses above can be carried forward indefinitely although their use
depends on future profitability in each jurisdiction.
There are no temporary timing differences in respect of the company.
10. Earnings/(Loss) Per Share
The basic and diluted earnings/(loss) per share on continuing activities was based on the loss attributable to
shareholders of £1,373,410 (2015-restated: loss of £1,787,857) and the weighted average number of ordinary shares
in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).
The basic and diluted earnings/(loss) per share on discontinued activities was based on the profit attributable to
shareholders of £573,800 (2015-restated: £262,431) and the weighted average number of ordinary shares in issue
during the year of 74,592,510 shares (2015: 63,051,043 shares).
The basic and diluted earnings/(loss) per share attributable to equity holders of the Company was based on the loss
to shareholders of £799,610 (2015-restated: loss of £1,525,426) and the weighted average number of ordinary shares
in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).
There were no outstanding options in 2016.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
11. Property, Plant, and Equipment
Leasehold
property and
improvements
Classroom
and office
equipment
Motor
Vehicle
£
£
£
537,373
8,117
-
(6,840)
538,650
4,365
(164,861)
-
-
378,154
406,914
48,774
-
-
455,688
16,376
(119,212)
-
-
352,853
1,947,697
82,532
(9,920)
(25,505)
1,994,804
13,270
(213,356)
(173,757)
-
1,620,961
1,640,104
99,041
-
-
1,739,145
57,478
(175,097)
(130,224)
-
1,491,301
11,990
-
-
(158)
11,832
28,264
(126)
-
-
39,970
-
2,201
-
-
2,201
3,725
-
-
170
6,096
Total
£
2,497,060
90,649
(9,920)
(32,503)
2,545,286
45,899
(378,343)
(173,757)
-
2,039,085
2,047,018
150,016
-
-
2,197,034
77,579
(294,309)
(130,224)
170
1,850,250
25,301
82,962
129,660
255,658
33,874
9,631
188,835
348,251
Cost
As at 1 January 2015
Additions
Disposals
Exchange differences
As at 31 December 2015/
1 January 2016
Additions
Disposals-Subsidiary
Disposals
Exchange differences
As at 31 December 2016
Accumulated depreciation
As at 1 January 2015
Charge for the year
Disposals
Exchange differences
As at 31 December 2015/
1 January 2016
Charge for the year
Disposals-Subsidiary
Disposals
Exchange differences
As at 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
At the net asset statement date, the Group held computers, classroom and office equipment, and a motor vehicle
under finance lease and hire purchase agreements. These are included in the tables of property, plant and equipment
above and summarised as follows:
2016
Classroom and office equipment
Motor vehicle
2015
Classroom and office equipment
Motor vehicle
Additions
£
-
28,264
28,264
£
-
-
-
Depreciation Net book value
£
32,161
6,096
38,257
£
19,793
2,706
22,499
£
50,113
22,168
72,281
£
54,521
7,442
61,963
P a g e 36 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
12. Investment in Subsidiary Companies
Company
Investment in subsidiaries
Unquoted equity shares, at cost
As at the beginning of the year
Additions
As at the end of the year
Provision against the cost of investment in subsidiaries
As at the beginning of the year
Impairment charge
As at the end of the year
Net book value at the end of the year
2016
£
2015
£
6,360,107
727,166
7,087,273
6,360,107
-
6,360,107
2,702,522
176,187
2,878,709
1,100,000
1,602,522
2,702,522
4,208,564
3,657,585
During the year ended 31 December 2016, Malvern House International Pte Ltd (Singapore) was capitalized for an
additional £727,166
After an internal review, it was decided that a further impairment of £176,187 will be required for AEC Bilingual
which has become dormant in 2016.
Malvern International Academy Pte Ltd (Singapore), Malvern House Group Limited, AEC Bilingual Pte Ltd and
Malvern Language Academy Pte Ltd are the Company’s immediate subsidiaries.
The details of the principal subsidiary companies of Malvern International Academy Pte Ltd and Malvern House
Group Limited as at 31 December 2016 are as follows:
Malvern House Group Limited-100% owned by plc (registered office:Witan Gate House, 500-600 Witan Gate West,
Milton Keynes, MK9 1SH):
• Malvern House International Limited ,UK -100% (registered office: Witan Gate House, 500-600 Witan Gate
West, Milton Keynes, MK9 1SH)
Malvern International Academy Pte Ltd (Singapore)- 100% owned by plc (registered office: 167 Jalan Bukit
Merah, Connection One #02-12A, Singapore 150167)
• AEC Edutech Sdn Bhd (Malaysia)-100% (registered office: Suite 20.03(A), 20th floor, Menara MAA,
•
No.12, Jalan Dewan Bahasa,50460 Kuala Lumpur.
IMS Professional Training Services (Malaysia)-100% (registered office: Suite 20.03(A), 20th floor, Menara
MAA, No.12, Jalan Dewan Bahasa,50460 Kuala Lumpur.
• Kasturi Management Consultancy (Malaysia)-100% (registered office: Suite 20.03(A), 20th floor, Menara
MAA, No.12, Jalan Dewan Bahasa,50460 Kuala Lumpur.
P a g e 37 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
13. Investment in Joint Ventures
Enterintel Investments Ltd
2016
£
-
2015
£
89,675
Malvern House Group Limited, through its wholly owned subsidiary, Lastsay Investments Ltd owns a 50% joint
venture, Enterintel Investments Ltd, in Cyprus. The other 50% is owned by Fairmind Enterprises Ltd and there is no
controlling party. Enterintel Investments Ltd provides English language courses for adults and children.
The joint venture agreement expired on the 30th of June 2016 and was not renewed.
At 31 December 2015, the Group’s investment of £89,675 represents the 50% interest in Enterintel Investments and
is summarised as follows.
Summarised financial information in respect of the Group’s interest in Enterintel:
Share of net post acquisition reserve:
Balance at the beginning of the year
Share of (loss)/profit for the year
Share of tax on profits for the year
Profit distribution (prior years)
Exchange differences
Balance at the end of the year
Investments in joint venture
2016
£
-
-
-
-
-
-
-
2015
£
97,799
(965)
-
-
(7,159)
89,675
89,675
Summarised financial information in respect of the Group’s interest in Enterintel Investments Ltd is set out below:
Total assets
Total liabilities
Net assets
Revenue
Profit for the year
2016
£
-
-
-
308,933
49,898
2015
£
43,493
(6,279)
37,214
599,014
965
P a g e 38 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
14. Intangible Assets
Intangible assets are summarised as follows:
Group 2016
Cost
As at 1 January 2015
Additions
Exchange differences
As at 31 December 2015/
1 January 2016
Additions
Exchange differences
As at 31 December 2016
Accumulated amortisation
As at 1 January 2015
Charge for the year – continuing activities
Charge for impairment – continuing
activities
Exchange differences
As at 31 December 2015/
1 January 2016
Charge for the year – continuing activities
Charge for impairment – continuing
activities
Exchange differences
As at 31 December 2016
Net book value
At 31 December 2016
Analysed as follows:
Indefinite life
Definite life
Net book value
At 31 December 2015
Analysed as follows:
Indefinite life
Definite life
Licences
£
Brands
£
Trademarks
£
Total
£
868,006
-
-
868,006
-
-
868,006
120,871
10,450
-
(4,574)
126,747
8,333
3,750,000
-
-
3,750,000
-
-
3,750,000
1,400,000
150,000
495,648
-
2,045,648
150,000
150,000
22,579
-
-
22,579
-
-
22,579
17,863
4,716
-
-
22,579
-
-
(6,986)
128,094
-
2,345,648
-
22,579
739,912
1,404,352
734,046
5,866
739,912
-
1,404,352
1,404,352
741,259
1,704,352
734,046
7,213
741,259
-
1,704,352
1,704,352
-
-
-
-
-
-
-
-
4,640,585
-
-
4,640,585
-
-
4,640,585
1,538,734
165,166
495,648
(4,574)
2,194,974
158,333
150,000
(6,986)
2,496,321
2,144,264
734,046
1,410,218
2,144,264
2,445,611
734,046
1,711,565
2,445,611
Licences
At 31 December 2016, the licences purchased by the subsidiary, Smart Eduprocess Group Sdn Bhd, permit the Group
to provide professional and academic courses in Malaysia for an indefinite period. The capitalised licence fees that
are regarded as having indefinite useful economic lives, are not amortised but would be reviewed as part of the yearly
impairment testing. These calculations are performed annually, or more frequently if events or circumstances indicate
that the carrying amount may not be recoverable. The value in use calculations are based on discounted forecast cash
flows over a maximum period of five years as envisaged by IAS 36 – Impairment of intangible assets.
P a g e 39 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Brands
At 31 December 2016, the Group’s principal acquired brand, Malvern House was regarded as having a remaining
definite useful economic life of 21 years. This brand was acquired and fair valued when the Group acquired 100% of
the issued share capital of Malvern House Group Limited in July 2009. The Malvern House brand is protected by
trademarks, which are renewable indefinitely, in all of the major markets where it has schools. There is an annual
amortisation charge for the Malvern House brand made in accordance with the stated accounting policy. In addition,
the Board also reviewed all ongoing cash generating units in accordance with the detailed procedures set out later in
this note and concluded that a further impairment of £150,000 is required for 2016 in respect of the Malvern House
Brand for Asia.
Trademarks
At 31 December 2016, the Group’s trademarks were all considered to have fixed lives for accounting purposes
although would be renewable when they expire.
Impairment reviews
Impairment reviews have been undertaken having regard to the Cash Generative Units (CGUs) of the group being
Europe (UK) and Asia (Singapore and Malaysia). In undertaking the impairment reviews consideration has been
given to relatively prudent growth assumptions of 3%, the assumption that the Group will obtain the Edu Trust
Certifcation in Singapore and using discount rates that are calculated based on the Group’s weighted average cost of
capital with appropriate adjustment to reflect the Group’s assessment of the specific risks relating to the relevant
market or region. The Group’s weighted average cost of capital is calculated 10.8% (2015: 10.8%).
Based upon the sensitivity analysis had the estimated discount rate used been 2% higher and the perpetual revenue
growth rate used been 2% lower in these calculations the Group would still not have incurred any material impairment
for any of the categories of intangibles and goodwill.
15. Goodwill
Cost
Balance as at the beginning of the year
Impairment of goodwill
Exchange differences
Balance as at the end of the year
2016
£
1,312
-
1,312
2015
£
422,520
(404,352)
(16,856)
1,312
Goodwill has arisen on acquisitions by the Group. Goodwill is allocated to the Group’s cash generating unit
(“CGU”) identified according to business result and country of operation presented below:
Education
Europe
Asia
2016
£
-
1,312
1,312
2015
£
-
1,312
1,312
To ensure that goodwill on acquisitions is not carried at above its recoverable amount, impairment reviews are
performed comparing the net carrying value with the recoverable amount using value in use calculations. The
methodology followed is similar to that explained in Note 14.
16. Inventories
Publications and books
2016
£
3,129
2015
£
9,142
P a g e 40 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
17. Trade Receivables
Trade Receivables
Trade receivables are denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
The age analysis of trade receivables is as follows:
Not yet due and impaired
Past due but not impaired
- Past due 0 to 3 months
- Past due 3 to 6 months
- Past due over 6 months
Impaired trade receivables
Less: Allowances for impairment loss
2016
£
460,939
2015
£
575,952
11,135
30,756
281,031
138,017
-
460,939
2016
£
152,335
149,915
72,094
86,595
308,604
38,852
48,013
340,415
106,687
41,985
575,952
2015
£
257,841
133,655
79,277
105,179
318,111
241,946
(241,946)
192,910
(192,910)
460,939
575,952
As required by IFRS 7 on disclosure of Financial Instruments a reconciliation of changes in the record of impairments
of receivables is provided below.
Balance at the beginning of the year
Allowances reversed during the year
Allowances made during the year-continuing operations
-discontinued operation
Allowances written-off during the year
Currency realignment
Balance as at the end of the year
2016
£
192,910
(38,155)
106,646
-
(19,455)
-
241,946
2015
£
210,600
-
23,213
-
(40,753)
(150)
192,910
P a g e 41 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
18. Other Receivables and Prepayments
Deposits
Prepayments
Staff loan
Others
19. Due from Related Parties
Due from related parties
Non-trade
Group
Company
2015
£
226,873
504,180
-
72,950
804,003
2016
£
12,993
-
-
12,993
2015
£
-
111,022
-
-
111,022
Group
Company
2015
£
-
2016
£
-
2015
£
-
2016
£
239,750
286,163
819
93,261
619,993
2016
£
-
Balances with related parties are denominated in the following currencies:
Due from related parties
Nil
20. Cash and Cash Equivalents
Cash at bank and in hand
Fixed deposits with bank
Cash and cash equivalents
Cash and cash equivalents are denominated
in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
Group
Company
2016
£
-
2015
£
-
2016
£
-
2015
£
-
Group
Company
2016
£
116,541
-
116,541
14,339
39,426
61,201
1,575
-
116,541
2015
£
416,268
-
416,268
71,472
145,326
141,133
58,337
416,268
2016
£
851
-
851
-
851
-
-
851
2015
£
5,235
-
5,235
-
5,235
-
-
5,235
P a g e 42 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
21. Trade Payables
Trade payables are denominated in the
following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
Group
Company
2016
£
2015
£
2016
£
2015
£
16,994
61,284
92,397
-
-
170,675
27,231
349,381
80,344
78,984
-
535,940
-
-
-
-
-
-
-
-
-
-
-
-
22. Deferred Income
Deferred income relates to course fees received in advance and recognised in the income statement based on
classes and examinations conducted
Deferred income are denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
2016
£
224
42,429
200,644
-
-
243,297
2015
£
578,068
178,214
-
-
-
756,282
23. Other Payables and Accruals
Other payables
Accrued expenses
Group
Company
2016
£
535,930
273,894
809,824
2015
£
906,457
581,540
1,487,997
2016
£
234,634
51,119
285,753
2015
£
192,291
47,395
239,686
P a g e 43 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
24. Due to Related Parties
Due to related parties
Non-trade
Trade payables are denominated in the
following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
Group
Company
2016
£
2015
£
2016
£
2015
£
1,223,256
1,589,052
1,159,253
1,492,430
64,003
1,159,253
-
-
1,223,256
57,720
1,492,430
-
38,902
1,589,052
-
1,159,253
-
-
1,159,253
-
1,492,430
-
-
1,492,430
During the year KSP Investments Pte Ltd, a company of which two of the Directors are also shareholders, advanced
loans to the Group totalling £706k (2015: £949k). All the loans are currently unsecured and interest free. All amounts
due to related parties are unsecured, interest-free and due within the next twelve months.
Due to related parties
KSP Investments Pte Ltd
C G Corp
Others
Group
Company
2016
£
2015
£
2016
£
2015
£
1,223,256
-
-
1,223,256
1,342,199
207,951
38,902
1,589,052
1,159,253
-
-
1,159,253
1,284,479
207,951
-
1,492,430
During the 2016 reported year, the company has agreed that £824,404 of its outstanding balance with KSP
Investments Pte Limited and £207,951 being the remainder of its outstanding loan balance with CG Corp to be
converted into ordinary shares in the Company at a price of 5p per share.
25. Financial Liabilities
Non-current liabilities
Finance lease obligations
Term loan
Intra-group financial guarantee
Current liabilities
Finance lease obligations
Term loan
Intra-group financial guarantee
Total
29,270
38,875
Group
Company
2016
£
24,447
-
-
24,447
4,823
-
-
4,823
2015
£
7,492
-
-
7,492
31,383
-
-
31,383
2016
£
2015
£
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
P a g e 44 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Finance Lease Obligations
At 31 December 2016, the Group has no material lease obligations under finance leases that are payable:
Term Loan
At 31 December 2016, the Group has no obligations under any term loan agreement.
Intra-group financial guarantee
There are no intra-group financial guarantee in the books of the Company and Group.
26. Share Capital
Allotted, called up and fully paid
No of
Ordinary
shares
Nominal
Value of
Ordinary
shares
No of
deferred
shares
Nominal
value of
deferred
shares
Nominal
value of
All
shares
92,277,983 4,613,899 44,198,781 2,209,939 6,823,838
63,051,043 3,152,552 44,198,781 2,209,939 5,362,491
At 31 December 2016 5p ordinary shares
and 5p deferred shares
At 31 December 2015 5p ordinary shares and
5p deferred shares
On 20 December 2013, the shareholders approved splitting each existing ordinary share of 10p each into one new
ordinary share of 5p and one deferred share of 5p. As all rights remain with the new ordinary shares of 5p each, these
deferred shares are effectively valueless but remain as part of the share capital of the company.
27. Reserves
The Company has the following types of reserves:
(i)
Share premium reserve
Balance as at the beginning of the year
Issue of new shares
Balance as at the end of the year
2016
£
896,111
-
896,111
2015
£
896,111
-
896,111
The share premium reserve arises where shares have been issued at a price in excess of the nominal value of 5p
(formerly 10p until the division of the shares) less any costs of the issue.
(ii)
Share based compensation reserve
There are new share options issued to any member of the Company.
P a g e 45 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
(iii)
Retained earnings
At the beginning of the year
Loss for the year
Unclaimed dividends returned
At the end of the year
Group
Company
2016
£
(6,964,400)
(820,681)
-
(7,785,081)
2015
£
(5,444,476)
(1,525,426)
5,502
(6,964,400)
2016
£
(3,599,468)
(528,242)
-
(4,127,710)
2015
£
(1,909,060)
(1,695,910)
5,502
(3,599,468)
Retained earnings represent the accumulated surplus or deficit of distributable reserves.
(iv)
Translation reserve
At the beginning of the year
Currency translation differences
At the end of the year
Group
Company
2016
£
965,602
39,920
1,005,522
2015
£
1,297,945
(332,343)
965,602
2016
£
-
-
-
2015
£
-
-
-
The translation reserve arises from translation differences arising from converting subsidiary operations’
consolidated income statements and statements of financial positions at the prevailing rates of exchange.
(v)
Capital reserve
At the beginning of the year
Movement
At the end of the year
Group
Company
2016
£
170,560
-
170,560
2015
£
170,560
-
170,560
2016
£
-
-
-
2015
£
-
-
-
The capital reserve arose on the merger of the Company, then AEC Plc, and AEC Edu Group Pte Limited in 2004.
28. Related Party Transactions
In addition to the related party information disclosed in notes 20 and 25, there were the following significant
transactions of income/(expenses) with related parties on terms agreed between the parties:
Group
Company
With Subsidiaries:
Malvern House International Ltd
Interest costs
AEC Bilingual Pte Ltd
Management fees
With a related party with common
directors:
Wilso Consulting Ltd
2016
£
2015
£
2016
£
-
-
-
135,806
-
(72,000)
-
-
-
2015
£
-
26,667
-
P a g e 46 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Key management personnel
Directors’ remuneration:
- Salaries and bonuses
- Directors’ fees
Analysis of directors’ fees and emoluments:
2016
Gopinath Pillai
William Swords
Ramasamy Jayapal
Haider Sithawalla
Sabin Joshi
Sam Malafeh
2015
Gopinath Pillai
William Swords
Ramasamy Jayapal
Haider Sithawalla
Sabin Joshi
2016
£
2015
£
40,288
59,000
99,288
90,712
84,583
175,295
Salary & Bonus
£
-
-
(24,712)
30,000
-
35,000
40,288
-
-
45,712
45,000
-
90,712
Fees
£
10,000
29,000
10,000
-
10,000
-
59,000
10,000
48,000
10,000
6,583
10,000
84,583
Total
£
10,000
29,000
(14,712)
30,000
10,000
35,000
99,288
10,000
48,000
55,712
51,583
10,000
175,295
29. Operating Lease Commitments
The Group has various operating lease agreements for equipment, offices and school facilities. Most leases contain
renewal options. The Group also has operating leases for some premises for periods of up to 15 years and are
renewable under such terms and conditions as may be agreed upon with the lessor. At the net asset statement date,
the future minimum lease payments under these non-cancellable operating leases were as follows: -
2015
£
2016
£
Expiring:
Within one year
Between two to five years
Over five years
449,889
1,498,879
922,036
2,870,804
694,105
2,538,831
1,980,317
5,213,253
P a g e 47 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
30. Subsequent events
The Directors are reporting the following subsequent events to the Statement of Financial Position which are
significant to these Financial Statements.
(i)
(ii)
(iii)
On the 19th of January 2017, a new capital injection was recorded totalling £100,000 arising from the issue
of new shares.
On the 7th February 2017, the group has agreed with a shareholder that loans from them amounting in
aggregate to £38,000 shall be converted into ordinary shares in the company. Further, on the same date, new
capital injections totalling £206,000 were registered comprising £80,000 additional funds from the issue of
new shares for cash and £126,000 of shares issued to directors in lieu of salary/fees.
On the 4th of April 2017, the group has agreed with a shareholder that loans from them amounting in
aggregate to £80,000 shall be converted into ordinary shares in the company. Further, on the same date, new
capital injections totalling £290,000 were registered comprising £260,000 additional funds from the issue of
new shares for cash and £30,000 of shares issued to directors in lieu of salary/fees. In addition KSP has
agreed to advance the Company a further £315,949 on an unsecured, interest free basis of which £150,000 is
expected to be repaid within five months.
Accordingly, 14,280,000 Ordinary Shares had been issued at 5p each to increase the total number of
Ordinary Shares held in the Company to 106,557,983 (previously: 92,277,983). The details of the new
shares are as provided as below:
C G Corp
KSP Investments Pte Ltd
Sam Malafeh (Director)
Haider Sithawalla(Director)
Ramasamy Jayapal(Director)
Gopinath Pillai(Director)
Sabin Joshi(Director)
Previous
shareholding
27,591,122
27,523,117
4,000,000
19,000
633,131
25,000
-
New shares
3,800,000
2,360,000
5,000,000
1,500,000
820,000
400,000
400,000
Current
shareholding
31,391,122
29,883,117
9,000,000
1,519,000
1,453,131
425,000
400,000
% Owned
29.46
28.04
8.45
1.43
1.36
0.40
0.38
31. Financial Instruments
Financial Risk Management Objectives and Policies
Risk management is integral to the whole business of the Group. The Group has a system of controls in place to
create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management
continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and
control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities.
Credit risk
(i)
Exposure to the credit risks are monitored on an ongoing basis. The Group does not require collateral in respect of
financial assets.
The carrying amount of trade and other receivables, subsidiary companies and related party balances and cash
represent the Group’s maximum exposure to credit risk. Cash and cash balances are placed with reputable financial
institutions. Therefore, credit risk arises mainly from the inability of customers to make payments when due. 76%
(2015: 49%) of the Group’s accounts receivables are made up of individual students, 24% (2015: 35%) relates to
large funding organisations such as government related bodies and the balance of 0% (2015: 16%) to other
organisations. All trading activities are concentrated in South East Asia and Europe. The analysis of aging debtors is
provided in Note 17.
P a g e 48 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Liquidity risk
(ii)
The Group seeks to adopt a prudent liquidity risk management by maintaining sufficient cash and having adequate
amounts of credit facilities. Due to the nature of the Group’s operations, the Group aims at maintaining flexibility
in funding by keeping committed credit facilities available.
The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group and Company can be required to pay.
2016
Trade payables
Other payables
Due to related parties
Finance lease obligations
On demand
or within
one year
£
170,675
535,931
1,223,256
4,823
1,934,685
Within 2 to
5 years
£
-
-
-
24,447
24,447
Foreign currency risk
(iii)
The Group’s investments in overseas subsidiaries and associated companies which are held for long-term investment
purposes are exposed to currency translation risk. The differences arising from such translation are recorded under
the foreign currency translation reserve. The Group does not use derivative financial instruments to hedge against
the volatility associated with foreign currency transactions as the Directors believe that the risks arising from
fluctuations in foreign currency exchange rates are not significant.
Sensitivity analysis for foreign exchange risk
The following analyses illustrate the effect that specific changes could have had on our income and equity for
exchange movements. This analysis is for illustrative purposes only, as in practice market rates rarely change in
isolation. Actual results in the future may differ materially from these results due to developments in the global
financial markets which may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts
disclosed in the following table, which therefore should not be considered a projection of likely future events and
losses.
At 31.12.2016
Singapore Dollar
Malaysian Ringgit
Euro
At 31.12.2015
Singapore Dollar
Malaysian Ringgit
Euro
10% weakening of GBP
Impact on
Impact on
income/
Equity
reserves
£
£
10% strengthening of GBP
Impact on
Impact on
income/
Equity
reserves
£
£
315,851
154,474
15,368
38,450
(315,851)
(154,474)
(15,368)
(38,450)
228,135
75,674
225
5,758
15,908
26,050
(228,135)
(75,674)
(225)
(5,758)
(15,908)
(26,050)
P a g e 49 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
Interest rate risk
(iv)
The Group’s exposure to market risk for changes in interest rates relate primarily to the Group’s bank
overdraft facility and term loan. A change in interest rate at the reporting date would not materially affect
income or reserves. For 2016, there was none to report.
The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets
and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.
At 31.12.2016
Assets
Trade and other receivables
Cash and bank balances
Non-financial assets
Total assets
At 31.12.2016
Liabilities
Borrowings
Non-financial liabilities
Total liabilities
Floating
rates
Less than
12 months
£
Non-interest
Bearing
£
-
-
-
-
-
-
-
-
1,144,441
116,541
2,335,916
3,596,898
778,529
1,223,256
484,163
2,485,948
Total
£
1,144,441
116,541
2,335,916
3,596,898
778,529
1,223,256
484,163
2,485,948
(v) Fair Values of financial assets and financial liabilities
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and short
term borrowings approximate their respective fair values due to the relatively short-term maturity of these financial
instruments. The fair values of other financial assets and liabilities are as disclosed in the respective notes.
(vi) Capital risk management policies and objectives
The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance The capital
structure of the Group consists of debt, cash and bank balances and equity attributable to holders of ordinary shares
of the Company comprising issued capital, other reserves and retained earnings as disclosed in the financial
statements. The Board of Directors reviews the capital structure regularly and at the minimum on a yearly basis.
32. Discontinued activities
On the 7 July 2016, The Group publicly announced the divestment of its 51% interest in Malvern House Ireland
Limited for a consideration of €660,000.00.
The completion of the divestment took place on 15 July 2016, when the transfer of ownership took place. On this
date, Malvern House Ireland was classified as discontinued operation and the 2015 results of the disposed company
has been reclassified and restated as a disposal company held for sale within the 2016 Annual Report for Malvern
International plc.
P a g e 50 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2016
The results of Malvern House Ireland Limited are presented below:
Revenue
Expenses
Operating Income
Finance Costs
Profit before tax from discontinued operations
Taxation
Profit after tax from discontinued operations
2016
£
1,332,951
(1,303,366)
29,585
4,763
34,348
-
34,348
2015
£
2,905,301
(2,653,232)
252,069
(6,788)
245,281
17,150
262,431
The major classes of assets and liabilities of Malvern House Ireland Limited as of 31 December 2015 were as follows:
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Deferred income
Total liabilities
Net liabilities
2015
£
111,615
467,292
58,337
637,244
298,956
578,069
877,025
239,781
The amount reported for profit for the year from discontinued business for 2016 is explained as follows:
Profit on Sale of Malvern House Ireland
55% share of profits on 6-month results
Total profits from discontinued activities
The net cash flows incurred by Malvern House Ireland were as follows:
Operating
Investing
Financing
Net cash inflow
2016
£
554,909
18,891
573,800
2016
£
202,555
(24,627)
0
2015
£
57,460
(38,257)
(6,788)
177,928
12,415
P a g e 51 |