2017
MALVERN INTERNATIONAL PLC
Annual Report
FOR THE YEAR ENDED
31 DECEMBER 2017
Company No 05174452
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Contents
CHAIRMAN’S STATEMENT ............................................................................................ 1
STRATEGIC REPORT ...................................................................................................... 5
DIRECTORS’ REPORT .................................................................................................... 9
CORPORATE GOVERNANCE ........................................................................................ 12
STATEMENT OF DIRECTORS’ RESPONSIBILITIES .......................................................... 14
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF MALVERN
INTERNATIONAL PLC .................................................................................................. 15
CONSOLIDATED INCOME STATEMENT ........................................................................ 20
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...................................... 21
STATEMENTS OF FINANCIAL POSITION ...................................................................... 22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................ 24
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................... 25
COMPANY STATEMENT OF CHANGES IN EQUITY ........................................................ 26
COMPANY STATEMENT OF CASH FLOWS ................................................................... 27
NOTES TO THE FINANCIAL STATEMENTS .................................................................... 28
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
CHAIRMAN’S STATEMENT
Overview and Group strategy
2017 was a pivotal year in the delivery of Malvern’s growth plans. Malvern’s ambition is to be a global partner in
learning and skills development and, building on its experience and infrastructure, has a clear strategy to achieve
this.
Malvern’s growth strategy includes:
promoting Malvern’s globally recognisable brand in education and training;
continuing to strengthen management and administrative systems to achieve world class delivery and
quality standards;
innovating to improve and expand the range of products and services offered;
extending distribution through our agent network and collaborations;
delivering organic growth through making training accessible to an increasingly mobile student population
using multi-location and technology options; and
making complementary acquisitions to broaden geographical reach and subject range.
Operational highlights
At the end of 2016 we announced our strategic objectives for 2017. I am pleased to report that we made considerable
progress in pursuit of these objectives. Highlights included completing collaboration agreements with Playware and
Oxford University Press; the acquisition of SAA Global Education Centre Pte Ltd. (‘SAA-GE’) in Singapore; the
appointment of Dr Sam Malafeh as Chief Executive Officer; and post the period end, the launch of the Malvern
Online Academy. The strategy really started showing positive results from the second half of 2017 with London
leading the growth across the Group. This is a milestone considering the difficult situation London has faced in the
last few years. Also, the new systems helped to reduce the cost of the operations and improved the quality of
operations across the Group.
The quality standards of training delivery remain a vital measure in our industry. We have put considerable effort
into raising our quality standards across the Group and our efforts have been recognised and rewarded. In Singapore
we had our EduTrust certification re-instated; in Malaysia we have been classified as a 4 STAR provider (Very
Good), and in London we have been assessed by the Independent Schools Inspector as a provider that “Exceeds
expectations”.
By location, other highlights include:
In the UK, London saw significant improvement which has driven a 53% increase in revenue year-on-year. In
particular, seasonal summer camps continued to attract more students and the school also managed to attract
more of the long term students from the Far East and South America.
In Singapore the school regained its EduTrust certificate and there was a consequential improvement in the
performance. In addition, the acquisition of SAA-GE, was completed in November 2017. This acquisition
provides a platform to attract professional students in the areas of business and accounting.
In Malaysia a restructuring of the management team was undertaken and new quality systems were
implemented. These changes have resulted in the school obtaining an improved STAR rating of its quality to 4
Star (Very Good). Also since the year end the school has received, for the first time, an international license
which allows it to take international students for vocational training. The operation now has the platform to
perform significantly better during 2018.
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Financial results and business review
Group
In 2017 the total income for the continuing operations of the Group was £4.1 million (2016: £4.0 millon).
For the 2017 financial year, the Group incurred a loss after tax of £701,328 on the continuing business as compared
to the loss of £1,373,410 in 2016 which included impairment charges of £150,000 made against goodwill and
intangible assets due to the uncertainty surrounding the EduTrust License during 2016. In FY 2017, there was a
reversal of the 2016 impairment against intangible assets of £150,000 due to the subsequent award of the EduTrust
license for the Singapore operations. Included within losses for the year were the HQ operational costs of £0.58
million (2016-£0.71 million)
The Group loss for the year was £701,328. The 2016 loss of £799,610 includes the gain on the sale of shares in the
Dublin operations and the six-month operating profit for Dublin totalling £573,800.
Hence the net loss per share for the year on a continuing basis for 2017 was 0.66 compared to the 1.84p for 2016
and cash at the end of the year stood at £0.48 million (2016: £0.12 million). At the year end the Company had
outstanding loans of approximately £1.0 million (2016: £1.22 million) and outstanding convertible loan notes of
approximately £1.0 million (2016: nil). The Group continues to be well supported by its major shareholders, KSP
Investments and CG Corp each of whom provided new loans in the period.
The net assets of the Group as at 31 December 2017 were £1.20 million (2016: £0.97 million).
Subsidiaries
The European Sector comprises only the UK operations in London. The Asia Sector comprises Singapore and
Malaysia. A brief summary of these two sectors is set out below:
United Kingdom (Malvern House)
The business in London has improved dramatically, as the restructuring and reorganisation plans that began in 2015
have started to take effect. Revenue for the year was up 53% to £2.02 million (2016: £1.32 million). Due to the
revenue improvement, EBITDA (Note 3) improved to a positive £17,000, as compared to a loss of £386,000 in
2016.
In 2018, the performance of London is expected to continue to improve. In addition to the current growing
operational revenue streams, there are new initiatives that were commenced in 2017 which will start to contribute
in 2018 and beyond. These includes new partnerships with other educational institutes and online revenue
generation models.
Post the period end, we are delighted to have announced a partnership agreement with the University of East London
which will see Malvern established as an embedded college within UEL, delivering pre-sessional foundation and
English language courses for international students at both Degree and Masters levels.
Asia - comprises Singapore and Malaysian operations.
The total revenue for Asian operations in 2017 was £1.94 million compared to £2.68 million in 2016, a decrease of
27%. If the revenue from the new acquisition (£0.34 million) was excluded, on a like for like basis, the comparison
would be £1.60 million in 2017 compared to £2.68 million in 2016, a decrease of 40%. On a like for like basis, the
Asian operations incurred an EBITDA loss of £0.16 million in 2017, higher than the £0.15 million loss that was
recorded in 2016. If the new acquisition was included, the EBITDA (Note 3) loss reduces to £0.05 million for 2017.
In Singapore revenue increased 119% to £0.54 million (2016: £0.24 million) due to revenue from the acquisition
of SAA-GE of £0.34 million. The new acquisition in Singapore possesses a four-year license which affords a greater
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scope of revenue streams to the Group. Going forward, the new company will be the focal business operation in
Singapore with its multi-year license.
The Malaysian operation struggled in 2017 due to the restructuring of management and operations undertaken by
local and Group management. Revenue for the year decrease to £1.41 million (2016: £2.43 million). In 2017
revenue could only be generated in the local market but with the recently acquired international licence sales should
increase in 2018. The Board is also looking at the possibility of further expansion of the operations to the different
states in Malaysia to gain benefit from the rising educational hub status of Malaysia.
Acquisition of SAA-GE
In November 2017 the Company completed the acquisition of SAA-GE for a consideration of Singapore Dollars
(SGD) $500,000 satisfied by the issue of 5,630,350 new ordinary shares of 5p each. SAA-GE has a 30 year history
of providing diploma, undergraduate, postgraduate and professional programmes in the accountancy, finance and
business related disciplines. It offers preparatory courses leading to ATTS, ACCA, FIA/CAT, ICAEW and
Singapore Chartered Accountant qualification, as well as degrees from Plymouth University and the University of
London in the UK.
SAA-GE has a reputation for providing high-quality, industry-recognised programmes that have also attracted
international students from Japan, China, Vietnam and the Philippines. It continues to achieve high pass-rates and
produces top-performing students and prize-winners for the ACCA and FIA/CAT programmes annually. SAA-GE
has a four-year EduTrust Certification issued by the Committee for Private Education Singapore.
The acquisition of SAA-GE provides Malvern with fresh opportunities to reach and work with the large local
partners, with a substantial student base of more than 1,000 SAA-GE students and provides access to its highly
qualified trainers and lecturers. It will also broaden and strengthen Malvern's platform as an international hub for
accountancy and finance education, adding to the existing/upcoming offerings in Malaysia and London.
Since its acquisition, SAA-GE’s courses are now being more widely promoted through the Group and an
improvement in sales is already being seen. In addition, the existing Singapore school has now been relocated to
SAA-GE’s premises which will bring cost savings.
Dividend
The Board does not propose the payment of a final dividend for the year ended 31 December 2017 (2016: nil).
Outlook and prospects
2017 as a whole, and in particular the second half, has seen a considerable improvement in the Group's performance
and an upward trajectory is now discernible. This has been due to three main factors. Firstly, a stronger management
has been in place which will be strengthened further as we go forward. Secondly, the agent network has been
reorganised successfully. Thirdly, our offerings now cover a wider range of products. In addition to these factors, I
am optimistic that the first major acquisition which we completed in November 2017 will have a significantly
positive impact not only on the operations of Singapore but also for our global platform. The Board continues to
be active in discussions with potential acquisition partners.
With the new acquisition of a four-year EduTrust licensed school in Singapore, the continuing new initiatives in
London and the re-introduction of international student intakes in Malaysia, the Group is well positioned to benefit
from the expected growth through acquisition and organic growth. We have taken big leaps in reducing our
operating losses from £1.45 million in 2016 to £0.69 million in 2017.
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Trading in the current financial year has started well and the Board is now confident that with the reorganised and
a more focused Group, the impact on the performance of the Group can only be positive going forward and that it
will bring the Group to profitability in 2018.
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 period of significant change and activity. We look forward to their continuing
support going forward in implementing the new plans to bring the Group back to profitability in the years ahead.
We would also 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: 26 April 2018
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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, Chief Financial Officer and Senior Executives from each business unit, who are responsible for the
Operations, Human Resources and Development. The board committees provide the oversight and monitoring on
financial management, board effectiveness and governance, risk and controls.
Strategy and Business Plan
During 2017, an extended amount of the Group’s resources were utilized to restructure the operations in London
and Singapore, for the acquisition of new complimentary schools and to realign the overall Group’s business plan
to include traditional and non-traditional products and services, including the viability of introducing online
learning through Malvern Online Academy.
The Group has experienced on par better results in 2017 in the top line and also lower losses for the year. The result
is much better for the second half of 2017 in comparison to the second half of the previous year with 38% increase
in revenue with reduction in losses.
Malvern’s focus in 2018 will be in:
Continuing with the strengthening of the operations and management
Further expansion in marketing and sales’ international reach through the recruitment agents and direct
digital marketing
Acquisitions in the countries of operations to add to the current offering
Development in the online offering including Malvern Online Academy and a number of other initiatives
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 2017 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
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The continued support the shareholders have shown support for the Group for the last four years in ensuring
it is a going concern. With the improvements being made in the last 18 months, the shareholders continue
to be supportive and committed to the Group.
The Directors have confidence in the committed 2018 planned performance from the Plc and local operating unit
management and they believe that the cashflows generated from trading, together with the potential need for further
fundraising and shareholder support, 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.
Principal Risks and Uncertainties Facing the Group
The board through the Audit and Risk Management Committee assess the group’s risks on an on-going basis. Risk
governance culture is embedded across the group and there is a formal risk management framework to assess,
monitor and report to the board. There are four main types of risks faced by the Group:
Regulatory risks such as changes in government policy on education, work through visa and immigration
restrictions, funding changes and continued accreditation;
Financial exposures such as credit risk, liquidity risk, unfavourable exchange rate fluctuations and
operational cost increases; and
Changes to consumer demand and competition.
Reputational risks such as brand management and stakeholders’ perception and confidence.
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 2017 (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 2017, only the operations of Malvern House International Limited are located in the UK and critically
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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
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.
In November 2017, the Company issued non-secured interest-bearing Convertible Loan Notes totalling £1,200,000.
All the notes were issued to KSP Investments Pte Ltd, a major shareholder of the Group. In December 2017,
£100,000 of these notes were converted into share capital.
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Key Performance Indicators
Financial
Total Income from continuing operations
(Decrease)/growth
Operating loss
Loss/profit before Taxation-continuing operations
2017
2016
£4,078,889
1%
(£692,022)
(£706,712)
£4,044,889
(19%)
(£1,454,854)
(£1,343,037)
Loss per share-continuing operations
(0.66 pence)
(1.84 pence)
From FY2017, the Board is also tracking non-financial indicators as per below:
Non-Financial
Number of Courses offered
Students attending
2017
2016
48
7,430
22
6,301
The increase in student numbers during the year reflects the 53% increase in revenue for the UK Market. This
relates to a significant increase in the number of students undertaking the English Study Tours. At the same time,
the acquisition of SAA Global Education has also resulted in higher student numbers as most of the programmes
can be done on a modular basis. This allows both full-time and part-time students to participate in the programme.
Sam Malafeh
DIRECTOR
Date: 26 April 2018
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DIRECTORS’ REPORT
The Directors present their report and the audited financial statements of Malvern International plc (the “Company”)
for the year ended 31 December 2017.
Annual General Meeting
The Annual General Meeting will be held at 24 Martin Lane, London, EC4R 0DR on 21 May 2018 at 09.00.
Dividends
The Directors do not recommend the payment of a dividend for the year ended 31 December 2017 (2016: £nil).
Directors
The names of the Directors who held office during the year and to date were:
Gopinath Pillai (Chairman)
Sithawalla Haider Mohamedally
Sam Malafeh
Ramasamy Jayapal
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee
Navin Khattar
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:
At beginning of the Year/
At date of Appointment
Shares of £0.05 each
At end of the Year
Share of £0.05 each
Name of Company and Director
Malvern International plc
Direct interests:
Gopinath Pillai (Chairman)
Sithawalla Haider Mohamedally
Sam Malafeh
Ramasamy Jayapal
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee
Navin Khattar
Indirect Interests:
Gopinath Pillai (Chairman)
Sithawalla Haider Mohamedally
Sam Malafeh
Ramasamy Jayapal
Sabin Joshi
Nadir Ali Zafar
Wee Hock Kee
Navin Khattar
Sam Malafeh
There were no share options granted to any Directors of the Company.
-
-
4,000,000
633,131
-
-
-
-
25,000
19,000
-
-
-
-
-
-
-
400,000
1,500,000
9,000,000
1,453,131
400,000
-
-
-
25,000
19,000
-
-
-
-
-
-
-
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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 23 March 2018, 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
Institute of Singapore Chartered Accountants
31,391,122
29,883,117
15,083,294
9,000,000
5,630,350
%
(note)
27.49
27.92
13.21
7.88
4.93
Note: As a percentage of the issued share capital of the Company, comprising 114,188,333 shares.
Controlling Party
There is no controlling party for this Company.
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.
Financial instruments
The financial risk management objectives and policies together with details regarding credit risk, liquidity risk,
foreign currency risk, interest rate risk, financial assets and financial liabilities, and, capital risk management
policies and objectives, are outlined in note 31.
Subsequent Events
The key subsequent events that have arisen are as follows:
KSP Investments had provided new loans of £372K in 2018 to support the growing number of new
initiatives within the Group. This increases their total loan to £860K.
Malaysia has been granted the International License for Vocational (Food & Beverage and Culinary).
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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
Sam Malafeh
DIRECTOR
Date: 26 April 2018
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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 group’s governance structure had been enhanced and best practices
were supported by the board and board committees.
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, Deputy Chairman – Mr. Haider M. Sithawalla, Executive Director – Dr. Sam Malafeh, CEO, and 5
Non-Executive Directors. There is a robust process in place to ensure the non-executive directors exercised a high
level of independence and objectivity in discharging their fiduciary duties.
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 (ARMC)
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, risk 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
The ARMC is in the process of evaluating the establishment of an independent internal audit function to reinforce
the governance, risk and control assurance within the group.
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 and operational 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 continued to review the effectiveness
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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 2018.
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
Sam Malafeh
DIRECTOR
Date: 26 April 2018
P a g e 14 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
MALVERN INTERNATIONAL PLC
Opinion
We have audited the financial statements of Malvern International Plc (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 31 December 2017, which comprise:
the Group consolidated income statement for the year ended 31 December 2017;
the Group consolidated statement of comprehensive income for the year ended 31 December 2017;
the Group and parent company statements of financial position as at 31 December 2017;
the Group and parent company statements of changes in equity for the year then ended;
the Group and parent company statements of cash flows for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company's
affairs as at 31 December 2017 and of the Group’s loss for the period 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 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified in this respect, we have considered the
recurring losses of the group and the net current liability position of the group and company as at 31 December
2017 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, the assumptions made regarding the potential need for further
fundraising and shareholder support, highlight a material uncertainty. The financial statements do not include the
adjustments that would result if the group or company was unable to continue as a going concern.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it
could reasonably be expected to change the economic decisions of a user of the financial statements. We used the
concept of materiality to both focus our testing and to evaluate the impact of misstatements identified.
P a g e 15 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Based on our professional judgement, we determined overall materiality for the Group financial statements as a
whole to be £47,500 (2016: £50,000). In determining this, we have given specific focus and weighting to the
benchmarks in respect of revenue (0.75% of Group revenue) and profit (8% of Group loss) for the financial year.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the
judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to
the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £2,500. Errors below that
threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
We conducted full scope audit work, engaging where appropriate with component auditors, in three countries
(UK, Singapore and Malaysia) in which the Group has significant operations.
In establishing our overall approach to the Group audit, we determined the type of work that needed to be
undertaken at each of the components by us, as the primary audit engagement team. For the full scope
components in Malaysia and Singapore, where the work was performed by three different component auditors, we
determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the Group as a whole.
The primary team led by the Senior Statutory Auditor was ultimately responsible for the scope and direction of
the audit process. The primary team interacted regularly with the component teams where appropriate during
various stages of the audit, reviewed all working papers and were responsible for the scope and direction of the
audit process. We visited Singapore, reviewed the work of each of the three component auditors and discussed
matters with local management and each of the three component auditors. This, together with the additional
procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial
statements.
Key Audit Matters
In preparing the financial statements, management made a number of subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain. We focused our work primarily on these areas by assessing management’s judgements
against available evidence, forming our own judgments and evaluating the disclosures in the financial statements.
We also addressed the risk of management override of controls, including evaluating whether there was evidence
of bias by management, which may represent a risk of material misstatement, especially in areas of accounting
judgements and key sources of estimation uncertainty as outlined in note 2(v).
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we
considered necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence
through testing of the effectiveness of controls, substantive procedures or a combination of both. In determining
the key audit matters we noted the following changes from the prior year:
The assessment of the disposal of the Group’s 51% interest in Malvern House Ireland Limited and the
discontinued activities arising was a significant audit risk for the year ended 31 December 2016, being the
year of disposal.
P a g e 16 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
The assessment of the SAA Global Education Center Pte Ltd acquisition and business combination as a
significant risk for the current year ended 31 December 2017, being the year of acquisition.
There have been no other changes in the Group’s overall operations during the current year that significantly
impacted our audit. Therefore, our assessment of the most significant risks of material misstatement and resulting
key audit matters, which are those risks having the greatest effect on our audit strategy and requiring particular
focus, are otherwise the same as in the prior year and are detailed below.
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition and deferred income
The Group undertakes the provision of
education services and has a number of related
income streams that are recognised as outlined
in note 2 (xix). The timing of revenue
recognition depends upon the contractual
arrangements in place with any amounts
invoiced and/or paid relating to a future period
being deferred until the fulfilment of the
contractual terms at a later date.
Carrying value of goodwill, investments and
intangible assets
When assessing the carrying value of goodwill,
investments and intangible assets, management
make judgements regarding the appropriate cash
generating unit, strategy, future trading and
profitability and the assumptions underlying
these. We considered the risk that goodwill,
investments and/or intangible assets were
impaired.
SAA Global Education Center Pte Ltd business
combination
When an acquisition occurs, an evaluation is
made regarding the fair value of assets,
liabilities and other intangible assets acquired
and the fair value of goodwill arising.
We selected a sample of customer contracts to ensure that
revenue was recognised in accordance with the contractual
terms policy outlined in note 2 (xix). We also examined the
recognition of amounts in deferred income where the
contractual terms has not been met at the year end. We also
examined the prior period adjustment in respect of deferred
income outlined in note 34. Where appropriate we directed
focus on and reviewed the work undertaken by the
component auditors on revenue recognition and deferred
income.
We evaluated, in comparison to the requirements set out in
IAS36, management’s assessment as to whether goodwill,
investments and/or intangible assets were impaired and the
appropriateness in respect of any reversal of previous
impairment made. We challenged, reviewed and
considered by reference to external evidence,
management’s impairment model and key estimates,
including the discount rate. We reviewed the
appropriateness and consistency of the process for making
such estimates.
We evaluated the method upon which the fair value of
goodwill arising on the acquisition of SAA Global
Education Center Pte Ltd had been determined, and
substantively tested management’s assessment of the fair
value of all assets, liabilities and other intangible assets
acquired. We challenged management’s approach,
including their evaluation of separately identifiable
intangible assets arising on acquisition.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole.
They were not designed to enable us to express an opinion on these matters individually and we express no such
opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included
in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
P a g e 17 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
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 group and the parent company and their 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.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement, set out on page 13, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
P a g e 18 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 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 company's
members as a body, for our audit work, for this report, or for the opinions we have formed.
Nigel Bostock
(Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditors
London
26 April 2018
P a g e 19 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
Note
2017
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
Impairment of loans and receivables
Operating loss
Share of results of associated companies and joint ventures
Finance costs
Loss before income tax
Income tax charge
Loss after income tax for the year from continuing activities
Profit after income tax for the year from discontinued
activities
Loss after income tax 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
17
8
13
7
9
10
10
10
2016
£
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
£
3,959,506
119,383
4,078,889
1,847,062
1,124,708
158,583
63,880
1,744,500
-
(150,000)
(17,822)
(692,022)
-
(14,690)
(706,712)
5,384
(701,328)
-
(701,328)
(799,610)
(701,328)
-
(701,328)
(799,610)
-
(799,610)
2017
(0.66)
(0.66)
0.00
0.00
2016
restated
(1.84)
(1.84)
0.77
0.77
(0.66)
(0.66)
(1.07)
(1.07)
P a g e 20 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
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
2017
2016
£
(701,328)
(266,067)
(967,395)
(967,395)
-
(967,395)
£
(799,610)
(21,071)
(820,681)
(820,681)
-
(820,681)
P a g e 21 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
STATEMENTS OF FINANCIAL POSITION
Note
2017
Group
2016-
restated
Company
2017
2016
£
£
£
£
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
245,956
-
-
2,382,291
1,505
474,207
-
3,103,959
6,100
398,642
948,938
-
-
-
-
479,565
1,833,245
4,937,204
188,835
-
-
4,490,081
-
4,208,564
-
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
-
-
-
-
-
4,490,081
-
-
-
-
-
4,208,564
-
-
-
-
13,775
6,374
1,655,286
-
-
403
1,675,838
6,165,919
12,993
32,539
817,353
-
-
851
863,736
5,072,300
P a g e 22 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
STATEMENTS OF FINANCIAL POSITION (Continued)
Note
2017
Group
2016-
restated
Company
2017
2016
£
£
24,447
£
-
EQUITY AND LIABILITIES
Non-Current Liabilities
Financial liabilities-Leasing
Financial Liabilities-Term Loan
Financial liabilities-Convertible
Loan Notes
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
32
21
22/34
23
24
25
20,320
159,178
995,813
1,175,311
277,151
668,775
748,072
-
835,853
31,524
-
2,561,375
3,736,686
-
24,447
995,813
995,813
170,675
386,039
809,824
-
1,223,256
4,823
9,626
2,604,243
2,628,690
-
-
113,947
80,625
489,748
-
-
684,320
1,680,133
£
-
-
-
-
-
285,753
35,055
1,159,253
-
-
1,480,061
1,480,061
Equity attributable to equity
holders of the Company
Share capital
Share premium
Retained earnings
Translation reserve
Capital reserve
Convertible loan reserve
Non-controlling interests
Total equity
Total Equity and Liabilities
26
27 (i)
27 (iii)
27 (iv)
27 (v)
32
7,919,356
896,111
(8,629,151)
739,455
170,560
104,187
1,200,518
-
1,200,518
4,937,204
6,823,838
896,111
(7,927,823)
1,005,522
170,560
-
968,208
-
968,208
3,596,898
7,919,356
896,111
(4,433,867)
-
-
104,186
4,485,786
-
4,485,786
6,165,919
6,823,838
896,111
(4,127,710)
-
-
-
3,592,239
-
3,592,239
5,072,300
The loss for the financial year dealt with in the financial statements of the parent Company as of the 31
December 2017 was £306,157 (2016: loss £528,242).
The financial statements were approved by the Board of Directors on 26 April 2018 and were signed on
its behalf by:
Sam Malafeh
Company-registration-number: 05174452
Director
P a g e 23 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Share
Capital
Share
Premium
Retained
Earnings
Translation
Reserve
Capital
Reserve
Convertible
Loan
Reserve
Balance at 1 January 2016
5,362,491
896,111
(6,964,400)
965,602
170,560
Restatement (note 34)
-
-
(142,742)
-
-
£
£
£
£
£
Restated Balance at 1 January
2016
Loss for the year
Other comprehensive income
Total comprehensive income
for the year
New Share Issue
Balance at 31 December
2016/ 1 January 2017
Convertible loan reserve
Loss for the year
Other comprehensive income
Total comprehensive income
for the year
New Share Issues
Balance at 31 December
2017
5,362,491
896,111
(7,107,142)
965,602
170,560
-
-
-
1,461,347
-
-
-
-
(820,681)
-
-
(820,681)
39,920
39,920
-
-
-
-
-
-
6,823,838
-
896,111
-
(7,927,823)
-
1,005,522
-
170,560
-
-
104,187
-
-
-
1,095,518
-
-
-
-
-
-
(701,328)
-
-
(266,067)
-
-
-
-
-
-
(701,328)
-
-
(266,067)
-
5,502
-
-
-
-
(967,395)
1,095,518
5,502
-
1,461,347
968,208
-
(701,328)
(266,067)
7,919,356
896,111
(8,629,151)
739,455
170,560
104,187
1,200,518
Attributable
To Equity
Holders of the
Company
£
Non-
controlling
Interests
Total
£
£
430,364
(108,000)
322,364
(142,742)
-
(142,742)
287,622
(108,000)
179,622
(820,681)
108,000
(712,681)
39,920
-
39,920
(780,761)
108,000
(672,761)
£
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,461,347
968,208
104,187
(701,328)
(266,067)
(967,395)
1,095,518
5,502
1,200,518
P a g e 24 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
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 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/Development Expenditure
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
Acquisition of Subsidiary
Net cash used in investing activities
Cash Flows from Financing Activities
Interest paid
Term loan
Finance leases
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
2017
£
(706,712)
-
158,583
63,880
2,169
-
(150,000)
-
-
14,693
-
(617,392)
(6,516)
(347,588)
(2,970)
1,173,550
199,084
-
199,084
3
-
(28,654)
(82,531)
(111,182)
(14,694)
185,708
(3,956)
250,000
417,067
(150,474)
354,495
116,541
471,036
2016
restated
£
(1,343,037)
573,800
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
1 This includes the cash arising from shares issued during the year. In addition, a number of share issues arose which were
non-cash transactions (2017: £845,518; 2016 £1,032,355) in respect of shares issued in lieu of salary, shares issued as
consideration for capitalisation of shareholder loans and/or shares issued on conversion of convertible loan notes.
P a g e 25 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Share
Capital
£
Share
Premium
£
Retained
Earnings
£
Convertible
loan reserve
£
5,362,491
-
896,111
-
(3,599,468)
(528,242)
-
1,461,347
1,461,347
-
-
-
(528,242)
-
-
6,823,838
896,111
(4,127,710)
-
-
-
-
-
-
Total
£
2,659,134
(528,242)
(528,242)
1,461,347
1,461,347
3,592,239
104,186
104,187
-
-
1,095,518
1,095,518
-
-
-
-
(306,157)
(306,157)
-
-
-
-
-
-
(306,157)
(201,971)
1,095,518
1,095,518
7,919,356
896,111
(4,433,867)
104,186
4,485,786
Balance at 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/ 1
January 2017
Convertible loan
reserve
Loss for the year
Total comprehensive
income for the year
New Share Issues
Total transactions
with owners
Balance at 31
December 2017
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its
own income statement.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
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
Interest received
Convertible Loan Notes
New Share Issues1
Net cash used in financing activities
Cash Flows from Investing Activities
Interest expense
Interest income
Acquisition of subsidiaries
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
2017
£
2016
£
(306,157)
(528,242)
-
-
-
(306,157)
25,381
(171,806)
202,134
(250,448)
-
-
250,000
250,000
-
-
-
-
(448)
851
403
-
176,187
-
(352,055)
(606,672)
745,245
(219,894)
(433,376)
-
-
428,992
428,992
-
-
-
-
(4,384)
5,235
851
1 This includes the cash arising from shares issued during the year. In addition, a number of share issues arose which were non-cash
transactions (2017: £845,518; 2016 £1,032,355) in respect of shares issued in lieu of salary, shares issued as consideration for
capitalisation of shareholder loans and/or shares issued on conversion of convertible loan notes.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. General Information
Malvern International plc (the “Company”) is a public limited 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 consolidation of the acquisition of SAA Global Education in Singapore was prepared in accordance to IFRS 3.
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 2017. 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 2017 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
directors consider that IFRS15 (in respect of the revenue recognition for revenues) and IFRS9 (in respect of the
impact of the expected loss model on the impairment of receivables) will not give rise to any significant or material
impact on the Group. The exercise regarding IFRS16 (in respect of leases) is not concluded, but the Directors but do
presently anticipate that the adoption of IFRS16 may potentially have a material impact on the Group’s Financial
Statements following initial application, on the basis that, the leases held within the group may need to be capitalised
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
as a lease asset, there will be a recognition of the lease obligation as a liability and the recoding of depreciation and
interest as an income statement expenses rather than rental costs.
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 2017 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
• The continued support the shareholders have shown support of the Group for the last four years in
ensuring it is a going concern. With the improvements being made in the last 18 months, the shareholders
continue to be supportive and committed to the Group.
The Directors have confidence in the committed 2018 planned performance from the Plc and local operating unit
management and they believe that the cashflows generated from trading, together with the potential need for further
fundraising and shareholder support, 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.
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:
Determining the fair value of assets and liabilities acquired on a business combination.
Where a business combination arises there is a requirement to evaluate the fair value of assets and liabilities acquired
including the identification of any separately identifiable intangible assets arising on acquisition. The Group ensures
that a process is in place to ensure that the fair value requirements arising are appropriately addressed. The key
judgements and assumptions are the initial evaluation of assets and liabilities acquired and then the subsequent
determination of the fair value arising on each asset or liability.
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
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
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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.
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.
Prior period adjustments
Where they arise the Group reviews such items to evaluate the circumstances in which they arose, the period in which
they relate, the reasons for any misstatement and whether the matter arising is an adjustment in respect of an earlier
period or a change of circumstances and/or accounting estimate. The Group will also examine the supporting and
corroboration information available to evaluate, verify and conclude on the position to be take. Judgement will then
be made regarding the appropriate accounting, disclosure and estimates arising.
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.
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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.
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.
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
The following rates of exchange have been applied:
2016
2017
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
5.423
5.530
1.794
1.778
1.212
1.141
5.572
5.590
1.185
1.221
1.794
1.877
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:
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 up to 25 years, except for the Brand value
for SAA Global Education of £150,000 which will be amortised over 10 years, and the Customer Listing Asset for
SAA Global, which will amortised over a 5 year period.
(xiv) Development Expenditure
Development Expenditure are amortised using a straight-line method over a period of 3 to 5 years.
Impairment of tangible and intangible assets excluding goodwill
(xv)
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
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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.
(xvi) 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.
(xvii) 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 de-
recognition 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.
(xviii) Impairment of financial assets
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.
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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.
(xix) Revenue Recognition
Revenue is recognised on the following basis:
Course fees, training 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 and application 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.
(xx) 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.
(xxi) Trade and Other Receivables
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.
(xxii) Inventories
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.
(xxiii) 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.
(xxiv) 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.
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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.
(xxv) 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.
(xxvi) 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.
(xxvii) 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.
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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.
(xxviii) 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.
(xxix) 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.
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.
(xxx) 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.
(xxxi) 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.
P a g e 36 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
(xxxii) 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.
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 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:
2017
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
2016-restated
Revenue from external customers
Depreciation, write offs and amortisation
Loss before taxation
Taxation charge
Profit on discontinued activities
Profit/Loss for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
Europe
£
2,017,681
82,500
(258,565)
-
-
(258,565)
Asia
£
1,941,825
(10,036)
(448,147)
5,384
-
(442,763)
Total
£
3,959,506
72,464
(706,712)
5,384
-
(701,328)
1,207,264
(1,263,520)
36,000
3,729,940
(2,473,166)
768,057
4,937,204
(3,736,686)
804,057
1,314,904
(92,852)
(528,355)
-
573,800
45,445
2,677,677
(293,060)
(814,683)
(30,373)
-
(845,055)
3,992,581
(385,912)
(1,343,037)
(30,373)
573,800
(799,610)
1,018,926
(1,165,073)
3,653
2,577,972
(1,463,617)
42,246
3,596,898
(2,628,690)
45,899
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Alternative performance measures reconciliation (EBITDA excluding HQ costs and discontinued activities)
2017 (including SAA acquisition in the year)
Loss for the year
Interest
Tax
Depreciation
Amortisation
Impairment reversal
EBITDA (incl. HQ costs and discontinued activities)
Discontinued Activities
Others - HQ Costs allocation
EBITDA (excl. HQ costs and discontinued activities)
2016
Loss for the year
Interest
Tax
Depreciation
Amortisation
Impairment charge
EBITDA (incl. HQ costs and discontinued activities)
Discontinued Activities
Others - HQ Costs allocation
EBITDA (excl. HQ costs and discontinued activities)
Europe
£
(258,565)
19
-
15,000
67,500
-
(176,046)
-
193,178
17,132
£
45,445
(65,018)
-
10,352
82,500
-
73,279
(573,800)
114,784
(385,737)
Asia
£
(442,763)
14,691
(5,384)
48,880
91,083
(150,000)
(443,513)
-
392,114
(51,399)
£
(845,055)
3,099
30,373
67,227
75,833
150,000
(518,523)
-
369,085
(149,438)
Total
£
(701,328)
14,690
(5,384)
63,880
158,583
(150,000)
(619,559)
-
585,292
(34,267)
£
(799,610)
(61,919)
30,373
77,579
158,333
150,000
(445,244)
(573,800)
483,869
(535,175)
Note that the Segmental liabilities figure for South East Asia 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.
Group HQ costs of £585,292 (2016-£483,869) were allocated to each segment based on the revenue for each
segment. In 2017, the allocation was 51% (2016-33%) for Europe and 49% (2016-67%) for Asia.
4. Sale of Services
Course fees
Accommodation fees
Application fees, registration and examination fees
Training fees and other sales
5. Other Income
Govt grants
Interest income
Rental and related income
Miscellaneous income
Write back of Accruals/Debts
2017
£
2,678,699
773,984
104,652
402,171
3,959,506
2016
£
3,395,083
454,129
60,669
82,700
3,992,581
2017
£
36,098
-
50,162
691
32,432
119,383
2016
£
-
-
37,218
-
14,886
52,104
P a g e 38 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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
2017
£
1,313,082
166,678
165,508
6,089
150
1,651,507
(526,799)
1,124,708
2016
£
1,179,884
172,188
59,000
40,288
-
-
1,451,360
(292,563)
1,158,797
163,540
35,000
Number
74
16
60
150
Number
31
14
64
109
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 2016 and 31 December 2017 no pension payments were paid or
accrued.
7. Finance Costs
Interest payable to related parties
Interest on finance leases
Bank overdraft
Other Charges
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
2017
£
-
14,676
-
14
14,690
2016
£
(64,999)
-
-
3,080
(61,919)
2017
£
2016
£
34,000
38,100
23,975
39,832
(11,600)
27,258
7,432
6,329
118,041
12,000
3,648
8,412
101,922
(21,390)
110,023
P a g e 39 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Office and equipment rental
910,672
768,547
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
2017
£
5,384
-
5,384
-
5,384
2016
£
(33,696)
-
(33,696)
3,323
(30,373)
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
2017
2016
£
(706,712)
120,141
-
%
17.0
-
£
(1,343,037)
228,316
-
%
17.0
-
(15,803)
2.7
(21,366)
(1.6)
-
-
-
-
-
(98,954)
-
-
5,384
-
(13.5)
-
-
(0.8)
-
(237,324)
-
-
(30,373)
-
(17.7)
-
-
(2.3)
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.
Composition of deferred taxation:
On the excess of the net book value over tax written down value of plant and
equipment
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
2017
£
2016
£
-
-
-
-
-
-
-
13,797
3,323
(17,120)
-
-
-
-
P a g e 40 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Deferred tax liability
Balance at the end of the year
-
-
-
-
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
2017
£
552.474
4,148,178
4,700,652
2016
£
82,146
3,628,440
3,710,586
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.
P a g e 41 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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 £701,328 (2016: loss of £1,373,410) and the weighted average number of ordinary shares in issue
during the year of 105,708,809 shares (2016: 74,592,510 shares).
The basic and diluted earnings/(loss) per share on discontinued activities was based on the profit attributable to
shareholders of £0 (2016: £573,800) and the weighted average number of ordinary shares in issue during the year of
105,708,809 shares (2016: 74,592,510 shares).
The basic and diluted earnings/(loss) per share attributable to equity holders of the Company was based on the loss
to shareholders of £701,328 (2016: loss of £799,610) and the weighted average number of ordinary shares in issue
during the year of 105,708,809 shares (2016: 74,592,510 shares).
Calculations for dilutive EPS have not been made in respect of the convertible loan notes (note 32) on the basis the
impact would be anti-dilutive.
There were no outstanding options in 2017.
P a g e 42 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
11. Property, Plant, and Equipment
Leasehold
property and
improvements
Classroom
and office
equipment
Motor
Vehicle
£
£
£
Cost
As at 1 January 2016
Additions
Disposals-Subsidiary
Disposals
Exchange differences
As at 31 December 2016/
1 January 2017
Additions
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2017
Accumulated depreciation
As at 1 January 2016
Charge for the year
Disposals-Subsidiary
Disposals
Exchange differences
As at 31 December 2016/
1 January 2017
Charge for the year
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
538,650
4,365
(164,861)
-
-
378,154
-
-
(146,790)
252,376
16,336
500,076
455,688
16,376
(119,212)
-
-
352,853
13,325
-
(145,484)
251,215
-
471,915
1,994,804
13,270
(213,356)
(173,757)
-
1,620,961
28,654
(5,480)
(202,418)
779,701
6,742
2,228,160
1,739,145
57,478
(175,097)
(130,224)
-
1,491,301
43,599
(5,480)
(201,555)
691,757
17,547
2,037,163
28,167
25,301
190,991
129,660
11,832
28,264
(126)
-
-
39,970
-
-
-
-
988
40,958
2,201
3,725
-
-
170
6,096
8,064
-
-
-
-
14,160
26,798
33,874
Total
£
2,545,286
45,899
(378,343)
(173,757)
-
2,039,085
28,654
(5,480)
(349,208)
1,032,077
24,066
2,769,194
2,197,034
77,579
(294,309)
(130,224)
170
1,850,250
64,988
(5,480)
(347,039)
942,972
17,547
2,523,238
245,956
188,835
P a g e 43 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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:
2017
Classroom and office equipment
Motor vehicle
2016
Classroom and office equipment
Motor vehicle
Additions
£
-
28,264
28,264
£
-
28,264
28,264
Depreciation Net book value
£
-
14,160
14,160
£
32,161
6,096
38,257
£
-
22,168
22,168
£
50,113
22,168
72,281
12. Investment in Subsidiary Companies
Company
Investment in subsidiaries
Unquoted equity shares, at cost
As at the beginning of the year
Additions*
Disposals**
As at the end of the year
Provision against the cost of investment in subsidiaries
As at the beginning of the year
Disposal
Impairment
As at the end of the year
Net book value at the end of the year
2017
£
2016
£
7,087,273
281,518
(253,710)
7,115,081
6,360,107
727,166
7,087,273
2,878,709
-
(253,709)
2,625,000
2,702,522
176,187
2,878,709
4,490,081
4,208,564
**During the 2017 financial year, a dormant subsidiary, AEC Bilingual, was closed and struck off from the Company
registers in Singapore.
*During the 2017 financial year, a new subsidiary in Singapore, SAA Global Education Center Pte Ltd, was acquired
for £281,518. (see note No: 35 for more details)
Malvern International Academy Pte Ltd (Singapore), Malvern House Group Limited, Malvern Language Academy
Pte Ltd and SAA Global Education Center Pte Ltd (Singapore) 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 2017 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):
P a g e 44 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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.
13. Investment in Joint Ventures
Nil
2017
£
-
2016
£
-
P a g e 45 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
14. Intangible Assets
Intangible assets are summarised as follows:
Group 2017
Cost
As at 1 January 2016
Additions
Exchange differences
As at 31 December 2016/
1 January 2017
Additions (Note 35)
Exchange differences
As at 31 December 2017
Accumulated amortisation
As at 1 January 2016
Charge for the year – continuing activities
Charge for impairment – continuing
activities
Exchange differences
As at 31 December 2016/
1 January 2017
Charge for the year – continuing activities
Reversal of impairment – continuing
activities
Exchange differences
As at 31 December 2017
Net book value
At 31 December 2017
Analysed as follows:
Indefinite life
Definite life
Net book value
At 31 December 2016
Analysed as follows:
Indefinite life
Definite life
Licences
Brands
£
£
Trade
Mark
£
Customer
List
£
Total
£
868,006
-
-
868,006
-
-
868,006
126,747
8,333
3,750,000
-
-
3,750,000
150,000
-
3,900,000
2,045,648
150,000
150,000
(6,986)
128,094
-
2,345,648
8.583
150,000
-
(8.387)
128,290
(150,000)
-
2,345,648
739,716
1,554,352
733,850
5,866
739,716
-
1,554,352
1,554,352
739,912
1,404,352
734,046
5,866
739,912
-
1,404,352
1,404,352
22,579
-
-
22,579
-
-
22,579
22,579
-
-
-
22,579
-
-
-
22,579
-
-
-
-
-
-
-
-
-
-
-
88,223
-
88,223
-
-
-
-
-
-
-
-
-
4,640,585
-
-
4,640,585
238,223
-
4,878,808
2,194,974
158,333
150,000
(6,986)
2,496,321
158,583
(150,000)
(8,387)
2,496,517
88,223
2,382,291
88,223
88,223
-
-
-
-
733,850
1,648,441
2,382,291
2,144,264
734,046
1,410,218
2,144,264
Licences
At 31 December 2017, 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 46 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
Brands
At 31 December 2017, the Group’s principal acquired brand, Malvern House was regarded as having a remaining
definite useful economic life of 17 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.
As at 31 December 2017 the accumulated amortization on brands was £2,345,648. This comprises £1,350,000
amortised based on the normal amortization policy together with a further total amount of £1,145,648 that had been
previously impaired prior to 1 January 2016.
During 2016 an impairment charge of £150,000 was made against brands due to the uncertainty surrounding the
EduTrust License in Singapore. However, during 2017, there was a reversal of the 2016 impairment of £150,000
due to the subsequent award of the EduTrust license for the Singapore operations, and thus a change in circumstance
that had originally given rise to the impairment in 2016.
The Board had reviewed all ongoing cash generating units in accordance with the detailed procedures set out later in
this note and concluded that no impairment would be required for the 2017 financial year. Further, the Board is of
the opinion that the previous year’s impairment for Asia of £150,000 had been based on the assumption that there
was a high risk of the Singapore operation being unable to obtain the EduTrust license to continue growing its
business. The license was awarded to this entity in July 2017 and accordingly, the Board had reviewed and concluded
that the specific impairment for Asia of £150,000 is to be reversed in 2017.
Trademarks
At 31 December 2017, the Group’s trademarks were all considered to have fixed lives for accounting purposes
although would be renewable when they expire.
Customer List
The new acquisition of SAA Global Education Pte Ltd in Singapore had also generated a new intangible asset value
in Customer Listing for £88,223. Amortization is planned annually over a 5-year period
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 5% and 7% respectively for the European and Asian CGUs, the
assumption that the Group will continue to be granted the Edu Trust Certification 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% (2016: 10.8%).
The discounted cash flows have initially been evaluated over 5 years although sensitivity across longer periods have
been considered to reflect the range of intangibles and their relatively variable definite or indefinite useful economic
life. Based upon the sensitivity analysis had the estimated discount rate used been 2% higher and/or the perpetual
revenue growth rate used to be 2% lower in these calculations the Group would still not have incurred any material
impairment for any of the categories of intangibles and goodwill.
P a g e 47 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
15. Goodwill
Cost
Balance as at the beginning of the year
Additions-Subsidiary
Exchange differences
Balance as at the end of the year
2017
£
1,312
450,000
22,895
474,207
2016
£
1,312
-
-
1,312
On the 26th of October 2017, Malvern International plc acquired 100% of the shareholding of SAA Global Education
Center Pte Ltd (Singapore). In reviewing the consolidation of the subsidiary for the first time under IFRS3, a resultant
intangible asset of £688,223 was acquired by the Group on consolidation. The intangible asset has been identified as
purely a Goodwill asset after a review of the acquired assets and liabilities of the new acquisition. (See note 35 for
more details)
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
2017
£
-
474,207
474,207
2016
£
-
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
17. Trade Receivables
Trade Receivables
Trade receivables are denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
2017
£
6,100
2017
£
398,642
47,668
103,466
220,757
26,751
-
398,642
2016
£
3,129
2016-
restated
£
460,939
11,135
30,756
281,031
138,017
-
460,939
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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
2017
£
108,603
157,876
54,087
78,076
290,039
2016
£
152,335
149,915
72,094
86,595
308,604
102,040
(102,040)
241,946
(241,946)
398,642
460,939
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
18. Other Receivables and Prepayments
2017
£
241,946
(122,084)
-
-
(17,822)
-
102,040
2016
£
192,910
(38,155)
106,646
-
(19,455)
-
241,946
Deposits
Prepayments
Staff loan
Others
19. Due from Related Parties
Due from related parties
Non-trade
Group
Company
2016
£
239,750
286,163
819
93,261
619,993
2017
£
13,775
-
-
13,775
2016
£
12,993
-
-
12,993
Group
Company
2016
£
-
2017
£
-
2016
£
-
2017
£
359,865
401,320
12,220
175,534
948,939
2017
£
-
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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
21. Trade Payables
Trade payables are denominated in the
following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
Group
Company
2016
£
-
2017
£
-
2016
£
-
Group
Company
2016
£
116,541
-
116,541
14,339
39,426
61,201
1,575
-
116,541
2017
£
403
-
403
-
403
-
-
403
2016
£
851
-
851
-
851
-
-
851
2017
£
-
2017
£
471,036
8,529
479,565
180,248
105,712
189,238
4,367
-
479,565
Group
Company
2017
£
2016
£
2017
£
2016
£
90,003
105,052
82,096
-
-
277,151
16,994
61,284
92,397
-
-
170,675
-
-
-
-
-
-
-
-
-
-
-
-
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 is denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
2017
£
453,538
179,689
35,548
-
-
668,775
2016-
restated
£
224
185,171
200,644
-
-
386,039
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
23. Other Payables and Accruals
Other payables
Accrued expenses
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
Total
During the year,
Group
Company
2017
£
179,778
568,294
748,072
2016
£
535,930
273,894
809,824
2017
£
58,150
55,797
113,947
2016
£
234,634
51,119
285,753
Group
Company
2017
£
2016
£
2017
£
2016
£
835,853
1,223,256
489,748
1,159,253
367,624
468,229
-
-
835,853
64,003
1,159,253
-
-
1,223,256
-
489,748
-
-
489,748
-
1,159,253
-
-
1,159,253
a) KSP Investments Pte Ltd, a company of which two of the Directors are also shareholders, advanced loans to
the Group totalling £583k (2016: £706k).
b) CG Corp , a major shareholder of the company, advanced loans to the Group totalling £538k (2016: £0k).
c)
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
2017
£
487,978
347,875
-
835,853
2016
£
1,223,256
-
-
1,223,256
2017
£
239,748
250,000
-
489,748
2016
£
1,159,253
-
-
1,159,253
During the 2017 reported year, the company has agreed that
a) £118,000 of its outstanding balance with KSP Investments Pte Limited and £190,000 of its outstanding
balance with CG Corp be converted into 2,360,000 and 3,800,000 5p ordinary shares respectively in the
Company at a price of 5p per share (note 26).
b) £1,200,000 of its outstanding balance with KSP Investments Pte Limited be converted into an unsecured and
interest bearing Convertible Loan Notes. (see note: 32). Of these Convertible Loan Notes issued, £100,000
were settled prior to the year end from the issue of 2,000,000 5 ordinary shares (note 26).
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
25. Financial Liabilities
Non-current liabilities
Finance lease obligations
Convertible Loan Notes
Term Loan
Current liabilities
Finance lease obligations
Convertible Loan Notes
Term Loan
Group
Company
2017
£
20,320
995,813
159,178
1,175,311
4,994
-
26,530
31,524
2016
£
24,447
-
-
24,447
4,823
-
-
4,823
2017
£
2016
£
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,021,127
29,270
Finance Lease Obligations
At 31 December 2017, the Group has no material lease obligations under finance leases that are payable:
Convertible Loan Notes
At 31 December 2017, the Group has obligation for £1,100,000. (see Note: 32)
Term Loan
On December 2017, the Malaysian entity had received a Term Loan from Ambank Malaysia for £185,708 (RM
1,000,000). This loan carries an interest rate of 6.7% and will be repaid over 84 months on a fixed monthly instalment
basis.
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
114,188,333 5,709,417 44,198,781 2,209,939 7,919,356
92,277,983
4,613,899 44,198,781 2,209,939 6,823,838
At 31 December 2017 5p ordinary shares
and 5p deferred shares
At 31 December 2016 5p ordinary shares and
5p deferred shares
During 2017 21,910,350 5p ordinary shares were issued. The movement in share capital during the year can be
summarised as follows:
January 2017 – 2,000,000 5p ordinary shares were issued at par to Dr Sam Malafeh
February 2017 – 760,000 5p ordinary shares were issued at par to KSP Investments Pte Limited as part of the
capitalisation of loans due to that party totalling £38,000
February 2017 – 1,600,000 5p ordinary shares were issued to CG Corp at par
February 2017 – 2,520,000 5p ordinary shares were issued at par to certain directors in lieu of salary/fees
March 2017 – 3,000,000 5p ordinary shares were issued at par to Dr Sam Malafeh
March 2017 - 1,600,000 5p ordinary shares were issued at par to KSP Investments Pte Limited as part of the
capitalisation of loans due to that party totalling £80,000
P a g e 52 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
March 2017 – 600,000 5p ordinary shares were issued at par to certain directors in lieu of salary/fees
March 2017 – 2,200,000 5p ordinary shares were issued to CG Corp at par
October 2017 - 5,630,350 5p ordinary shares were issued at par as consideration for the acquisition of SAA
Global Education Center Ltd (note 35)
December 2017 – 2,000,000 5p ordinary shares were issued at par to KSP Investments Pte Limited as part of a
capitalisation of convertible loan notes issued (note 32) totalling £100,000
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
2017
£
896,111
-
896,111
2016
£
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 no new share options issued to any member of the Company.
iii)
Retained earnings
At the beginning of the year
Loss for the year
Unclaimed dividends returned
At the end of the year
Group
Company
2017
£
(7,927,823)
(701,328)
-
(8,629,151)
2016-restated
£
(7,107,142)
(820,681)
-
(7,927,823)
2017
£
(4,127,710)
(306,157)
-
(4,433,867)
2016
£
(3,599,468)
(528,242)
-
(4,127,710)
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
2017
£
1,005,522
(266,067)
739,455
2016
£
965,602
39,920
1,005,522
2017
£
-
-
-
2016
£
-
-
-
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.
P a g e 53 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
(v)
Capital reserve
At the beginning of the year
Financial Liability reserve
At the end of the year
Group
Company
2017
£
170,560
-
170,560
2016
£
170,560
-
170,560
2017
£
-
-
-
2016
£
-
-
-
The capital reserve arose on the merger of the Company, then AEC Plc, and AEC Edu Group Pte Limited in 2004.
(vi)
Convertible loan reserve
At the beginning of the year
Additions in the year
At the end of the year
Group
Company
2017
£
-
104,187
104,187
2016
£
-
-
-
2017
£
-
104,187
104,187
2016
£
-
-
-
The convertible loan reserve arose on the issue of convertible loans notes in November 2017 (note 32)
28. Related Party Transactions
In addition to the related party information disclosed in notes 19 and 24, there were no transactions of
income/(expenses) with related parties.
Details of key management personnel and directors’ fees and emoluments were as follows:
Key management personnel
Directors’ remuneration:
- Salaries and bonuses
- Directors’ fees
Analysis of directors’ fees and emoluments:
2017
Haider Sithawalla
Wee Hock Kee
Sam Malafeh
2016
Gopinath Pillai
William Swords
Ramasamy Jayapal
Haider Sithawalla
Sabin Joshi
Sam Malafeh
2017
£
2016
£
165,658
6,089
171,747
40,288
59,000
99,288
Salary & Bonus
£
2,118
-
163,540
165,658
-
-
(24,712)
30,000
-
35,000
40,288
Fees
£
-
6,089
-
6,089
10,000
29,000
10,000
-
10,000
-
59,000
Total
£
2,118
6,089
163,540
171,747
10,000
29,000
(14,712)
30,000
10,000
35,000
99,288
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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: -
Expiring:
Within one year
Between two to five years
Over five years
2017
£
2016
£
1,351,689
2,763,957
592,524
4,708,170
449,889
1,498,879
922,036
2,870,804
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
30. Subsequent events
The Directors are reporting the following subsequent events to the Statement of Financial Position which are
significant to these Financial Statements.
KSP Investments had provided new loans of £372K in 2018 to support the growing number of new initiatives
within the Group. This increases their total loan to £860K.
Malaysia has been granted the International License for Vocational (Food & Beverage and Culinary).
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 markets
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. 55%
(2016: 76%) of the Group’s accounts receivables are made up of individual students, 37% (2016: 24%) relates to
large funding organisations such as government related bodies and the balance of 8% (2016: 0%) to other
organisations. All trading activities are concentrated in South East Asia and Europe. The analysis of aging debtors is
provided in Note 17.
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.
2017
Trade payables
Other payables
Due to related parties
Financial liabilities
Convertible Loan Notes
On demand
or within
one year
£
277,151
307,995
835,853
31,524
-
1,452,523
Within 2 to
5 years
£
-
-
-
179,498
1,100,000
1,279,498
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
P a g e 56 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
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 31.12.2017
Singapore Dollar
Malaysian Ringgit
At 31.12.2016
Singapore Dollar
Malaysian Ringgit
10% weakening of GBP
Impact on
Impact on
income/
Equity
reserves
£
£
10% strengthening of GBP
Impact on
Impact on
income/
Equity
reserves
£
£
71,465
26,891
36,918
15,448
(71,465)
(26,891)
(36,918)
(15,448)
315,851
154,474
15,368
38,450
(315,851)
(154,474)
(15,368)
(38,450)
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 2017, 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 31.12.2017
Assets
Trade and other receivables
Cash and bank balances
Non-financial assets
Total assets
At 31.12.2017
Liabilities
Borrowings
Non-financial liabilities
Total liabilities
Floating
rates
Less than
12 months
£
Non-interest
Bearing
£
-
-
-
-
-
-
-
-
1,353,680
479,565
3,103,959
4,937,204
1,125,704
2,042,688
568,294
3,736,686
Total
£
1,353,680
479,565
3,103,959
4,937,204
1,125,704
2,042,688
568,294
3,736,686
(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.
P a g e 57 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
(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. Convertible Loan Notes
The Company issued the following loan notes in 2017:
Convertible Loan Notes
Issue Name
Date of Issue
Date of Redemption
Interest Payable
Total Issued
Amount converted in year (note 26)
Balance at 31/12/2017
Convertible Unsecured Loan Notes 2020
17 November 2017
16 November 2020
1 Jan 2018-31 Dec 2018
1 Jan 2019-31 Dec 2019
1 Jan 2020-16 Nov 2020
£1,200,000
(£100,000)
£1,100,000
3%
4%
5%
Of the £1,200,000 Loan Notes issued in November 2017 £100,000 were converted shortly thereafter in December
2017 leaving a balance of £1,100,000 at the year end for which a fair value calculation has been determined to
evaluate the amount of the non-current liability arising. Accordingly, the Loan Notes of £1,100,000 were recorded
in the financial report as follows:
Non-Current Liabilities - £995,813
-£104,187
Reserves
33. Discontinued activities
In 2017, no new disposals are reported.
For the 2016 financial year, the Group had 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 2016 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.
Discontinued business is presented as follows:
Profit on Sale of Malvern House Ireland
55% share of profits on 6-month results
Total profits from discontinued activities
2017
£
-
-
-
2016
£
554,909
18,891
573,800
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
34. Restatement of the 2015 Financial Records
In the course of the review of the financial records of the London operations in 2017, an amount of £142,742 was
found to be deficient in the Deferred Income account. Upon further internal investigations by Management, the
following adjustments were deemed necessary to correct the financial records of the 2015 and 2016 financial years.
In the 2015 financial year, the London operations were streamlined with our then Dublin operations through a shared
services platform for the accounting and other back office functions. The back-office staff of London were
restructured out of the company and new resources were concentrated in the Dublin office.
During the takeover process, the deferred income recording system of CLASS were migrated from the London
system into the Dublin system. During this process, it was found that the Deferred Income was overstated by
£146,848 but finally an amount of £142,742 was released from the Deferred Income account to credit Revenue in
November 2015. This was a manual entry undertaken to correct, what was then perceived to be a correct adjustment,
the Revenue and Deferred Income accounts.
In 2017, it was fond that the Deferred Income account was now understated by £142,742. We have checked the
revenue recognition in 2016 and 2017 and found that revenue recognition for 2016 and 2017 were correctly recorded.
Accordingly, Management is now restating the 2015 financial records to correct this overstatement of Revenue and
understatement of Deferred Income.
The financial entries are as follows:
2015
2015
Profit & Loss Profit & Loss
Debit
£
142,742
Credit
£
2016
2016
Profit & Loss Profit & Loss
Debit
£
-
Credit
£
2015
Balance
Sheet
Debit
£
2016
Balance
Sheet
Debit
£
142,742
2015
Balance
Sheet
Credit
£
142,742
2016
Balance
Sheet
Credit
£
142,742
Overstated Revenue
Deferred Income
Retained Earnings
Deferred Income
P a g e 59 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
The Consolidated Financial Reporting of the three years in question are as follows:
Consolidated Income Statement
Revenue
Other Income
Total Income
Total Costs
Loss for the year-continuing
Profit for the year-discontinuing
Loss for the year
Currency Translation
Total Comprehensive Loss
Loss per share on continuing activities
– basic
- diluted
2015-restated
£
4,651,426
261,467
4,912,893
(6,725,398)
(1,812,505)
262,431
(1,550,074)
(311,466)
(1,861,540)
(2.87)
(2.87)
2015-as reported
£
4,794,168
261,467
5,055,635
(6,725,398)
(1,669,763)
262,431
(1,407,332)
(311,466)
(1,718,798)
(2.64)
(2.64)
Statement
Financial Position
of
2016-restated
2015-restated
£
2016-as
reported
£
2015-as
reported
Total Assets
3,596,898
4,752,782
3,596,898
4,752,782
Deferred Income
Other Liabilities
Total Liabilities
Total Equity
Total Equity &
Liabilities
386,039
2,242,651
2,628,690
968,208
3,596,898
899,024
3,674,136
4,573,160
179,622
4,752,782
243,297
2,242,651
2,485,948
1,110,950
3,596,898
756,282
3,674,136
4,430,418
322,364
4,752,782
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MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
35. New Acquisition for the Malvern Group
On 26 October 2017, The Group announced the acquisition of SAA Global Education Center Pte Ltd for a total
consideration of Sing Dollar $500,000 (£281,518). The Sale and Purchase Agreement was concluded with the
Institute of Singapore Chartered Accountants ("ISCA") to acquire the entire issued share capital of SAA Global
Education Centre Pte. Ltd through the issue of 5,630,350 new ordinary shares of 5p each in Malvern plc.
The fair value of assets and liabilities acquired together with the consideration provided can be summarized as
follows:
Fair value of assets and liabilities acquired:
Property, plant and equipment
Intangible assets
Brand*
Customer List*
Trade and other receivables
Fixed deposits
Cash and bank balances
Trade and other payables
Deferred income
Loans and amounts due to group companies
Provisions
Net Liabilities acquired
Consideration/Purchase Price
Goodwill arising on acquisition*
£
81,971
7,001
150,000
88,223
227,595
8,516
73,843
(266,479)
(441,114)
(179)
(97,859)
(168,482)
281,518
450,000
1 In accordance with IFRS 3, a review of the intangible asset of £688K was undertaken by Management through an
external consultant and the conclusion are as follows. The Board concurs with the analysis as provided by the external
consultant. The breakdown of the intangible asset on the consolidation of the new business is as follows:
Intangible Asset Review
Goodwill*
Brand*
Customer Lists*
Total
31 Dec 2017
£
450,000
150,000
88,223
688,223
2 Charges for amortisation of Customer List and Brands acquired will commence from 1 January 2018
SAAGE, a subsidiary of ISCA prior to the sale, provides commercial private education and has a 30-year history of
providing diploma, undergraduate, postgraduate and professional programmes in the accountancy, finance and
business related disciplines. SAA-GE has a four-year EduTrust Certification issued by the Committee for Private
Education Singapore.
P a g e 61 |
MALVERN INTERNATIONAL PLC ANNUAL REPORT
2017
The summary financial reporting for SAAGE under the Malvern group is summarized below.
Consolidated Income Statement
Total Income
Total Costs
Profit Before Tax
Tax
Profit for the Year
Nov 17 -Dec 17
£
336,029
(229,517)
106,512
-
106,512
Statement of Financial Position
31 Dec 2017
Total Assets
Total Liabilities
Net Assets
Share Capital
Total Reserves
Net Equity
£
589,310
(890,430)
(301,121)
167,244
(468,365)
(301,121)
P a g e 62 |