MALVERN INTERNATIONAL PLC ANNUAL REPORT
2018
Contents
CHAIRMAN’S STATEMENT ................................................................................................................................................... 1
STRATEGIC REPORT ............................................................................................................................................................. 6
BOARD OF DIRECTORS ........................................................................................................................................................ 9
DIRECTORS’ REPORT .......................................................................................................................................................... 12
CORPORATE GOVERNANCE ............................................................................................................................................... 15
REMUNERATION REPORT .................................................................................................................................................. 23
AUDIT AND RISK MANAGEMENT COMMITTEE REPORT ..................................................................................................... 26
STATEMENT OF DIRECTORS’ RESPONSIBILITIES ................................................................................................................. 28
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF MALVERN INTERNATIONAL PLC ...................................... 29
CONSOLIDATED INCOME STATEMENT ............................................................................................................................... 35
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ............................................................................................. 36
STATEMENT OF FINANCIAL POSITION ............................................................................................................................... 37
STATEMENT OF FINANCIAL POSITION (CONTINUED) ......................................................................................................... 38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ....................................................................................................... 39
CONSOLIDATED STATEMENT OF CASH FLOWS .................................................................................................................. 40
COMPANY STATEMENT OF CHANGES IN EQUITY ............................................................................................................... 41
COMPANY STATEMENT OF CASH FLOWS........................................................................................................................... 42
NOTES TO THE FINANCIAL STATEMENTS ........................................................................................................................... 43
CHAIRMAN’S STATEMENT
Overview and Group strategy
Malvern is in the business of providing young people with employable skills. Its 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 which includes:
•
• promoting Malvern globally by offering excellent service;
•
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 directly or in collaboration
with its prestigious partners;
extending distribution through its regional 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.
2018 has been a year of progress in all these areas albeit that the financial outturn for the year is somewhat below
what we had hoped it would be. Most notably 2018 has seen a considerable improvement in the Group's overall
performance with turnover nearly doubling and the Group recording an improvement in the operating performance
after adjusting for one-off costs. An upward trajectory is now established and momentum building. Our sales
strategy is delivering, and our offering now covers a wider range of products and is more organised with clear
divisions including English Language, Juniors, Professional training including ACCA, International Foundation
delivery for universities, and degree and diploma delivery in Singapore. 2018 also saw another acquisition
completed which has to date proved very successful.
Operational and business review
Group operational highlights in 2018 included completing the acquisition of Communicate School of English in
Manchester (part of the global strategy for the English language division), the agreement with University of East
London to deliver international foundation level programmes and reaching the Platinum and Gold status from
ACCA in Singapore and London respectively (part of the global ACCA delivery plan).
Quality education remains the key focus in building Malvern’s reputation and during the year it continued working
with key international partners to bring prestigious products to the Group for delivery. This included working with
accounting and tax bodies in the UK and Singapore (ACCA, the ICAEW, the AAT, the ISCA-AAT, the Singapore
Accounting Commission (delivering Singapore Chartered Accountants Qualification), the ATTS) and the
University of London (degrees in Singapore), the University of East London (foundation programmes), Qualifi (UK
partnership for online delivery of business qualifications) and the University of Gloucestershire. Further similar
partnerships are expected to be secured in 2019. Malvern continues to invest in new products such as Malvern
Online and programmes related to it. Malvern Online is a platform for delivering real-time “live” and online classes
around the world. This platform is expected to be fully functional by the end of 2020. The investment also includes
programmes scheduled for the upcoming years. The amount invested has been in the region of £0.26 million.
On the investment side, Malvern has been successful in attracting new investors while receiving continued support
from existing shareholders. In June 2018 the Company completed a placing to raise £4 million, principally to fund
the acquisition of Communicate. Then, post year end, in February 2019 the Company raised a further £606,000 to
provide additional working capital for the Group.
Europe
In the UK the Group’s activities are conducted through its London and Manchester schools.
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London saw another year of significant improvement in its trading performance, recording an increase in revenue
year-on-year of approximately 85%. This growth was driven, in particular, by seasonal summer camps which
attracted more students and by attracting more longer-term students from the Far East and South America.
The acquisition of the Communicate School of English in July provided the Group with a school in Manchester.
The consideration for the acquisition was £2.34 million, satisfied by £1.65 million in cash and £0.69 million by the
issue of 13,800,000 new ordinary shares at a price of 5 pence per share. Not only has the acquisition enhanced the
scale of the Group’s UK operations but it has also brought additional product, marketing and management resources
to the Group and created cross-selling opportunities through, for example, its strong links in the Middle East market.
Asia
In Asia the Group has operations in Singapore and Malaysia.
In Singapore the significant majority of the Group’s activities are conducted through SAA Global Education
(“SAAGE”) with some also conducted through Malvern International Academy. The merging strategy between the
programmes of Malvern International Academy and SAAGE brought significant saving to the Group through
reduction in rental and administration costs. Malvern International Academy continued with its short-term skills
development programmes, some of which are funded through different local schemes. This was SAAGE’s first full
year within the Group, having been acquired in November 2017 as a business which was making significant losses.
I am delighted to report that SAAGE has reduced its loss in 2018 and is expected to show a profit in 2019. Cost
saving measures were implemented including a rationalisation of the Group’s properties in Singapore and
investment was also made. A number of new programmes were introduced in 2018 including the introduction of
English language delivery, and a small acquisition of hospitality programmes was also undertaken. SAAGE also
took the opportunity to shift to a lower level in the same building in Singapore. The renovation cost was £0.186
million. There is also a saving in the lease rental for the new premises resulting in a significant saving. The lower
level has the added attraction of having a direct access for walk-in clientele.
Malaysia has been the most challenging part of the Group’s operations in 2018, absorbing more cash and
management resources than anticipated. Trading did not improve as much as hoped in the second half and it
continued to be loss making. Therefore, management decided to undertake further restructuring and limit activities
to focus only on those areas with the most promising future growth prospects. This downsizing exercise commenced
in the second half of 2018 and continued into early 2019. We believe the operations are now stable and while we
have limited expectations for 2019, we do not expect it to be a drain on the overall performance of the Group.
Financial review
Group
In 2018 the total income for the continuing operations of the Group was £7.6 million (2017: £4.1 million).
For the 2018 financial year, the Group generated an operating loss of £0.67 million (2017: loss £0.69 million). This
was after recognising one-off costs of £0.51 million, principally comprising integration costs in Singapore of the
acquisition of approximately of £0.25 million, and rationalisation costs in Malaysia of approximately £0.26 million.
The results for 2018 had been expected to benefit from a claim in excess of £0.3 million against a third party for
disruption and expenses incurred in relation to flood damage at premises in Singapore. In relation to the damage
caused, the company incurred £0.094 million of direct repair costs that were expensed in 2018 and have not been
adjusted for in Note 4 to the financial statements. While some recovery has been made against rent in 2019, the
claim is still being processed and the amount of any settlement remains uncertain. Therefore no recognition of claim
has been made in the 2018 numbers and any recovered amount will therefore be included in the current year.
The Group has recognised a tax credit for the year of £0.15 million (2017: £0.005 million). This principally
comprises a deferred tax credit that arose because Malvern House London is now trading profitably enabling its
carried forward losses to be considered a deferred tax. The Group has also recognised a tax charge of £0.04 million,
(2017: £Nil) for the profit made by Communicate English School.
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Group loss after tax for the year was £0.57 million (2017: loss £0.70 million).
Hence the loss per share for the year was 0.31p compared to a loss of 0.66p for 2017.
The net assets of the Group as at 31 December 2018 were £5.46 million (2017: £1.20 million).
Net debt at the year-end was approximately £1.0 million (2017: £2.0 million) after taking account of a related party
loan of £0.52 million (2017: £0.84 million) and convertible loan notes amounting to £0.30 million (2017: £1.1
million). The Company has no other debt. During the year the Company converted £0.77 million of convertible
loan notes, which are held by KSP Investment Pte Limited (“KSP”) into 15,437,960 new ordinary shares.
Trade receivables at the year-end were £1.04 million (2017: £0.40 million). Since the year end significant recoveries
have been made and as at 31 March 2019 trade receivables were £0.91 million. In part the increase is due to the
Group having to agree to longer payment terms than it has previously experienced with larger organisations to
which it is offering corporate training and university degrees. This means that more of the Company’s resources
are being absorbed into working capital and this trend may continue as the levels of business undertaken with larger
organisations increases. At the year end, these accounts represented approximately 20% of the trade receivables.
Approximately 40% of the year end trades receivables were over six months old. These relate to individual students
paying on an instalment basis. Management is working to reducing this amount and students will only receive their
qualification upon full payment of all outstanding fees. The Company is currently in negotiation for additional debt
funding to assist with potential increases and natural fluctuations in its working capital requirements.
As part of the year-end review and pursuant to rationalisation undertaken in Singapore during the year and
particularly following the acquisition of SAAGE, KSP has agreed that certain costs previously incurred exclusively
by Malvern will now be shared or wholly borne by KSP. These costs include certain premises and staffing costs.
In aggregate the costs incurred in 2018 allocated to KSP amount to approximately £128,000 and these have either
been settled in cash or will be offset against KSP’s interest free loan to the Company. The independent directors,
being the directors other than Messrs Pillai, Sithawalla and Khattar, consider, having consulted with the Company’s
nominated adviser, that the terms of the allocation to KSP are fair and reasonable insofar as shareholders are
concerned.
By sector and subsidiaries
The Group reports two geographic segments being Europe (entirely UK) and Asia (being Singapore and Malaysia).
In the UK, the Group operates through two subsidiaries, MH International Limited in London and Communicate
English School Limited in Manchester. In Asia the Group operates in Singapore and Malaysia. In Singapore the
Group operates three subsidiaries being SAA Global Education, Malvern International Academy Singapore and
Malvern International Services. In Malaysia the Group operates one subsidiary being Malvern International
Academy Malaysia.
United Kingdom
London (Malvern House)
The business in London has experienced another year of significant growth, reporting £3.7 million revenue in the
period in comparison to the £2.02 million revenue in 2017 and £1.32 million revenue in 2016. The year on year
growth for 2018 was around 85% and was the result of robust sales performance, opening new markets, and
penetration in the existing markets, backed up by quality service offered to all customers. Due to the revenue
improvement, EBITDA profit before head office costs and one-off costs was £0.31 million, as compared to the
EBITDA profit of £0.017 million in 2017.
Manchester (Communicate School of English)
The acquisition of Communicate was a significant step in 2018 to allow Malvern to have more Language schools
offering its products in the UK. The business joined the Group in early July 2018 and reported £0.68 million revenue
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and an EBITDA profit before head office costs and one-off costs of £0.22 million for the six months of operation
in the Group.
Asia
The total revenue for Asian operations in 2018 was £3.20 million compared to £1.94 million in 2017. The Asian
operations reported an EBITDA loss before head office costs and one-off costs of £0.018 million in 2018, an
improvement on the £0.051 million loss reported in 2017.
In Singapore, revenue increased to £2.1 million in 2018 from its previously recorded revenue of £0.54 million in
2017. The business has reported an EBITDA loss before head office costs and one-off costs of £0.08 million. SAA
Global Education Centre Pte Ltd showed an EBITDA profit before head office costs and one-off costs of £0.057
million. Malvern International Academy Pte Ltd and Malvern International Services Pte Ltd showed an EBITDA
loss before head office costs and one-off costs of £0.140 million.
In Malaysia, revenue for the year decreased to £1.1 million (2017: £1.41 million). The business has reported an
EBITDA profit before head office costs and one-off costs of £0.06 million.
Dividend
The Board does not propose the payment of a final dividend for the year ended 31 December 2018 (2017: nil).
Brexit
The Board is mindful of the general economic and political uncertainty that Brexit is causing. At present, the Board
does not believe this uncertainty is impacting Malvern and regardless of the eventual outcome of Brexit it is not
expected to significantly impact the Group’s trading. The Board considers that the UK will remain an attractive
centre for foreign students from Europe and the Rest of the World. This should be enhanced by recent initiatives
announced by the UK government to attract more international students to the UK. The most significant policy
announcements are 1) the inclusion of China and Brazil in the low-risk countries list which will make the visa
process easier and lead to higher approval rate and 2) a new working right policy for degree graduates which will
boost the number of students coming to UK universities.
Board and senior management changes
During the year Mr Sabin Joshi and Mr Nadir Zafar stood down as Non-Executive Directors and Mr Nirvana
Chaudhary, who is Chief Executive Officer of the CG Corp Group, was appointed as a Non-Executive Director.
Since the year end, Mr Wee Hock Kee has retired from the Board. The Company is actively looking to recruit an
experienced independent non-executive and hopes to make an appointment shortly.
The senior management team has been strengthened with the Communicate acquisition and also with the
appointments of Mr Bharat Guha as Group Chief Financial Officer and, since the year end, of Ms Wei Lin as Group
Chief Operating Officer.
Acknowledgments
On behalf of the Board, I would like to thank all staff members for their continued dedication, commitment, and
cooperation during what has been another period of significant change and activity. We would also like to extend
our appreciation and thanks to all our business partners and advisers, students, associates and shareholders for their
support throughout the year.
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.
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Outlook and prospects
The Board is confident that the Group can make further substantial progress in 2019. The Group’s operations are
now not only larger in terms of revenue and number of students (almost twice the number in 2017), but it also has
a greater range of products that can help deliver organic growth. In addition, 2019 will benefit from the now
profitable operations of SAAGE, a first full year contribution from Communicate and a growing contribution from
new revenue streams such as the foundation courses delivered at the University of East London.
Trading in the current financial year has started satisfactorily and is in line with the Board’s expectations for the
year as a whole. Trading up to the end of April was ahead of budget. Sales to the end of April plus sales booked
for delivery in the remainder of the year stood at £6.9 million (2018: £3.9 million). As in 2018, trading in 2019
as a whole will be second half weighted as revenue in the second half will benefit from summer enrolments in
London and Singapore, enrolment of the universities in the second half, and chartered accountants’ courses in
more demand through the second half of the year in Singapore.
Gopinath Pillai
Chairman
Date: 28 June 2019
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STRATEGIC REPORT
Principal Activities
The principal activity of Malvern International PLC is to provide quality education services in multiple locations.
In 2018 it has shown continuous growth in the number of clients offered such services.
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.
Organisation Overview
The Group’s business is directed by the Board and managed by a senior management team as outlined in the
Corporate Governance section. The board committees provide the oversight and monitoring on financial
management, board effectiveness and governance, risk and controls.
Strategy and Business Plan
The following key matters are included within the Chairman’s Statement on pages 1 to 5.
• Overview and Group Strategy
• Operational and business review
• Financial review
• Outlook and prospects
Principal Risks and Uncertainties Facing the Group
The Group is exposed through its operations to the following financial risks:
• Foreign currency risk;
• Liquidity risk; and
• Credit risk.
The policies for managing these risks are set by the Board following recommendations from the Group Finance
Director. Certain risks are managed centrally, while others are managed locally following guidelines
communicated from the centre. The policies for each of the above risks, and the nature and extent of those risks,
are described in detail in note 31 to the financial statements. Other risks and uncertainties are discussed in the
Operational and Financial Review on pages 2 and 3.
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.
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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.
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 2018, only the operations of Malvern House International Limited are located in the UK and critically
had the majority of their income and expenses denominated in Sterling. In the results for the financial period under
review, this covers about 58% 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.
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Key Performance Indicators
Financial
Total Income from continuing operations
Growth/(Decrease)
Operating Profit/(Loss)
2018
2017
£7,593,947
86%
(£673,177)
£4,078,889
1%
(£692,022)
Profit/(Loss) before Taxation-continuing operations
(£717,773)
(£706,712)
Profit/(Loss) after Taxation-discontinuing operations
(£566,946)
(£701,328)
Profit/(Loss) per share-continuing operations
(0.31 pence)
(0.66 pence)
From FY2018, the Board is also tracking non-financial indicators as per below:
Non-Financial
Number of Courses offered
Students attending
2018
58
8,506
2017
48
7,430
Sam Malafeh
DIRECTOR
Date: 28 June 2019
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BOARD OF DIRECTORS
Chairman
Mr. Gopinath Pillai
Ambassador Gopinath Pillai is Ambassador-at-Large in the Ministry of Foreign Affairs and Singapore’s Special
Envoy to Andhra Pradesh. He is the Chairman of the Institute of South Asian Studies. He has served as Singapore’s
Non-Resident Ambassador to Iran and Singapore’s High Commissioner to Pakistan.
Ambassador Pillai has varied business interests which include investments in education, logistics and information
technology. He is the Chairman of Playware Studios Pte Ltd, an EdTech Company focused on game-based learning
and education.
Ambassador Pillai has received several awards, including the Friend of Labour (NTUC 1987); Meritorious Award
(NTUC 1990); Friend of IT from Singapore Computer Society (2001); Distinguish Member of NUSS in 2011 and
Outstanding Service Award (NUS 2015). The Singapore government has awarded Ambassador Pillai the Public
Service Star Award (BBM) in 1999 and BBM (BAR) in the 2009 National Day Awards and The Meritorious Service
Medal on National Day 2015.
The Indian government conferred the Padma Shri award on Ambassador Pillai at the 2012 Republic Day.
Deputy Chairman
Mr. Haider M Sithawalla
Sithawalla started his career in the Government service and rose to the position of Deputy Secretary in the Ministry
of Finance. While in the Government Service he served on Tourist Promotion Board (Year 1972 – 1974), Sentosa
Development Corporation (Year 1974 – 1976) and a number of boards of companies in which the Singapore
Government had equity interest.
Mr Sithawalla resigned from Government service in 1978 and joined ACMA Ltd, a public listed Company, as its
General Manager and later became its Managing Director. In 1994 he retired from ACMA Ltd and joined as
Executive Director and a partner of KSP Investment Pte Ltd. He continues to be on the Board of a number of
companies.
He is currently also Chairman of Warees Investments Pte Ltd, Education Trust Fund Committee of Mendaki and a
member of Rahmatan Lil Alamin Foundation.
Mr Sithawalla also served as Singapore High Commissioner (Non-Resident) to Mauritius, Tanzania and Zimbabwe
during the years 1994 to 2008. For his public service, Mr Sithawalla has received many awards, such as the MUIS
Award Jasa Cemerlang (Outstanding Contributions to Muslim Community) in 2014, the Public Service Medal
Award (PBM) in 1999, the Meritorious Service Award (NTUC) in 1990, the Rochdale Medal Award (National Co-
Operative Federation Ltd) in 1984 and Friend of Labour Award (NTUC) in 1981.
Executive Director & CEO
Dr. Sam Malafeh
Sam Malafeh, PhD in Economics (The University of Auckland, New Zealand), is an innovative and results-driven
leader in education focused on achieving exceptional results in highly competitive environments. Sam has a proven
track record of building a strong team to deliver quality education. He is experienced in driving quality operations,
processes, and customer service improvements while building partnerships with key business decision-makers. Sam
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is passionate about education and believes in empowering people, whether they are students, academics, colleagues
or other individuals.
In his previous role as the Chief Executive Officer of a New Zealand education provider, Sam led the five schools
operating in the Group to offer education for employment and enterprise. The schools were repeatedly rated highly
by New Zealand Qualifications Authority. They are known as schools with exceptional support to students,
maintaining the integrity, high-quality delivery and high employment outcomes for graduates.
Dr Malafeh is delighted to be part of an international high-performance Company. With the new strategy, Malvern
International is improving its systems and processes, and teaming up with highly qualified and experienced people
to enhance the ultimate learning experience. As a Global Partner in Learning and Skills Development, Malvern
International is responsible for empowering individuals to become leaders of workforces and industries of the
future.
Non-Executive Director
Mr. Ramasamy Jayapal
Jayapal was the CEO of Malvern International plc during listing and subsequently the Finance Director before
becoming Non-Executive Director of Malvern International plc. He has more than 30 years’ management
experience of which 25 are in education.
Mr. Jayapal is a Fellow of the Chartered Association of Certified Accountants (FCCA) and the Fellow of the
Institute of Chartered Accountants of Singapore (FCA).
Mr. Jayapal is one of the Founder Members and a Fellow of the Institute of Management Consultants (FCMC) and
was its past president for a few years. He is currently the Deputy Chairman of a UK Accounting Group called
McMillan Woods International and Chairman of Hallmark Capital Pte. Ltd., Singapore.
Non-Executive Director
Mr. Navin Khattar
Navin Khattar is an executive director with a global investment Company and is principally focused on sourcing
and managing its UK and European portfolio of private equity and property investments. He is a founder director
of Eastleaf Ltd, a property development and investment firm focused on luxury housing in prime areas in the UK.
Navin is a qualified solicitor of the Law Society of England & Wales and previously practised within the City of
London, specialising in corporate finance. He holds an LLB (Hons) degree from the University of Bristol. His legal
background and multi-industry experience afford him a broad commercial perspective. This benefits him in the
numerous board positions he takes in investee companies in order to provide strategic advice and guidance in order
to stimulate growth and help achieve each entity’s respective potential and goals.
Non-Executive Director
Mr. Nirvana Chaudhary
Nirvana Chaudhary, Managing Director of CG Corp Global, started working at institutes like Credit Suisse and
American Express at the Age of 15. He was also working at Montys Restaurant as a waiter during his studies in
London. Today CG Corp Global is a $2.5 Billion multinational headquartered in Nepal, with a portfolio of 136
companies and 76 brands spread over 30 different countries. Educated at Doon, Harrow and MIT/London Business
School, Nirvana founded his own Company CG Finco when he was 19. He became the Managing Director of the
Chaudhary Group before reaching 30. He was elected Vice President of Confederation of Nepalese Industries (CNI)
in 2016. Today, CG Corp is a professionally driven Group that is amongst the most admired and respected
companies in the region. With a work force of nearly 12,000 employees it has made a massive imprint on Nepal’s
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business landscape, and is fast expanding in India, Asia, Europe and Africa as well. Chaudhary’s are the first and
only Forbes Billionaire listed family in Nepal.
Nirvana is well-known for his diverse interests and ventures—as a philanthropist, artist, curator, musician, spiritual
seeker, avid trekker and a former national squash player. The philanthropic arm of his Group that he leads—
Chaudhary Foundation—is busy building schools and homes for survivors of the April 2015 earthquake of Nepal.
He’s opened Nepal’s largest spiritual institute and partnered with Bill & Melinda Gates on Health and Sanitation
in Nepal. He is well known for his role in Social Impact Projects. He also runs his own private philanthropy initiative
in the name of his parents.
Nirvana is a youth icon of Nepal and beyond. He is often sought by youth organizations, schools, universities and
young entrepreneurs as a motivational speaker. He has authored several articles on leadership and management for
prominent business magazines. He became the Chairman of ASSOCHAM Nepal Chapter and was nominated in
the board of UN Business Advisory Council. He was also in the board of Cricket Association of Nepal. Lions Club
International and Rotary International have recognized him with the President’s Award for Social Contribution.
Nirvana is also the Honorary Consul General of Maldives to Nepal. He has served as the Personal Advisor to the
Minister of Industries, Government of Nepal. He has also held offices of various bilateral chamber of commerce
and industry. He has been the Brand Ambassador of WWF Foundation, Founder of Himalayan Climate Change,
the youngest Founder Member of Entrepreneur Organization Nepal Chapter, and Founder member of Young
Presidents Organization. He has led a campaign on “Spirit of Entrepreneurship” and just been featured as the First
Nepalese in CNBC’s Young Turks and Forbes NextGen Tycoons.
Nirvana has received numerous accolades and awards from various institutions and has been voted as the 50 Most
Influential People in Nepal in 2011. He was awarded The Rajiv Gandhi Foundation award for Young
Entrepreneur and Philanthropist in 2017. Nirvana has also been nominated on the Board of Trade for Ministry of
Commerce, Government of Nepal.
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DIRECTORS’ REPORT
The Directors present their report and the audited accounts for the year ended 31 December 2018.
Principal activities
The principal activity of Malvern International PLC is to provide quality education services in multiple locations.
In 2018 it has shown continuous growth in the number of clients offered such services.
Review of business and future developments
A review of the business and its outlook, including commentary on the key performance indicators of turnover,
gross margin, contribution, debtor days and net debt, and the principal risks and uncertainties facing the Group is
included in the Chairman’s Statement. The Group’s social, environmental and ethical policies are set out in section
5. A statement on the application of the going concern principle is set out below. Details of financial instruments
are set out in note 32 to the financial statements. Each of the above is incorporated in this report by reference.
Group results
The Group loss from continuing operations before taxation for the year was £0.72 m (2017: loss £0.71 m). After
a deferred tax credit of £0.19 m (2017: tax credit of £0.005 m), the retained loss of £0.57 m (2017: retained loss
of £0.70m) has been transferred to reserves. The results for the year are set out in the consolidated income
statement on page 35.
Dividends
The Directors do not recommend a final dividend (2017: nil pence per ordinary share). The total dividends for
the year were nil pence per ordinary share (2017: nil pence per ordinary share).
Board of Directors
Biographical information on each of the Directors as at 1st of May 2019 is set out on pages 9 to 11, together with
details of membership of the Board committees.
The Company’s Articles of Association also require that each Director retire from office and seek reappointment
at the third annual general meeting after the general meeting at which he was last appointed, or reappointed. Mr
Gopinath Pillai, Mr Navin Khattar and Dr Sam Malafeh are due for re-election at the next AGM.
Directors’ interests
The Directors’ beneficial interests in the ordinary share capital of the Company are set out within the
remuneration report in on page 24.
P a g e 12 |
Principal shareholders
At the close of business on 1st of May 2019 (being the latest practical date prior to the signing of the Directors’
Report) the Company had received notification of the following substantial interests representing over 3% of
the issued share capital:
KSP Investments PTE Limited
CG Corp
HSBC GLOBAL CUSTODY NOMINEE (UK) LIMITED
Des:800757
VIDACOS NOMINEES LIMITED Des:IGUKCLT
VIDACOS NOMINEES LIMITED Des:FGN
SPREADEX LIMITED
Dr Sam Malafeh
Mr Ho Peng Cheong
Mrs Marzena Mace
Mr Richard Mace
Number of
ordinary shares
1p
43,292,405
40,091,122
Percentage
held
16.7%
15.5%
23,750,000
20,947,943
14,031,894
11,555,000
9,000,000
7,953,672
6,900,000
6,900,000
9.2%
8.1%
5.4%
4.5%
3.5%
3.1%
2.7%
2.7%
Capital structure
The Company has one class of share in issue, ordinary shares of 1p. The shares are listed on the Alternative
Investments Market (AIM) of the London Stock Exchange and shareholders are entitled to vote at Company
meetings, to receive dividends and to the return of their capital in the event of liquidation.
The Directors are not aware of any restrictions on transfers of shares in the Company or on voting rights or of
any agreements between holders of the Company’s shares which may result in such restrictions.
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.
In preparing the financial statements on a going concern basis, the Group have considered each of the following
factors:
• The Group’s main source of funds are internally generated funds and new capital injections.
• During 2018 the Group incurred losses as they continue to manage growth, make an acquisition in the UK,
integrate parts of the business in Singapore and restructure their operations in Malaysia. All of these had a
net cash outflow impact for the business in 2018 which in part was financed by trading and share issues.
• Profit and cash flow projections for the Group assume profitable growth in its key operating entities based in
each of the key jurisdictions.
• There is challenge on the Group continuing to manage their working capital requirements of the business and
•
its ability to meet liabilities as and when they fall due
It is anticipated that there will continue to be a requirement for future raising of funds, through the issue of
equity and other funding sources, to manage the growth and strategic plans for the business. Since the year end
Malvern International plc undertook another fund raising in February 2019 which raised £606,000. These funds
were used for working capital for the growth of the organisation.
• There has been 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.
After making appropriate enquiries, whilst accepting the above factors highlight some material uncertainty, the
Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in
P a g e 13 |
operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Corporate social responsibility
The Group recognises its corporate social responsibilities and reports on these in a separate statement of social,
environmental and ethical policies in section 5. This statement covers the Group’s Employment Policies,
Environmental Policy and Health and Safety Policy.
Directors’ and officers’ liability insurance and indemnity
The Company has purchased insurance to cover its Directors and officers against their costs in defending
themselves in any legal proceedings taken against them in that capacity and in respect of damages resulting
from the unsuccessful defence of any proceedings.
Political donations
There were no political donations made by the Group during the year (2017: none).
Corporate Governance
The Corporate Governance Report in section 5 forms part of the Directors’ Report.
Subsequent Events
The Directors are reporting the following subsequent events to the Statement of Financial Position which are
significant to these Financial Statements.
• Malvern International PLC undertook another fund raising in February 2019 which raised £606,000. These
funds were used for working capital for the growth of the organisation.
Auditor
Pursuant to section 489 of the Companies Act 2006, resolutions will be proposed at the 2019 Annual General
Meeting to reappoint Crowe U.K. LLP as auditor to the Company and to authorise the Directors to determine
their remuneration.
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.
Annual General Meeting
The resolutions to be proposed at the Annual General Meeting will appear in the Notice of the Annual General
Meeting together with the explanatory notes. This will be circulated with the annual report when sent to all
Shareholders.
ON BEHALF OF THE BOARD
Sam Malafeh
DIRECTOR
Date: 28 June 2019
P a g e 14 |
CORPORATE GOVERNANCE
1. Introduction
Prior to 2018, the Company sought to model its corporate governance on the 2013 Quoted Companies Alliance
Corporate (QCA) Governance Code for Small and Mid-Size Quoted Companies, as far as was practicable and
appropriate, having regard to the size and resources of the Company. On 8 March 2018, the London Stock
Exchange issued revised rules for AIM–listed companies, within which was a requirement (Rule 26) for AIM
companies to apply a recognised corporate governance code from 28 September 2018.
Accordingly, in September 2018, the Company decided to apply the 2018 QCA Corporate Governance Code (the
Code) and this Corporate Governance Report for the year ended 31 December 2018 is based upon the Code. The
principal means of communicating our application of the Code are this Annual Report and our website
(www.malverninternational.com).
2. Chairman’s Statement
As Non-Executive Chairman, I am responsible for the leadership of the Board, ensuring its effectiveness on all
aspects of its role, including good governance in dealing with all of our stakeholders. This includes ensuring
that Board meetings are held in an open manner, that the Directors receive accurate, timely and clear
information and allowing sufficient time for agenda items to be discussed. I am also responsible for ensuring
the Company has effective communications with shareholders.
The Board is committed to applying high standards of corporate governance and evolving them as the business
grows and has adopted the Code to provide a framework against which to do this. In the remainder of this report,
I set out how the Group applies the ten key principles of the Code, which fall under three broad categories.
3. Deliver Growth – Principles 1 to 4
Principle 1: Establish a strategy and business model which promote long term shareholder value for shareholders
The Company’s vision is to invest in and develop its operating businesses in the global education sector to deliver
long term, sustainable growth in shareholder value to reflect Malvern’s core values.
The Company aims to achieve this by:
a. Promoting Malvern’s globally recognisable brand in education and training
b. Strengthening management and corporate/administrative systems to achieve world class delivery and quality
standards
c. Innovating to improve and expand the range of products and services offered
d. Extending distribution through our agent network and collaborations and strategic alliance
e. Delivering organic growth through making training accessible to an increasingly mobile student population
using multi-location and technology options
f. Making complementary/strategic acquisitions to broaden geographic reach and subject areas
g. A clearly laid out long term plan linked to performance driven culture challenges faced by the Group in
executing its strategy include repositioning the business service offerings, changing the internal operating model,
market competition and macro-economic factors.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Board is aware of the need to protect the interests of minority shareholders and balancing these interests
with those of any more substantial shareholders.
P a g e 15 |
The Board regards regular communications with shareholders as one of its key responsibilities. The Company
is committed to engaging with shareholders and this effort is led by the CEO. A clearly laid out investors’
relationship strategy is in place.
In order to gauge shareholder sentiment, the Company meets with the key institutional shareholders typically
every six months and when necessary solicits feedback from its larger shareholders via its nominated adviser.
The Company holds an open Q&A session at every Annual General Meeting and attends investor events to
engage with retail shareholders.
The communication allows the board to understand the shareholders’ views, and to ensure that the strategies
and objectives of the Group are aligned with shareholders. In its decision-making, the Board will have regard
to the ascertained expectations and needs of its shareholders (as appropriate in accordance with its statutory
and fiduciary duties).
The Company welcomes shareholder contact at any time and contact details can be found on the website.
Principle 3: Take into account Wider Stakeholder and Social Responsibilities and their implications for long-
term success
The Directors are aware of the Company’s responsibilities to the communities within which they operate and
are keen to adopt a proactive approach towards community education-driven initiatives, particularly where they
involve the education of those less fortunate members of the respective communities. The Company is currently
involved with Refugee Aid agencies in the UK as well as community associations in Asia.
The Group’s responsibilities to stakeholders including staff, suppliers and customers and wider society are also
recognised.
The environmental impact of the Group’s activities is carefully considered and the maintenance of high
environmental standards is a priority. A sustainability plan with clear board oversight is in the pipeline.
The Board has regard to the feedback of relevant stakeholders in its decision-making and the formulation of
strategy.
Principle 4: Embed effective risk management
The board is ultimately responsible for the Group’s system of internal control and for reviewing its effectiveness
and is assisted in this respect by the Audit Committee. The Group maintains an internal risk register which is
updated quarterly and reviewed periodically by the Audit Committee.
The Group intends to establish a separate internal audit function to ensure appropriate and effective financial
internal controls and appropriate financial transparency/accountability. This will give further assurance to the
Board and Management that the operations of the business are conducted effectively and appropriately. The
internal audit function will also highlight any areas for improvement alongside feedback received from its
external auditors as part of the annual audit process.
The principal risks faced by the Group are presented in the strategic outline.
The Board is not aware of any significant failings or weaknesses in the system of internal control.
P a g e 16 |
4. Maintain a Dynamic Management Environment – Principles 5 to 9
Principle 5: Maintain a well-functioning, balanced board
At the date of this report, the Board comprises me as Non-Executive Chairman, Non-Executive Directors and
Malvern International PLC’s Chief Executive Officer as an executive director. The CEO was appointed in
December 2017 replacing Haider Sithawalla who was appointed as Non-Executive Deputy Chairman, a new
board role, on the same date. The table on page 24 sets out the dates of tenure of the current Directors on the
Board.
The Board has a balance of Executive and Non-Executive Directors such that no individual or small group of
individuals can dominate the Board’s decision making. The Board has a range of backgrounds and skills. The
Board considers both non-executive Directors to be independent, with neither having a length of service of greater
than three years. The Non-Executive Directors ensure that independent judgement is brought to Board discussions
and decisions. The Board considers that there are no relationships or circumstances which are likely to affect the
independent judgement of the Non-Executive Directors.
The Board has meetings scheduled regularly throughout the year to review and approve the Group’s strategy
and to monitor progress against set objectives. Additional meetings are also held as business dictates. The Board
has a formal schedule of matters reserved for its specific approval which includes a review of Group strategic,
operational and financial matters such as proposed acquisitions and divestments. All members of the Board are
normally supplied in advance of meetings with the agenda and supporting papers covering the matters which
are to be considered.
As Non-Executive Chairman, I am responsible for the leadership of the Board, ensuring its effectiveness on all
aspects of its role. This includes ensuring that Board meetings are held in an open manner, that the Directors
receive accurate, timely and clear information and allowing sufficient time for agenda items to be discussed.
Annual appraisals are held of each Director, providing feedback and reviewing any training or development needs.
I am also responsible for effective communications with shareholders and relaying any shareholder concerns to
the Directors. During the year I met with the other Non-Executive Director without the Executive Directors being
present.
Directors appointed since the last annual General Meeting, and those retiring by rotation will submit themselves
for election or re-election at the next Annual General Meeting, as set out in the Directors’ report in section 8 and
in the separate Notice of Annual General Meeting sent to all Shareholders. I confirm that the performance of each
Director continues to be effective and the individuals continue to demonstrate commitment to their role.
New Directors receive a comprehensive, formal and tailored induction to the Group’s operations including
corporate governance, the legislative framework and visits to Group premises.
The Board has meetings scheduled regularly throughout the year to review and approve the Group’s strategy and
to monitor progress against set objectives. Additional meetings are also held as business dictates. A table showing
the number of meetings of the Board and its Committees held during the year, and attendance at those meetings by
each Board member, is set out below.
Board Personnel
Gopinath Pillai
Haider Sithawalla
Sam Malafeh
Navin Khattar
Jayapal Ramasamy
Nirvana Chaudhary
Board Title Designation
Chairman
Deputy Chairman
Executive Dir-CEO
Non -Executive Dir
Non -Executive Dir
Non -Executive Dir
Audit and Risk
Committee Title
–
Chairman
–
–
Member
Member
Nomination &
Remuneration
Committee Title
–
Member
–
Chairman
Member
–
P a g e 17 |
During the year 8 scheduled Board meetings were convened as necessary to deal with various matters. Details of
attendance at Board meetings is summarised below. Committee attendance is shown for Committee members
only.
Number held
8
4
Board
Audit
Nomination and
remuneration
1
Date
22.2.18
24.4.18
16.5.18
24.7.18
12.9.18
25.10.18
22.11.18
27.12.18
18.10.18
11.5.18
24.7.18
12.9.18
15.11.18
Attended
7/7
8/8
7/8
7/8
8/8
6/8
7/8
7/7
Attended
Attended
3/4
3/4
3/4
3/4
3/4
Note: 5/8 Directors who were members of the Board at the time attended the Group’s Annual General Meeting on
24 May 2018
The Board maintains close dialogue by email, telephone and conference calls between scheduled meetings. The
Board has a formal schedule of matters reserved for its specific approval which was reviewed during the year and
includes a review of Group strategic, operational and financial matters such as proposed acquisitions and
divestments. It approves the annual accounts and interim report, the annual budget, significant transactions, major
capital expenditure and reviews the effectiveness of the system of internal control and the risks faced by the Group.
It covers all controls, including financial, operational, compliance and risk management. During 2018 the Board
continued to regularly track potential risks associated with Brexit.
The Board delegates specific responsibilities to Two Committees: The Audit and Risk Management Committee,
The Nomination and Remuneration Committee. The Audit and Risk Management, and Nomination and
Remuneration Committees of the Board each have formal written terms of reference. These terms of reference
are available on the Group’s website (https://www.malverninternational.com/corporate-governance/ ).
The Audit Committee comprises the three non-executive Directors and is chaired by Mr Haider Sithawalla. The
Audit Committee meets at least three times a year. Details of the responsibilities of the Audit and Risk Management
Committee are set in page 26. Where necessary, specialist external consultants are used to assist the Committee.
The Nomination and Remuneration Committee comprises of three Non-Executive Directors and is chaired by Mr
Navin Khattar. The Committee is responsible for proposing candidates for appointment to the Board, having due
regard to the balance and structure of the Board, as well as succession planning.
The process for new Board appointments includes an initial search, preliminary interviews and discussions.
Following this process, recommendations are then made by the Committee to the Board on merit against objective
criteria. Where necessary external recruitment consultants are used to assist the process.
P a g e 18 |
Principle 6: Ensure the board has the necessary up-to-date experience, skills and capabilities
Directors who have been appointed to the Group have been chosen because of the skills and experience they
offer. The Directors’ biographies, which are set out on pages 9 to 11, illustrate the range of business
backgrounds, skills, independence and experience contributed by each Board member. The board are aware of
the importance of attaining greater diversity amongst its members.
Each member of the Board takes responsibility for maintaining his skill set, which includes roles and experience
with other boards and organisations. All Directors have the opportunity to undertake relevant training and attend
relevant seminars and forums. Where the board considers specialist, advice is required to address matters reserved
for the Board, it will seek to engage competent external advisors.
Mr Hock Kee Wee acted as the de facto Senior Independent Director during 2018. He was an additional contact
point for shareholders if they had reason for concern, when contact through the normal channels of the Executive
Directors and Chairman had failed to resolve their concerns, or where such contact was inappropriate.
All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring
that Board procedures, applicable rules and regulations are observed. There is an agreed procedure for Directors
to obtain independent professional advice, if necessary, at the Company’s expense.
Principle 7: Evaluating board performance and development
The board undertakes an annual evaluation of its own performance and that of its Committees and individual
Directors.
The Board undertook an annual evaluation of its own performance and that of its Committees and individual
Directors for the year. My own performance was reviewed by the other Non-Executive Director. The outcome
of the evaluation of the Board is reviewed by the Board as a whole and the results are used to assist the Board
in developing its approach going forward. The results of the evaluation performed in 2018 were satisfactory.
Principle 8: Promoting ethical values and behaviours
The Group is committed to maintaining the highest standards of ethics, professionalism and business conduct
as well as ensuring that we act in accordance with the law at all times. Further details are set out under the
“Ethics” section of the Social, Environmental and Ethical Policies Report in section 5.
A critical aspect of the Group’s strategy is to be perceived as a trusted partner of its clients. In order to achieve
this objective, a culture of teamwork, openness, integrity and professionalism forms a key element of our
Company principles and values which sets out the standards of behaviour we expect from all our employees.
The board supports and promotes the principles of equal opportunities in employment and promotes a culture
where every employee is treated fairly. The board and management conduct themselves ethically at all times
and promote a culture in line with the standards set out in the employee handbook.
Principle 9: Maintain governance structures and processes that are fit for purpose
As the Non-Executive Chairman, I am responsible for the leadership of the Board, ensuring its effectiveness on
all aspects of its role. This includes ensuring that Board meetings are held in an open manner, that the Directors
receive accurate, timely and clear information and allowing sufficient time for agenda items to be discussed.
Annual appraisals are held of each Director, providing feedback and reviewing any training or development
needs. The Chairman is also responsible for effective communications with shareholders and relaying any
shareholder concerns to the Directors.
Authority is delegated to senior operational management through Group authorisation limits on a structured
basis, ensuring that proper management oversight exists at the appropriate level. During the year, the Group
P a g e 19 |
operated through a single division to offer education in Asia and UK. The operational board comprises the
Group Chief Executive Officer, the Group Chief Operating Officer, and the Group Chief Financial Officer. The
operational board meetings are held monthly and are attended by other senior management as appropriate.
Regular updates are provided by the heads of different divisions and operations as Marketing, London,
Manchester, Malaysia, Singapore. Any key issues from these meetings are reported to the main Board.
5. Build Trust – Principle 10
Principle 10: Communicate how the Company is governed and performing, maintaining a dialogue with
shareholders and other relevant stakeholders
The Board attaches great importance to providing shareholders with clear and transparent information on the
Group's activities, strategy and financial position. Details of all shareholder communications are provided on
the Group's website (https://www.malverninternational.com/category/regulatory-news/ ).
The Company engages where possible in regular dialogue with its major Shareholders through presentations
and meetings after the announcement of the Group’s full year and interim results. Private and institutional
shareholders are given an opportunity to communicate directly with the Board at the Annual General Meeting.
Shareholders’
at
cosec@MalvernInternationalPLC.com or by telephone to the Group’s head office are responded to in person
by the Company Secretary or by another appropriate employee.
Secretary’s
Company
received
address
queries
email
the
via
Most members of the Board usually attend the Annual General Meeting. The chairmen of the Audit,
Remuneration and Nomination Committees will normally be available to answer Shareholders’ questions at
that meeting. Notice of the Meeting is posted to Shareholders with the report and accounts no fewer than 21
clear days prior to the date of the Annual General Meeting. The information sent to Shareholders includes a
summary of the business to be covered at the Annual General Meeting, where a separate resolution is proposed
for each substantive matter. The Group’s annual report and accounts, interim report and other stock exchange
announcements are published on the Group’s website at https://www.malverninternational.com.
The Annual Report is designed to present a fair, balanced and understandable view of the Group’s activities
and prospects. The Operating & Financial Review provides an assessment of the Group’s affairs and position.
The Annual Report is sent to all Shareholders on the shareholder register. The Group’s Annual and Interim
Reports and Notices of the Annual General Meeting for the past 5 years are available on the Group’s website.
The Group details how it is governed and performing both in this Annual Report and Accounts and on its
website.
The reports to the shareholders of the Nomination and Remuneration, and Audit and Risk Management
committees can be found in sections 6 and 7 respectively.
P a g e 20 |
6. Corporate Social Responsibility
Employment policies
As a professional services business, Malvern International PLC’s strength derives from the commitment,
capability and cultural diversity of its employees. The Group aims to adopt a policy of diversity at all levels
including selection, role assignment, teamwork and individual career development.
The Group encourages the participation of all employees in the operation and development of the business by
offering open access to senior management, including the Executive Directors, and adopting a policy of regular
communications through road shows and the intranet.
The Group also encourages all employees to participate in an annual employee survey. Results are communicated
to staff with proposed actions to address any identified issues. The results from the 2018 survey reflected broadly
average staff engagement and satisfaction.
The Group is planning to incentivise employees through share-based incentives and the payment of bonuses and
commissions linked to performance objectives. Where appropriate these objectives are linked to profitability. The
Group is currently reviewing its approach to performance appraisal and career progression, with a view to
implementing an improved talent development programme.
Health & Safety
The Health and Safety of Malvern International PLC’s employees is paramount. Group policy is to provide and
maintain safe and healthy working conditions, equipment and systems of work for all employees and to provide
such information, training and supervision as is needed for this purpose.
Appropriate written health and safety information outlining the Group’s policy in each area is issued to all new
employees. This includes:
• First aid — Each office has a person qualified in first aid. First aid boxes are readily accessible, and records
kept of all accidents and injuries.
• Fire safety — Each office has an evacuation marshal who will liaise with building management or local
emergency authorities, as appropriate. Evacuation assembly points are agreed for every location and a full
evacuation carried out every six months. Fire alarms are tested regularly.
• Employees’ health — Any employee who believes he/she is suffering from an illness or condition related
to their working environment is encouraged to report this to his/her manager for investigation
In order to support any employees suffering from mental health issues, the Group is planning to roll out a Stress
and Wellbeing Course across all of its locations with the aim of enabling managers to identify any early signs of
concern and provide initial support to individuals.
Social responsibilities
It is Group policy to be a good corporate citizen wherever it operates. As part of the Group’s social
responsibility, it provides scholarships and free courses to those underprivileged applications and local
communities. For instance, in London, free space is offered to the local refugee council for its members to
attend English Language training classes.
Environmental policy
While Malvern International PLC’s operations by their very nature have minimal environmental impact, the
Group recognises its responsibilities to protect and sustain the environment and its resources. The Group’s
policy is to meet or exceed the statutory requirements in this area and it has adopted a code of good
environmental practice, particularly in its main areas of environmental impact, namely energy efficiency, use
and recycling of resources and transport.
Recycling
The Group makes every effort to recycle office paper and envelopes. Appropriate containers are provided at all
offices and all paper collected is sent to recycling plants. The Group also recycles as much other material, such
as toner cartridges, as is economically viable.
P a g e 21 |
Paper usage
The Group constantly strives to implement paper-saving practices to reduce wastage. Examples include electronic
timesheets, E-invoicing, E-pays lips, electronic expense claims, electronic books and notes to students.
Ethics
Malvern International PLC is committed to maintaining the highest standards of ethics, professionalism and
business conduct as well as ensuring that we act in accordance with the law at all times. The Group supports and
promotes the principles of equal opportunities in employment and promotes a culture where every employee is
treated fairly. A culture of teamwork, openness, integrity and professionalism forms a key element of our
Company principles and values which sets out the standards of behaviour we expect from all our employees.
Anti-Bribery Act
Malvern International PLC’s Anti-Bribery and Corruption policy is written to follow the UK regulatory
requirements in relation to the Anti-Bribery Act. The policy has Executive Director ownership and is available on
the Group’s intranet. Client and supplier arrangements are regularly reviewed and guidance forms part of each
employee’s induction.
During the year under review the policy was updated, with amendments including incorporation of the Company’s
responsibilities in respect of tax evasion under the Criminal Finance Act 2017. The Professionals division maintains
a preferred supplier list (PSL) for payroll companies used by its contractors and undertakes tax due diligence before
allowing companies on to its PSL.
Modern Slavery Policy
Malvern International PLC has a zero-tolerance approach to modern slavery and is committed to acting ethically
and with integrity in all its business dealings and relationships, and to implement and enforce effective systems
and controls to ensure modern slavery is not taking place anywhere in its own business, or its supply chain. The
following actions have been taken during 2018.
• Supply Chain Review - we continue to take positive steps to improve supply chain transparency. Following
the annual review of our policy and supply chain, we continue to believe that we operate a supply chain
with a very low inherent risk of slave and human trafficking potential. Our supply chain is mainly made up
of UK based suppliers of professional services, computer software and equipment, office supplies and our
contractor and associate workers. Nevertheless, this assessment is kept under continual review and due
diligence is conducted with any new suppliers.
• Staff Training - during 2018 we have continued to provide training to all new employees on the Modern
Slavery Act 2015 and our Modern Slavery Policy as part of our onboarding program to ensure all employees
are aware of their responsibilities.
During 2018 no instances of modern slavery were reported or identified.
General Data Protection Regulations (GDPR)
The Company takes its data protection obligations seriously and commenced preparations for GDPR in 2017,
establishing a working party with executive director sponsorship in order to ensure compliance.
During the year under review we have updated our Data Protection, Privacy, Information Security, Cookies and
Data Breach policies to comply with the new regulations. We have also undertaken a review of the internal
processing of personal data and have implemented a number of measures including a purge of obsolete data and a
tightening of our IT security. We have provided training and guidance on the new regulations to all staff and the
guidance will form part of each new employee’s induction.
Gopinath Pillai
Chairman
Date: 28 June 2019
P a g e 22 |
REMUNERATION REPORT
Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises Navin Khattar as Chairman and fellow non-executive
Directors Haider Sithawalla and Jayapal Ramasamy.
The committee’s primary objectives are to ensure that remuneration arrangements are aligned with the strategy
and culture of the Company and its subsidiaries. To this end, it ensures the Group’s remuneration policy
encourages and rewards the right behaviours, values and culture. The committee also ensures that there is a
robust process for the appointment of new board Directors and senior management positions. It works closely
with the Company’s Board of Directors and external advisers to identify the skills, experience, personal qualities
and capabilities required for the next stage in the Company’s development, linking the Company’s strategy to
future changes on the Board.
Within the Terms of Reference for the Nomination and Remuneration Committee as approved by the Board, the
responsibilities of the committee are stated as follows: -
a) To consider the nomination and appointment, increments and bonus plans of the Group CEO, Group CFO,
subsidiary General Manager and Group senior management team members;
b) To review any letter of resignation from the Group CEO and Group CFO, and any questions of resignation or
dismissal;
c) To review whether there is reason (supported by grounds) to believe that the Senior Managers of the Group or
its subsidiaries are not suitable for continued employment;
d) Review the statement with regard to the Remuneration and Nomination polices of the Group for inclusion in
the Annual Report and report the same to the Board;
e) To consider any other functions as may be agreed between the Committee and the Board.
f) Review the Board and Board Committee effectiveness.
The committee members keep themselves fully informed of all relevant developments and best practice by
reference to the QCA’s Remuneration Committee guide.
Remuneration policy
Malvern International plc aims to recruit, motivate and retain high calibre executives capable of achieving the
objectives of the Group and to encourage and reward appropriately superior performance in a manner which
enhances shareholder value. Accordingly, the Group operates a remuneration policy which ensures that there is a
clear link to business strategy and a close alignment with shareholder interests and current best practice and aims
to ensure that senior executives are rewarded fairly for, and commensurate to, their respective individual
contributions to the Group’s performance.
Details of all emoluments paid to Directors of the Company are set out in page 24.
Share Option Scheme
The Company is currently looking to create an Executive Share Option Plan and is taking advice from external
advisers in this respect to incentivise and reward high-performing executives and employees who achieve their
respective goals and targets.
Non-Executive Directors’ Remuneration
The Board determines the remuneration of all independent Non-Executive Directors with the fees being set at a
level to attract individuals with the necessary experience and ability to contribute to the Group.
The Non-Executive Directors do not receive bonuses or pension contributions and are entitled to be reimbursed for
reasonable expenses incurred by them in carrying out their duties as Directors of the Company.
P a g e 23 |
The Board, with the assistance of the Nomination and Remuneration Committee, reviews the remuneration level of
Non-Executive Directors on an annual basis to ensure it remains competitive in attracting suitable talent.
All Board appointments are made subject to the Company’s articles of association.
Contractual arrangements for current Directors are summarised below:
Director
Mr Gopinath Pillai
Mr Haider Sithawalla
Mr Nirvana Chaudhry
Mr Navin Khattar
Mr Jayapal Ramasamy
Dr Sam Malafeh
Contract date
20 October 2016
11 June 2018
13 September 2018
21 October 2016
11 June 2018
21 October 2016
Notice period
n/a
n/a
n/a
n/a
n/a
n/a
Contractual termination
payment
n/a
n/a
n/a
n/a
n/a
n/a
1 Unless otherwise specified, the appointment of Non-Executive Directors is terminable at the will of the parties.
Directors’ remuneration
The remuneration of the Directors who served during the year is set out below:
Salary/ fees Benefits
Directors
Mr Gopinath Pillai
Mr Haider Sithawalla
Mr Nirvana Chaudhry
Mr Navin Khattar
Mr Jayapal
Ramasamy
Dr Sam Malafeh
Mr Hock Kee Wee
Total emoluments
2018
£’000
0
0
0
0
0
103
11
114
Executive Directors’ share options
2018
£’000
0
0
0
0
0
0
0
0
Total
emoluments
2018
£’000
0
0
0
0
0
Company pension
contributions
2018
£’000
0
0
0
0
0
Share-based
payments
2018
£’000
0
0
0
0
0
103
11
114
0
0
0
0
0
0
As at
1 January
2018
Lapsed/
surrendered
in the
year
Exercised
in the
year
Awarded
in the
year
As at 31
December
2018
Exercise
period
Exercise
price
per share
Malvern International
PLC
Executive share option plan
n/a
Sub-total
Total
0
0
0
-
-
-
-
-
-
-
-
-
0
0
0
n/a
n/a
0
0
P a g e 24 |
Directors’ interests in shares
The beneficial interests of the Directors who served during the year and their families in the ordinary share capital
of the Company are shown below:
Name of Company and Director
At beginning of the Year/ At date
of Appointment
Shares of £0.05 each
At end of the Year
Share of £0.01 each
Malvern International plc
Direct interests:
Gopinath Pillai (Chairman)*
Sithawalla Haider Mohamedally*
Sam Malafeh
Ramasamy Jayapal
Nirvana Chaudhary**
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
KSP Investments PTE Limited*
CG Corp**
-
-
9,000,000
633,131
-
-
-
-
-
25,000
19,000
-
-
-
-
-
-
-
31,883,117
31,391,122
400,000
1,500,000
9,000,000
1,453,131
-
400,000
-
-
-
25,000
19,000
-
-
-
-
-
-
-
43,292,405
40,091,122
*Mr Gopinath Pillai and Mr Sithawalla Haider Mohamedally have an indirect interest through KSP Investments Pte Ltd.
**Mr Nirvana Chaudhary has an indirect interest through CG Corp.
Navin Khattar
Chairman - Nominations & Remuneration Committee
Date: 28 June 2019
P a g e 25 |
AUDIT AND RISK MANAGEMENT COMMITTEE REPORT
Audit and Risk Management Committee
The Audit and Risk Management Committee is a sub-committee of the Board and comprises Mr Haider Sithawalla
as Chairman (Mr Wee Hock Kee was Chairman for entire 2018 year), and two other non-executive board members.
The Audit and Risk Management Committee meets at least three times a year. The external auditors and Executive
Directors attend when appropriate at the invitation of the Committee. The external auditors meet separately with
the Audit Committee on request, without the presence of the Executive Directors, to ensure open communication.
The primary objectives of the Committee are to assist the Board in discharging its statutory duties and
responsibilities relating to accounting and financial reporting practices of the Group and to assist the Board in their
responsibilities to identify, assess and monitor key business risks to mitigate adverse impacts on achieving strategic
objectives with a view to safeguard shareholders’ investments and the Group’s assets.
In addition, the Committee shall assist the Board:
a) In complying with specified accounting standards and required disclosure as administered by AIM, relevant
accounting standards bodies, and any other Laws and regulations as amended from time to time.
b) In presenting a balanced and understandable assessment of the Group’s position and prospects.
c) In establishing a formal and transparent arrangement for maintaining an appropriate relationship with the
Company's auditors and overseeing, appraising the quality of audited conducted by the Company's external
auditors and reviewing the independence of the external auditors; and
d) In determining the adequacy of the Group's administrative, operating, accounting & financial controls and
internal controls.
Meetings
Attendance at the meetings can be found in the table on page 18.
Matters Considered
During the year, the Committee:
•
•
review of the monthly management accounts.
reviewed the annual and interim report and financial statements of the Group, and the clarity of disclosures
made;
• oversaw the relationship with the external auditor, including a review of the external auditor’s findings
during the audit in relation to the year ended 31 December 2017;
reviewed the Group’s Risk Register;
reviewed the external auditor’s Audit Plan in relation to the year ended 31 December 2018.
•
•
External Auditor
In order to ensure an appropriate balance between audit quality, objectivity and independence, and cost-
effectiveness the Audit and Risk Management Committee reviews the nature of all services, including non-audit
work, provided by the external auditor each year. Through the review, it was recommended to the board and the
Company to continue with the existing auditors. This was based on the consideration of price, efficiency and the
quality of the work done by the existing external auditors.
P a g e 26 |
Internal Audit
The Group intends to establish a separate internal audit function to enhance existing internal controls. This will
give assurance to the Board and Management that the operations of the business are conducted effectively and
appropriately. The internal audit will also highlight any areas for improvement.
Significant Issues Relating to the Financial Statements
The Audit Committee reviewed the following issues in relation to the financial statements for the year under review:
Going Concern
The Committee reviewed a paper prepared by executive management in support of the Going Concern statement
and agreed to the point raised in the paper.
Haider Sithawalla
Chairman - Audit & Risk Committee
Date: 28 June 2019
P a g e 27 |
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 Group and parent Company financial statements for each financial
year. Under that law the Directors have elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the EU (IFRSs 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 their profit or loss for
that period. In preparing each of the Group and parent Company financial statements, the Directors are required
to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the Group and parent Company financial statements;
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
parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006.
They are responsible for safeguarding the assets of the Group and parent Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a
Directors’ Report that complies with that law and those regulations.
They are further responsible for ensuring that the Strategic report and the Directors’ report and other information
included in this annual report and financial statements is prepared in accordance with applicable law in the United
Kingdom.
The maintenance and integrity of the Malvern International Plc website is the responsibility of the Directors; the
work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred in the accounts since they were initially
presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other
information included in annual reports may differ from legislation in other jurisdictions.
P a g e 28 |
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 2018, which comprise:
•
•
•
•
•
•
the Group consolidated income statement for the year ended 31 December 2018;
the Group consolidated statement of comprehensive income for the year ended 31 December 2018;
the Group and parent Company statements of financial position as at 31 December 2018;
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 2018 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
We draw attention to note 3 (iv) in the financial statements, which indicates the factors considered in the
preparation of the financial statements on a going concern basis. As stated in note 3 (iv), these events or
conditions, indicate that a material uncertainty exists that may cast significant doubt on the Group or Company’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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.
Based on our professional judgement, we determined overall materiality for the Group and Company financial
statements as a whole to be £60,000 (2017: £47,500) and £16,000 (2017: £15,000) respectively. In determining
P a g e 29 |
this, we considered a range of benchmarks with specific focus on approximately 0.75% of Group revenue,
approximately 8% of Group losses before tax, and, 8% Company profit before tax 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, undertaking three
countries (UK, Singapore and Malaysia) in which the Group has operations. Operations in UK and Singapore
were considered to be significant components.
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 significant
components in Singapore, where the work was performed by 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. We also directed review work required by component auditors in Malaysia for
the non-significant components.
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
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 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 3 (xxix).
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. Other than the
Communicate English School Limited acquisition during the year, 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.
P a g e 30 |
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition
The Group operating revenues arise from the
provision of education services and has a
number of related income streams that are
recognised as outlined in note 3 (xvi).
We obtained an understanding of the revenue agreements
and evaluated the Group’s processes and controls in place
to calculate the amount and timing of education services
and related income stream revenue transactions.
The key revenue recognition risks are in respect
of the following:
• Appropriate recognition of revenue in
accordance with the stated policies ensuring
appropriate cut-off is applied for the
recognition in the correct period and of
accrued and deferred revenue;
• Completeness of revenue; and
• The transition to IFRS 15 and the
application of the revenue in accordance
with satisfaction of the respective
performance obligations of each revenue
stream.
We performed the following audit procedures on a sample
basis, having regard to satisfaction of performance
obligations, to assess the appropriateness of revenue
recognition for individual transactions:
• Assessed the appropriateness of the allocation of
various revenue elements with reference to the terms of
the contractual terms and accounting policy outlined in
note 3 (xvi) (page 48);
• Ensured revenue recognised from education services
and related income streams was aligned with delivery
of such services within the year;
• Assessed the existence of debtors through testing to
contracts, cash received where applicable and a review
of credit notes issued after year-end;
• Assessed that revenue was recognised in the correct
period, agreeing back to supporting documentation the
contract price and the period in which the services were
delivered. We also examined the recognition of
amounts in deferred income where the contractual
terms has not been met at the year end;
• Where appropriate we directed focus on and reviewed
the work undertaken by the component auditors on
revenue recognition and deferred income; and
• Reviewed the Group’s assessment of the impact of
IFRS 15 on the revenue streams in the business.
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.
We evaluated, in comparison to the requirements set out in
IAS36, management’s assessment (using discounted cash
flow models) 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.
Business combinations and acquisition accounting (Including the carrying value of goodwill and separately
identifiable intangible assets)
During the year, the Group completed the
acquisition of Communicate English School
Limited as disclosed in note 33.
Our procedures included the following:
• Assessing the competence and independence of third
party engaged in undertaking the PPA valuation for
Management;
P a g e 31 |
Key audit matter
How the scope of our audit addressed the key audit matter
• Reviewing the share purchase agreement in respect of
each business combination to understand the nature and
terms of the acquisition and to agree fair value of the
consideration paid;
• Assessing whether the acquisition during the year met
the criteria of a business combination in accordance
with IFRS 3;
• Validating whether the date of acquisition was correctly
determined by scrutinising the key transaction
documents to understand key terms and conditions;
• Assessing the fair value of assets and liabilities
recorded in the purchase price allocation, by performing
procedures including considering the completeness of
assets and liabilities identified and the reasonableness
of any underlying assumptions in their respective
valuations and this would also include assessment on
the reasonableness of the useful lives of the intangible
assets and the consideration given;
• Assessing and challenging the valuation techniques,
assumptions (including those relating to growth rates
and discount rates), models and calculations used to
determine the fair value of the separately identifiable
intangible assets and goodwill recognised on date of
acquisition; and
• Assessing the disclosures in respect of the business
combination.
The Group has determined this acquisition to be
a business combinations, the accounting for
which can be complex.
For this acquisition the Group has determined
the amounts to be recognised for fair value of
both the consideration paid and the acquired
assets and liabilities. This can involve
significant estimates and judgments including, at
the acquisition date, determining how purchase
price is to be allocated between acquired assets
and liabilities and identified intangible assets,
and leading to the resultant recognition of
goodwill at their respective fair values.
There is a risk that inappropriate assumptions
could result in material errors in the acquisition
accounting.
The Group used projected financial information
in the purchase price allocation (PPA) exercise.
Management use their best knowledge to make
estimates when utilising the Group’s valuation
methodologies. In order to determine the
fair value of the separately identifiable
intangible assets on a business combination, the
valuation methodologies require input based on
assumptions about the future and use discounted
cash flows and cash flow forecasts.
Due to the Group’s estimation process in the
PPA Exercise and the work effort from the audit
team, business combinations is considered a key
audit matter.
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.
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.
P a g e 32 |
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.
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.
P a g e 33 |
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 U.K. LLP
Statutory Auditors
London
28 June 2019
P a g e 34 |
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Revenue
Sale of services
Other income
Total Revenue
Cost of services sold
Salaries and employees’ benefits
Amortisation of brand, licences and trademarks
Depreciation of plant and equipment
Development Expenditure Written Off
Other operating expenses
Impairment of intangible assets
Impairment of loans and receivables
Operating Profit/(Loss)
Finance costs
Note
2018
2017
£
£
5
6
7
14
12
9
14
17
7,410,641
183,306
7,593,947
4,429,826
1,328,941
217,940
129,050
2,230
2,212,455
-
(53,318)
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)
(673,177)
(692,022)
8
(44,596)
(14,690)
Profit/(Loss) before income tax
(717,773)
(706,712)
Income tax credit / (charge)
10
150,827
5,384
Profit/(Loss) after income tax for the year
(566,946)
(701,328)
Attributable to:
Equity holders of the Company
Non-controlling interest
Profit/(Loss) per share attributable to equity holders of the
Company (in pence)
Basic
Diluted
(566,946)
-
(566,946)
(701,328)
-
(701,328)
2018
2017
(0.31)
(0.31)
(0.66)
(0.66)
P a g e 35 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Profit/(Loss) after income tax for the year
Items that may be reclassified subsequently to profit or loss:
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
2018
2017
£
(566,946)
£
(701,328)
(150,165)
(717,111)
(266,067)
(967,395)
(717,111)
-
(717,111)
(967,395)
-
(967,395)
P a g e 36 |
STATEMENT OF FINANCIAL POSITION
Note
2018
2017
2018
2017
Group
Company
£
£
£
£
TOTAL ASSETS
Non-Current Assets
Property, plant and equipment
Investment in subsidiary
Companies
Intangible assets - Software
Intangible assets
Intangible assets – Development
assets
Goodwill
Deferred tax asset
Current Assets
Inventories
Trade receivables
Other receivables and
prepayments
Tax recoverable
Amounts due from subsidiary
companies
Amounts due from related parties
Cash and cash equivalents
12
13
14
14
15
10
16
17
18
19
20
544,888
-
5,946
2,878,616
261,736
2,250,018
190,000
6,131,204
6,220
1,041,712
1,263,360
-
-
56,679
105,380
2,473,351
245,956
-
-
8,100,495
-
4,490,081
-
2,382,291
1,505
474,207
-
3,103,959
6,100
398,642
948,938
-
-
-
479,565
1,833,245
-
-
-
-
-
-
-
8,100,495
-
-
-
4,490,081
-
-
-
-
61,368
-
2,591,269
58,667
2,134
2,713,438
13,775
6,374
1,655,286
-
403
1,675,838
Total Assets
8,604,555
4,937,204
10,813,933
6,165,919
P a g e 37 |
STATEMENT OF FINANCIAL POSITION (Continued)
Group
Company
Note
2018
2017
2018
£
£
£
EQUITY AND LIABILITIES
Non-Current Liabilities
Financial liabilities-Leasing
Financial Liabilities-Term Loan
Financial liabilities-Convertible
Loan Notes
Current Liabilities
Trade payables
Contract liabilities
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
23
24
25
63,957
140,135
299,280
503,372
380,677
653,220
569,361
-
554,694
29,846
92,225
2,280,023
2,783,395
20,320
159,178
-
-
995,813
1,175,311
299,280
299,280
277,151
668,775
748,072
-
835,853
31,524
-
2,561,375
3,736,686
-
-
129,983
601,348
297,197
-
-
1,028,528
1,327,808
2017
£
-
-
995,813
995,813
-
-
113,947
80,625
489,748
-
-
684,320
1,680,133
Equity attributable to equity
holders of the Company
Share capital
Share premium
Retained earnings
Translation reserve
Capital reserve
Convertible loan reserve
Total equity
26
27 (i)
27 (iii)
27 (iv)
27 (v)
32
9,211,736
5,016,849
(9,196,097)
589,290
170,560
28,822
5,821,160
5,821,160
7,919,356
896,111
(8,629,151)
739,455
170,560
104,187
1,200,518
1,200,518
9,211,736
5,016,849
(4,771,282)
-
-
28,822
9,486,125
9,486,125
7,919,356
896,111
(4,433,867)
-
-
104,186
4,485,786
4,485,786
Total Equity and Liabilities
8,604,555
4,937,204
10,813,933
6,165,919
The Loss for the financial year dealt with in the financial statements of the Parent’s Company as of the 31
December 2018 was a Loss of £337,415 (2017: Loss £306,157).
The financial statements were approved by the Board of Directors on 28 June 2019 and were signed on
its behalf by:
Sam Malafeh
Director
Company-registration-number: 05174452
P a g e 38 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
Capital
Share
Premium
Retained
Earnings
Translation
Reserve
Capital
Reserve
Convertible
Loan
Reserve
£
£
£
£
£
£
Attributable
To Equity
Holders of the
Company
£
Non-
controlling
Interests
Total
£
£
Balance at 1 January 2017
6,823,838
896,111
(7,927,823)
1,005,522
170,560
Convertible loan reserve
Profit / (Loss) for the year
Other comprehensive income
Total comprehensive income
for the year
New Share Issue
Balance at 31 December
2017 / 1 January 2018
Convertible loan reserve
Profit / (Loss) for the year
Direct costs relating to issue of
shares
Other comprehensive income
Total comprehensive income
for the year
New Share Issue
Balance at 31 December
2018
(701,328)
(266,067)
(701,328)
(266,067)
-
104,187
968,208
104,187
(701,328)
(266,067)
(967,395)
1,095,518
-
-
-
-
-
1,095,518
7,919,356
896,111
(8,629,151)
739,455
170,560
104,187
1,200,518
(566,946)
(324,780)
(150,165)
(566,946)
(150,165)
(75,365)
(75,365)
(566,946)
(324,780)
(150,165)
(717,111)
-
-
-
968,208
104,187
(701,328)
(266,067)
(967,395)
1,095,518
1,200,518
(75,365)
(566,946)
(324,780)
(150,165)
(717,111)
1,292,380 4,445,518
-
-
-
5,502
-
-
5,502
5,737,898
-
5,502
5,737,898
9,211,736
5,016,849
(9,196,097)
589,290
170,560
28,822
5,821,160
5,821,160
P a g e 39 |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash Flows from Operating Activities
Loss after income tax from continuing activities
Adjustments for:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Impairment of intangible assets
Interest expense
Changes in working capital:
Receivables
Payables
Inventories
Related parties and associated companies
Taxation
Net cash used from operating activities
Cash Flows from Investing Activities
Interest received
Purchase of software
Purchase of development assets
Purchases of property, plant and equipment
Acquisition of Subsidiary, net of cash acquired
Net cash used in investing activities
Cash Flows from Financing Activities
Interest paid
Term loan
Finance leases
Convertible Loan Note
New Share Issues1
Net cash generated by/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange losses on cash and cash equivalents
Cash and cash equivalents at the end of the year
2018
£
2017
£
(566,946)
(706,712)
217,940
129,050
-
-
-
(219,956)
158,583
63,880
2,169
(150,000)
(14,693)
(646,773)
(994,594)
(633,272)
(120)
-
(150,827)
(1,998,769)
2,014
(347,588)
(2,970)
1,173,550
-
178,233
-
(5,946)
(260,231)
(302,058)
(1,387,244)
(1,955,479)
-
(20,721)
(19,371)
-
3,675,220
3,635,128
(319,120)
479,565
(55,065)
105,380
3
(28,654)
82,531
53,880
14,694
185,708
(3,956)
-
250,000
446,446
678,559
116,541
(315,535)
479,565
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 (2018: £1,461,898; 2017: £845,518) 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 40 |
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
Capital
£
Share
Premium
£
Retained
Earnings
£
Convertible
loan reserve
£
Total
£
6,823,838
896,111
(4,127,710)
Balance at 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/ 1
January 2018
Convertible loan
reserve
Profit / (Loss) for the
year
Direct costs relating
to issue of shares
Total comprehensive
income for the year
New Share Issues
Total transactions
with owners
Balance at 31
December 2018
-
-
1,095,518
1,095,518
7,919,356
-
-
-
-
-
104,186
3,592,239
104,186
-
-
-
(306,157)
(201,971)
1,095,518
-
-
-
(306,157)
(306,157)
-
-
896,111
-
(4,433,867)
-
104,186
1,095,518
4,485,786
-
(75,365)
(75,365)
-
-
(337,415)
(324,780)
-
(324,780)
(337,415)
-
-
-
-
-
(337,415)
(324,780)
(662,195)
5,737,898
-
1,292,380
-
4,445,518
-
-
-
9,211,736
5,016,849
(4,771,282)
28,821
9,486,124
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its
own income statement.
P a g e 41 |
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
2018
£
Cash Outflows from Operating Activities
Loss before income tax
Adjustments for:
Adjustment made in prior year retained earnings
Taxation
(337,415)
6,374
(331,041)
Change in working capital
Receivables
Payables
Subsidiaries
Related parties
Net cash used in operating activities
(47,592)
16,036
(1,660,892)
(2,023,489)
2017
£
(306,157)
(306,157)
25,381
(171,806)
-
202,134
(250,448)
Cash Flows from Financing Activities
Interest received
Convertible Loan Notes
New Share Issues1
Net cash used in financing activities
-
-
3,675,220
3,675,220
-
-
250,000
250,000
Cash Flows from Investing Activities
Acquisition of subsidiaries
Investment in Subsidiary
Net cash generated from investing activities
Effect of foreign exchange rate changes on consolidation
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
(1,650,000)
(1,650,000)
-
-
-
1,731
403
2,134
(448)
851
403
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 (2018:£1,461,898; 2017: £845,518) 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 42 |
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 13 to the financial statements. There have been no significant changes
in the nature of these activities during the year.
2. Changes in significant accounting policies
This is the first set of the Group’s annual financial statements in which IFRS 15 Revenue from Contracts with
Customers (in respect of the revenue recognition for revenues) and IFRS 9 Financial Instruments (in respect of the
impact of the expected loss model on the impairment of receivables) have been applied. The Group has initially
applied IFRS 15 and IFRS 9 from 1 January 2018 although the adoption of these standards has not had a material
impact on the Group’s financial statements.
IFRS 15 Revenue from Contracts with Customers
(i)
Under IFRS 15 (in respect of the revenue recognition for revenues), revenue is recognised when a customer obtains
control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time –
requires judgement. Due to the nature of the Education business being the delivery of a programme over a period of
time, the revenue recognition is the same prior to the adoption of IFRS 15 for the previous years.
The customer being the student obtains the start of the service when they sign their application form and pay the
appropriate fees as detailed below:
• 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 at a point in time and spread over the
length of the stay.
• Publication sales are recognised upon sale of study guides.
• Registration fees and application fees are recognised upon approval of respective applications. These fees have
been recognised over the period of the programme. In the event that the student does not undertake the
programme of student, the fee will then be recognised at that point in time.
• 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.
IFRS 9 Financial Instruments
(ii)
IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the
classification and measurement of financial assets and liabilities, impairment of financial assets and hedge
accounting. IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace
the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest
revenue.
The Group and Company’s principal financial assets are cash and cash equivalents and receivables.
The Group and Company has assessed the impact of IFRS 9 on the impairment of its financial assets, including the
trade receivables balance. The Group revised its impairment methodology to the simplified approach of the expected
P a g e 43 |
credit loss model based on default rate percentage of similar product type assets (provision matrix) and grouped the
trade receivables based on shared characteristics, including line of business, and days past due. Based on the Group
and Company’s historical credit loss experience the adoption of IFRS 9 caused no material impact on the financial
statements.
3. 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.
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 2018. 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.
The consolidation of the acquisition of Communicate English School Limited in Manchester, UK, was prepared in
accordance to IFRS 3.
Adoption of new and revised International Financial Reporting Standards
(iii)
This is the first set of the Group’s annual financial statements in which IFRS 15 Revenue from Contracts with
Customers (in respect of the revenue recognition for revenues) and IFRS 9 Financial Instruments (in respect of the
impact of the expected loss model on the impairment of receivables) have been applied.
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.
IFRS 16- Leases
IFRS 16 supersedes IAS 17 Leases and introduces a new single lessee accounting model which eliminates the current
distinction between operating and finance leases for lessees. IFRS 16 will primarily affect the accounting for the
Group's operating leases and is effective for the next accounting period. As at the reporting date, the Group has non-
cancellable operating lease commitments of £5.064m as disclosed in note 29. Under IFRS 16, the obligations to pay
the future leases rentals over the outlined expected lease term will be recognised as a lease liability (current and non-
current) discounted at the incremental borrowing rate with a corresponding right of use asset also being recognised
in the statement of financial position. The adoption of IFRS 16 will have a material change in gross assets and
liabilities recognised, as a result of recognising the leases as right-of-use assets and liabilities, for the change in
accounting policy. Additionally, as the depreciation on the right of use asset and the interest on the finance liability
would be different to the present operating lease charge, it is anticipated that this may have a material impact on the
reported result in the income statement in the earlier years of adoption based upon the relative timing of the interest
element of the financial liability together with the depreciation charge on the asset in comparison to the current
accounting for the operating lease commitment as a rental charge in operating income. Management are presently in
the process of fully evaluating this impact. The Group and Company will adopt the standard in the financial year
ending 31 December 2019.
P a g e 44 |
A number of new standards and amendments to standards and interpretations have been issued but are not yet
effective and, in some cases, have not yet been adopted by the EU. There are no other standards issued not yet
effective that will have a material effect on the financial statements.
Going concern
(iv)
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.
In preparing the financial statements on a going concern basis, the Group have considered each of the following
factors:
• The Group’s main source of funds are internally generated funds and new capital injections.
• During 2018 the Group incurred losses as they continue to manage growth, make an acquisition in the UK,
integrate parts of the business in Singapore and restructure their operations in Malaysia. All of these had a net
cash outflow impact for the business in 2018 which in part was financed by trading and share issues.
• Profit and cash flow projections for the Group assume profitable growth in its key operating entities based in
each of the key jurisdictions.
• There is challenge on the Group continuing to manage their working capital requirements of the business and
•
its ability to meet liabilities as and when they fall due
It is anticipated that there will continue to be a requirement for future raising of funds, through the issue of equity
and other funding sources, to manage the growth and strategic plans for the business. Since the year end Malvern
International plc undertook another fund raising in February 2019 which raised £606,000. These funds were used
for working capital for the growth of the organisation.
• There has been 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.
After making appropriate enquiries, whilst accepting the above factors highlight some material uncertainty, the
Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Basis of Combination
(v)
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
(vi)
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
P a g e 45 |
the Group from the date that control commences until the date control ceases, using the acquisition method of
accounting.
Non-controlling Interests
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.
(vii) Functional and Presentational Currency
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.
(viii) Foreign Currency Translation
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Foreign currency
monetary assets and liabilities are translated using the exchange rate prevailing at the date of the Statement of
Financial Position. Non-monetary assets and liabilities are measured using the exchange rates prevailing at the
transaction dates, or in the case of the items carried at fair value, the exchange rates ruling when the values were
determined. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and
translation of foreign currency denominated assets and liabilities are recognised in the income statement.
Assets and liabilities of the entities having functional currency other than the presentational currency are translated
into sterling equivalents at exchange rates ruling at the net asset statement date. Revenues and expenses are translated
at average exchange rates for the year, which approximates the exchange rates at the dates of transactions. All
resultant differences are taken directly to equity. On disposal of a foreign entity, accumulated exchange differences
are recognised in the income statement as part of the gain or loss on disposal.
The following rates of exchange have been applied:
2018
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
5.280
5.375
1.111
1.128
1.737
1.795
1.794
1.778
5.423
5.530
1.212
1.141
Property, Plant and Equipment
(ix)
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 are 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.
P a g e 46 |
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.
(x)
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 following two
subsidiaries:
SAA Global Education -- Brand value of £150,000 which will be amortised over 10 years, and the Customer Listing
Asset value of £88,223, which will amortised over a 10 year period. This was initially stated as being amortised over
a 5-year period. However, upon reflection by Management, it was deemed that Customer Listing is a relationship-
based value with agencies that has a significant longer life than five years. It was deemed appropriate to change this
from 5 years to 10 years.
Communicate English School -- Brand value of £427,386, the Customer Listing Asset value of £274,637, and the
Domain Name value of £12,242 which will all be amortised over a 10-year period.
Software is amortised over a period of 3-5 years.
Intangible assets – development assets
(xi)
Development assets represent expenditure incurred on internally generated assets in respect of programme
development. Development assets are amortised using a straight-line method over a period of 3 to 5 years once they
are brought into use.
Impairment of tangible and intangible assets excluding goodwill
(xii)
An assessment is made at each net asset statement date of whether there is any indication of impairment of any asset,
or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no
longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An
asset’s recoverable amount is calculated as the higher of the asset’s value in use or its fair value less costs to sell.
Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset
and from its disposal at the end of its useful life.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An
impairment loss is charged to the income statement in the period in which it arises unless the relevant asset is carried
at a revalued amount in which case the impairment loss is treated as a revaluation decrease.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine
the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been
determined (net of any depreciation) had no impairment loss been recognised for the asset in prior years.
A reversal of an impairment loss is credited to the income statement in the period in which it arises unless the relevant
asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation increase.
(xiii) 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
P a g e 47 |
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.
(xiv) 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.
Financial assets at amortised cost
Financial assets held within a business model whose objective is to collect contractual cash flows which are solely
payments of principals and interest are classified as subsequently are measured at amortised cost using the effective
interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except
for short-term receivables when the recognition of interest would be immaterial. The Group’s financial assets at
amortised cost comprise ‘trade and other receivables’ and cash and cash equivalents included in the Consolidated
Statement of Financial Position.
Impairment of financial assets
(xv)
The Group assesses on a forward looking basis the expected credit losses for all debt instruments (other than
those categorised at fair value through profit or loss),
An impairment loss in respect of loans and receivables financial assets is recognised in profit or loss and is
measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the financial asset’s original effective interest rate. In a subsequent period, if the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the
carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would
have been had the impairment not been recognised.
The Group has adopted the simplified expected credit loss model for its trade receivables and contract assets, as
required by IFRS 9 to assess impairment, for further information see Note 17.
(xvi) 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 at a point in time and spread over the
length of the stay.
• Publication sales are recognised upon sale of study guides.
• Registration fees and application fees are recognised upon approval of respective applications. These fees have
been recognised over the period of the programme. In the event that the student does not undertake the
programme of student, the fee will then be recognised at that point in time.
• Revenues from support services are recognised when services are rendered.
P a g e 48 |
• 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.
(xvii) 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.
(xviii) 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.
(xix) 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.
Income Tax
(xx)
Income tax expense represents the sum of the tax currently payable and deferred tax movements.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using
tax rates and tax laws that have been enacted or substantively enacted in countries where the Company and its
subsidiaries operate by the net asset statement date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the
net asset statement liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associated companies, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each net asset statement date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the
asset realised based on tax rates and tax laws that have been enacted or substantially enacted by the net asset statement
date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
(xxi) 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
P a g e 49 |
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.
(xxii) 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.
(xxiii) Employees’ Benefits
Defined contribution plans
Contributions to defined contribution plans are recognised as an expense in the income statement as incurred.
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees up to the net asset statement date.
Share-based compensation
The Group operates an equity-settled, share-based payment plan. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense in the Income Statement with a corresponding
increase in the share-based payment reserve over the vesting period.
(xxiv) 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.
(xxv) 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
P a g e 50 |
• 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.
(xxvi) 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.
(xxvii) 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.
(xxviii) 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.
(xxix) Critical Accounting Judgements and Key Sources of Estimation Uncertainty
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 the estimate of 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 number of brands, licences and
trademarks is determined from value in use calculations. The key assumptions for the value in use calculation are the
estimates regarding expected discounted future cash flows.
P a g e 51 |
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 the estimates regarding expected discounted future cash flows.
Impairment of Assets other than Brands, Licences, Trademarks, and Goodwill
The Group reviews the carrying amounts of assets as at each net asset statement date to determine whether there is
any indication of impairment in accordance with their stated accounting policy. If any such indication exists, the
assets’ recoverable amount or value in use is estimated. Determining the value in use of property, plant and equipment,
which requires the determination of future cash flows expected to be generated from the continued use and ultimate
disposal of the asset, requires the Company to make estimates and assumptions that can materially affect the financial
statements. Any resulting impairment loss could have a material adverse impact on the Group’s financial position
and results of operations.
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. Judgement is made in the evaluation in respect of the fair value of any deferred tax asset
recognised in respect of taxable losses carried forward.
Evaluation of contract liabilities (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 estimate and evaluate the amount of contract liabilities/deferred income
to be recognised in a future period.
Impairment of receivables
The Group and Company reviews the impairment of its financial assets, including the trade receivables balance. The
Group estimates and evaluates impairment methodology using the simplified approach of the expected credit loss
model based on default rate percentage of similar product type assets (provision matrix) and grouped the trade
receivables based on shared characteristics, including line of business.
Contingent assets
The Group makes a judgement in its review of the position in respect of the potential inflow of economic benefits
and whether in the circumstances that arise, the realisation of the income is virtually certain, whereby recognition
arises, or, if due to an uncertainty, the inflow of economic benefit is probably, whereby a contingent asset is disclosed.
P a g e 52 |
4. 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:
2018
Revenue from external customers
Depreciation, write-offs and amortisation
Profit/(Loss) before taxation
Taxation credits
Profit/(Loss) for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
2017
Revenue from external customers
Depreciation, write offs and amortisation
Loss before taxation
Taxation charge
Profit/Loss for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
Europe
£
4,379,667
171,975
155,167
150,827
305,994
3,924,136
1,099,408
2,524,028
2,017,681
82,500
(258,565)
-
(258,565)
Asia
£
3,030,975
177,245
(872,940)
-
(872,940)
4,316,129
1,683,988
138,927
Total
£
7,410,642
349,220
(717,773)
150,827
(566,946)
8,240,265
2,783,396
2,662,955
1,941,825
(10,036)
(448,147)
5,384
(442,763)
3,959,506
72,464
(706,712)
5,384
(701,328)
1,207,264
(1,263,560)
36,000
3,729,940
(2,473,166)
768,057
4,937,204
(3,736,726)
804,057
P a g e 53 |
Alternative Performance Measures reconciliation (EBITDA and adjusted EBITDA measures)
2018 (including Communicate acquisition in the year)
Profit/(Loss) for the year
Interest
Taxation Credits
Depreciation
Amortisation
Impairment reversal
EBITDA
One-off integration costs*
One-off restructuring costs**
Total Integration and Restructure One-off Costs
Adjusted EBITDA (excl One-off
restructuring costs)
integration and
Europe
£
305,994
14,347
(150,827)
50,004
121,142
-
340,660
-
-
-
Asia
£
(872,940)
30,249
-
79,046
96,798
-
(666,847)
247,104
259,549
506,653
Total
£
(566,946)
44,596
(150,827)
129,050
217,940
-
(326,187)
247,104
259,549
506,653
340,660
(160,194)
180,466
Others – HQ Costs allocation***
Further adjusted EBITDA (excl One-off integration
and restructuring costs and HQ Costs)
195,075
142,340
337,415
535,735
(17,854)
517,881
2017
Loss for the year
Interest
Tax
Depreciation
Amortisation
Impairment reversal
EBITDA
One-off integration costs*
One-off restructuring costs**
Total Integration and Restructure One-off Costs
Adjusted EBITDA
restructuring costs)
(excl One-off
integration and
£
(258,565)
19
-
15,000
67,500
-
(176,046)
-
-
-
(176,046)
£
(442,763)
14,691
(5,384)
48,880
91,083
(150,000)
(443,493)
-
-
-
(443,493)
£
(701,328)
14,710
(5,384)
63,880
158,583
(150,000)
(619,559)
-
-
-
(619,559)
Others – HQ Costs allocation***
Further adjusted EBITDA (excl One-off integration and
restructuring costs and HQ Costs)
193,178
17,132
392,114
(51,399)
585,292
(34,267)
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.
* One-off integration costs relate to the integration of operations in Singapore during 2018 following the SAAGE
acquisition in late 2017. These costs include cover property, people, systems and termination of contracts.
** One-off restructuring costs relate to the restructuring and streamlining of operations in Malaysia during 2018.
These costs cover people, property and termination of contracts.
*** Group HQ costs of £337,415 (2017-£585,292) were allocated to each segment based on the revenue for each
segment. In 2018, the allocation was 58% (2017-33%) for Europe and 42% (2017-67%) for Asia.
P a g e 54 |
5. Sale of Services
Course fees
Accommodation fees
Application fees, registration and examination fees
Training fees, Sales of system support, course materials and others
2018
£
5,151,480
1,898,420
85,923
274,818
7,410,641
2017
£
2,678,699
773,984
104,652
402,171
3,959,506
6. Other Income
Govt grants
Interest income
Rental and related income
Consultancy Income
Write off provisions
7. 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
2018
£
15,799
2,097
43,135
80,034
42,241
183,306
2018
£
1,054,110
127,295
103,078
10,916
10,944
22,597
2017
£
36,098
-
50,162
691
32,432
119,383
2017
£
1,313,082
166,678
165,508
6,089
150
-
-
1,328,940
(526,799)
1,124,708
103,078
163,540
Number
105
24
72
201
Number
74
16
60
150
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 2018 and 31 December 2017 no pension payments were paid or
accrued.
P a g e 55 |
8. Finance Costs
Interest payable to related parties
Interest on finance leases
Interest on Term Loan
Interest on Convertible Loan Note
Other Charges
9. Operating Expenses
Auditors’ remuneration:
- Fees payable to the Company’s auditors for statutory audit
- Fees payable to the Company’s auditors and associates for statutory
audit of subsidiary Companies
Exchange loss/(gain)
Impairment for trade receivables charge
Office and equipment rental
Other Operating Expenses
Bad Debts allowance made during the year
10. 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 Credit
2018
£
-
2,698
21,749
20,149
-
44,596
2017
£
-
14,676
-
-
14
14,690
2018
£
2017
£
34,000
34,000
31,773
23,975
-
92,306
1,187,709
866,667
2,212,455
6,329
118,041
910,672
651,483
1,744,500
2018
£
-
-
(39,173)
190,000
150,827
2017
£
5,384
-
5,384
-
5,384
P a g e 56 |
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:
Profit/(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
2018
2017
£
(566,946)
96,381
-
%
17.0
-
£
(706,712)
120,141
-
%
17.0
-
-
-
(15,803)
2.7
54,446
9.6
-
-
-
150,827
-
-
26.6
(98,954)
-
-
5,384
(13.5)
-
-
(0.8)
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.
Analysis of provision for deferred taxation:
Balance at the beginning of the year
Deferred taxation for the year
Balance at the end of the year
Deferred tax asset
Deferred tax liability
Balance at the end of the year
2018
£
-
190,000
190,000
190,000
-
190,000
2017
£
-
-
-
-
-
-
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
2018
£
552,474
3,715,124
4,267,598
2017
£
552,474
4,148,178
4,700,652
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.
P a g e 57 |
11. Earnings/(Loss) Per Share
The basic and diluted earnings/(loss) per share attributable to equity holders of the Company was based on the loss
attributable to shareholders of £566,946 (2017: loss of £701,328) and the weighted average number of ordinary shares
in issue during the year of 243,426,293 shares (2017:105,708,809 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 2018.
P a g e 58 |
12. Property, Plant, and Equipment
Leasehold
property and
improvements
Classroom
and office
equipment
Motor
Vehicle
£
£
£
Cost
As at 1 January 2017
Additions
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2017/
1 January 2018
Additions
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2018
Accumulated depreciation
As at 1 January 2017
Charge for the year
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2017/
1 January 2018
Charge for the year
Disposals
Impairments
Acquisition-Subsidiary
Exchange differences
As at 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
378,154
-
-
(146,790)
252,376
16,336
500,076
284,444
(2,322)
-
-
-
782,197
352,853
13,325
-
(145,484)
251,215
-
471,909
16,747
(922)
-
-
-
487,734
1,620,961
28,654
(5,480)
(202,418)
779,701
6,742
2,228,160
19,014
-
-
178,603
-
2,425,777
1,491,301
43,599
(5,480)
(201,555)
691,757
17,547
2,037,169
104,010
-
-
52,679
-
2,193,858
39,970
-
-
-
-
988
40,958
-
-
-
-
-
40,958
6,096
8,064
-
-
-
-
14,160
8,293
-
-
-
-
22,453
Total
£
2,039,085
28,654
(5,480)
(349,208)
1,032,077
24,066
2,769,194
303,458
(2,322)
-
178,603
-
3,248,933
1,850,250
64,988
(5,480)
(347,039)
942,972
17,547
2,523,238
129,050
(922)
-
52,679
-
2,704,045
294,464
231,919
18,505
544,888
28,167
190,991
26,798
245,956
P a g e 59 |
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:
2018
Classroom and office equipment
Motor vehicle
2017
Classroom and office equipment
Motor vehicle
Additions
£
19,014
-
19,014
£
-
28,264
28,264
Depreciation Net book value
£
104,010
8,293
112,303
£
-
14,160
14,160
£
231,926
18,505
491,516
£
-
22,168
22,168
13. Investment in Subsidiary Companies
Company
Investment in subsidiaries
Unquoted equity shares, at cost
As at the beginning of the year
Additions*
Loan Capitalisation of SAAGE
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
2018
£
2017
£
7,115,081
2,980,290
630,124
-
10,725,495
7,087,273
281,518
(253,710)
7,115,081
2,625,000
-
2,625,000
2,878,709
-
(253,709)
2,625,000
8,100,495
4,490,081
**No disposal of subsidiaries was undertaken in 2018.
During the 2017 financial year, a dormant subsidiary, AEC Bilingual, was closed and struck off from the Company
registers in Singapore.
*During the 2018 financial year, a new subsidiary in Manchester (UK), Communicate English School Limited, was
acquired. (See note No: 33 for more details).
During the 2017 financial year, a new subsidiary in Singapore, SAA Global Education Centre Pte Ltd, was acquired
for £281,518. During 2018 there was an increase in this investment arising from the loan capitalisation for equity.
Malvern International Academy Pte Ltd (Singapore), Malvern House Group Limited, Malvern Language Academy
Pte Ltd and SAA Global Education Centre 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 2018 are as follows:
Malvern House Group Limited-100% owned by plc (registered office: Witan Gate House, 500-600 Witan Gate West,
Milton Keynes, MK9 1SH):
• Malvern House International Limited, UK -100% (registered office: Witan Gate House, 500-600 Witan Gate
West, Milton Keynes, MK9 1SH)
P a g e 60 |
Malvern International Academy Pte Ltd (Singapore)- 100% owned by plc (registered office: TripleOne Somerset,
#04-25, 111 Somerset Road, Singapore 238164)
• 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.
14. Intangible Assets
Intangible assets are summarised as follows:
Licences
Brands
Trademark
£
£
£
Customer
List
£
Domain
Name
£
Total
£
868,006
3,750,000
22,579
-
-
-
150,000
-
-
-
88,223
-
868,006
3,900,000
22,579
88,223
-
-
-
-
4,640,585
238,223
-
4,878,808
-
-
427,386
-
-
-
274,637
12,242
714,265
-
-
-
868,006
4,327,386
22,579
362,860
12,242
5,593,073
128,094
2,345,648
22,579
8,583
150,000
-
(8,387)
(150,000)
-
-
-
-
128,290
2,345,648
22,579
-
-
-
-
-
-
-
-
-
-
2,496,321
158,583
(150,000)
(8,387)
2,496,517
Group 2018
Cost
As at 1
January 2017
Additions -
Exchange
differences
As at 31
December
2017/
1 January
2018
Additions –
acquisition of
subsidiary
(note 33)
Exchange
differences
As at 31
December
2018
Accumulated
amortisation
As at 1
January 2017
Charge for the
year
Charge for
impairment
Exchange
differences
As at 31
December
2017/
1 January
2018
P a g e 61 |
Charge for the
year
Exchange
differences
As at 31
December
2018
Net book
value
At 31
December
2018
Analysed as
follows:
Indefinite life
Definite life
Net book
value
At 31
December
2017
Analysed as
follows:
Indefinite life
Definite life
Licences
Brands
Trademark
£
8,405
-
£
186,369
-
£
-
-
Customer
List
£
22,554
Domain
Name
£
612
Total
£
217,940
-
-
-
136,695
2,532,017
22,579
22,554
612
2,714,457
731,311
1,795,369
-
340,306
11,630
2,878,616
725,445
5,866
731,311
-
1,795,369
1,795,369
739,716
1,554,352
733,850
5,866
739,716
-
1,554,352
1,554,352
-
-
-
-
-
-
-
-
340,306
340,306
-
11,630
11,630
725,445
2,153,170
2,878,616
88,223
88,223
2,382,291
-
88,223
88,223
-
88,223
88,223
733,850
1,648,441
2,382,291
Licences
At 31 December 2018, 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.
Brands
At 31 December 2018, the Group’s principal acquired brand, Malvern House was regarded as having a remaining
definite useful economic life of 16 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.
a. As at 31 December 2018 the accumulated amortization on brands was £2,532,017. This is made as follows:
a. Malvern Brand being £1,500,000 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.
b. SAA Global Education Brand in Singapore being amortised over ten years starting 1 January 2018 for
£15,000 for the full year.
c. Communicate Brand in Manchester (UK) being amortised from 1 July 2018 for ten years for £21,369 for the
six months ending 31 December 2018.
P a g e 62 |
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 further impairment would be required for the 2018 financial year.
Trademarks
At 31 December 2018, the Group’s trademarks were all considered to have fixed lives for accounting purposes
although would be renewable when they expire.
Customer List
a. SAA Global Education Pte Ltd has a determined Customer List of £88,223. It was initially planned to
amortise this over a period of 5 years. However relationships with Educational Agents that are from the
Customer List have a relationship life of over ten years. Amortisation of £8,822 has been charged for the full
year for 2018 based on a ten-year amortisation period.
b. Communicate English School Limited has a determined Customer List of £274,637 to be amortised over ten
years. An amortisation for the six months from 1 July 2018 of £13,732 has been applied.
Domain Name
Communicate English School Limited has a determined Domain Name value of £12,242 to be amortised over ten
years. An amortisation for the six months from 1 July 2018 of £612 has been applied.
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 8% for both 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 9.19% (2017: 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
indefinite
The following sensitivity analysis was carried out on the detailed ten-year cashflow model:
economic
useful
or
life.
a. Reducing the growth by 15%
b. Applying a weighted average cost of capital of 11% and 14%.
Based upon these sensitivity analyses, the Group does not incur any material impairment for any of the categories of
intangibles and goodwill.
Development assets
During the year development assets of £260,231 (£1,505) were capitalised relating to internally generated intangibles
for programme development. The carrying value of these amounts of £261,736 (£1,505) will be amortised once the
assets are brought into use.
15. Goodwill
Cost
Balance as at the beginning of the year
Additions – acquisition of subsidiary (note 33)
Exchange differences
Balance as at the end of the year
2018
£
474,207
1,775,811
-
2,250,018
2017
£
1,312
450,000
22,895
474,207
On the 1st July 2018, Malvern International plc acquired 100% of the shareholding of Communicate English School
Limited in Manchester, UK. In reviewing the consolidation of the subsidiary for the first time under IFRS3, a resultant
intangible asset of £1,775,811 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 33 for
more details)
P a g e 63 |
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 in the table below:
Education
Europe
Asia
2018
£
1,775,811
474,207
2,250,018
2017
£
-
474,207
474,207
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
2018
£
6,220
2017
£
6,100
2018
£
1,041,712
2017
£
398,642
At 31 December 2018, the exposure to credit risk for trade receivables by geographic
region/currency was as follows:
Trade receivables are denominated in the following currencies:
Singapore - Singapore Dollar
UK - Pound Sterling
Malaysia - Malaysian Ringgit
Euro
Other
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
273,681
363,161
404,870
-
-
1,041,712
2018
£
183,492
404,436
20,441
433,343
1,041,712
47,668
103,466
220,757
26,751
-
398,642
2017
£
108,603
157,876
54,087
78,076
290,039
141,027
(141,027)
102,040
(102,040)
1,041,712
398,642
P a g e 64 |
The following table provides information about the exposure to credit risk and expected credit losses for
trade receivables as at 31 December 2018:
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
Weighted
average loss
rate
%
%
%
25%
Gross
carrying
amount
183,492
404,436
20,441
574,370
1,182,739
Loss
Allowance
-
-
-
(141,027)
(141,027)
Net
carrying
amount
183,492
404,436
20,441
433,343
1,041,712
Credit
impaired
No
No
No
Yes
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
Allowances written-off during the year
Currency realignment
Balance as at the end of the year
These are no contract assets within trade and other receivables.
18. Other Receivables and Prepayments
2018
£
102,040
-
92,305
(53,318)
-
141,027
2017
£
241,946
(122,084)
-
(17,822)
-
102,040
Deposits
Prepayments
Staff loan
Others
Group
Company
2018
£
344,242
722,205
12,043
184,869
1,263,359
2017
£
359,865
401,320
12,220
175,534
948,939
2018
£
-
11,839
-
49,528
61,367
2017
£
-
13,775
-
-
13,775
P a g e 65 |
19. Due from Related Parties
Due from related parties
Non-trade
2018
£
56,679
Balances with related parties are denominated in the following currency:
Group
Trade receivables are denominated in the
following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
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
2017
£
-
2017
£
-
-
-
-
-
-
2018
£
58,667
2017
£
-
Company
2018
£
-
58,667
-
-
-
58,667
2017
£
-
-
-
-
-
Group
Company
2017
£
471,036
8,529
479,565
180,248
105,712
189,238
4,367
-
479,565
2018
£
2,134
2,134
-
2,134
-
-
-
2,134
2017
£
403
-
403
-
403
-
-
-
403
2018
£
(1,988)
58,667
-
-
-
56,679
2018
£
96,573
8,807
105,380
36,562
53,076
15,742
-
-
105,380
Group
Company
2018
£
2017
£
2018
£
2017
£
181,194
199,483
-
-
-
380,677
90,003
105,052
82,096
-
-
277,151
-
-
-
-
-
-
-
-
-
-
-
-
P a g e 66 |
22. Contract liabilities
Contract liabilities is deferred revenue representing amounts billed on account of revenues where performance
obligations have not been met for recognition of revenue. Contract liabilities relates to course fees received in
advance and recognised in the income statement based on classes and examinations conducted.
The amount of £668,775 (2017: £386,039 ) recognised in contract liabilities at the beginning of the period has been
recognised as revenue for the period ended 31 December 2018
Contract liabilities denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Euro
Other
2018
£
451,133
194,440
7,646
-
-
653,219
2017
£
453,538
179,689
35,548
-
-
668,775
23. Other Payables and Accruals
Other payables
Accrued expenses
Group
Company
2018
£
268,008
301,353
569,361
2017
£
179,778
568,294
748,072
2018
£
96,805
33,178
129,983
2017
£
58,150
55,797
113,947
P a g e 67 |
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
2018
£
2017
£
2018
£
2017
£
554,694
835,853
262,436
489,748
218,824
335,870
554,694
367,624
468,229
-
-
835,853
-
262,436
262,436
-
489,748
-
-
489,748
a) KSP Investments Pte Ltd, a Company of which two of the Directors are also shareholders, advanced loans
to the Group and have also received repayment for their advances resulting in a year-end balance of an
amount of £516,021 (2017: £583 k).
b) CG Corp, a major shareholder of the Company, received their repayments and there is £ Nil amount owing
as at 31 December 2018. (2017: £538 k).
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
2018
£
516,021
-
38,673
554,694
2017
£
487,978
347,875
-
835,853
2018
£
262,436
-
-
262,436
2017
£
239,748
250,000
-
489,748
During the 2018 reported year, the Company has agreed that
a) £157,000 of its outstanding balance with KSP Investments Pte Limited and £348,000 of its outstanding
balance with CG Corp were paid as part of June 2018 Fund Raising for 3,925,000 and 8,700,000 1p ordinary
shares respectively in the Company at a price of 4p per share.
b) KSP Investments Pte Ltd exercised its right to convert £771,898 of its Convertible Loan Notes into
15,437,960 new Ordinary Shares at an exercise price of 5 pence per share. With the balance of the Convertible
Loan Notes of £328,102, KSP Investments Pte Ltd distributed the full amount to Mr. Ho Peng Cheong. Mr.
Ho is a director and shareholder of KSP and is now leaving KSP Investment Pte Ltd. (note 32)
P a g e 68 |
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
2018
£
63,957
299,280
140,135
503,372
-
-
29,846
29,846
2017
£
20,320
995,813
159,178
1,175,311
4,994
-
26,530
31,524
2018
£
-
299,280
-
299,280
-
-
-
-
2017
£
-
-
-
-
-
-
-
-
-
Total
533,319
1,206,835
299,280
Finance Lease Obligations
At 31 December 2018, the Group has no material lease obligations under finance leases that are payable:
Convertible Loan Notes
At 31 December 2018, the Group has obligation for £299,280. (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
243,426,293
Nominal
Value of
Ordinary
shares
7,001,797
No of
deferred
shares
Nominal
value of
deferred
shares
44,198,781 2,209,939 9,211,736
Nominal
value of
All
shares
114,188,333
5,709,417
44,198,781 2,209,939 7,919,356
At 31 December 2018 1p ordinary
shares and 1p deferred shares
At 31 December 2017 5p ordinary
shares and 5p deferred shares
During 2018, 124,600,000 1 p ordinary shares were issued. The movement in share capital during the year can be
summarised as follows:
•
•
•
June 2018 – 100,000,000 1 p ordinary shares were issued as a Fund Raising at 4 p each
June 2018 – 15,437,960 1 p ordinary shares were issued at the exercise price of 5 p per share to KSP Investments
Pte Limited as part of a capitalisation of convertible loan notes issued (note 32) totalling £771,898.
July 2018 – 13,800,000 1 p ordinary shares were issued at 5 p each for part settlement of the acquisition of
Communicate English School Limited
P a g e 69 |
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
Fund raising expenses
Balance as at the end of the year
2018
£
896,111
4,445,518
(324,780)
5,016,849
2017
£
896,111
-
-
896,111
The share premium reserve arises where shares have been issued at a price in excess of the nominal value of 1 p
(formerly 5 p 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
Profit / (Loss) for the year
Unclaimed dividends returned
At the end of the year
Group
Company
2018
£
(8,629,151)
(566,946)
-
(9,196,097)
2017
£
(7,927,823)
(701,328)
-
(8,629,151)
2018
£
(4,433,867)
(337,415)
-
(4,771,282)
2017
£
(4,127,710)
(306,157)
-
(4,433,867)
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
2018
£
739,455
(150,165)
589,290
2017
£
1,005,522
(266,067)
739,455
2018
£
-
-
-
2017
£
-
-
-
The translation reserve arises from translation differences arising from converting subsidiary operations’
consolidated income statements and statements of financial positions at the prevailing rates of exchange.
(v)
Capital reserve
At the beginning of the year
Financial Liability reserve
At the end of the year
Group
Company
2018
£
170,560
-
170,560
2017
£
170,560
-
170,560
2018
£
-
209,536
209,536
2017
£
-
-
-
The capital reserve arose on the merger of the Company, then AEC Plc, and AEC Edu Group Pte Limited in 2004.
P a g e 70 |
(vi)
Convertible loan reserve
At the beginning of the year
Additions in the year
At the end of the year
Group
Company
2018
£
104,187
(75,365)
28,822
2017
£
-
104,187
104,187
2018
£
104,187
(75,365)
28,822
2017
£
-
104,187
104,187
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:
2018
Sam Malafeh
Wee Hock Kee
2017
Haider Sithawalla
Wee Hock Kee
Sam Malafeh
2018
£
2017
£
103,078
10,916
113,994
165,658
6,089
171,747
Salary & Bonus
£
103,078
-
103,078
2,118
-
163,540
165,658
Fees
£
-
10,916
10,916
-
6,089
-
6,089
Total
£
103,078
10,916
113,994
2,118
6,089
163,540
171,747
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
2018
£
2017
£
1,160,415
3,655,597
247,900
5,063,912
1,351,689
2,763,957
592,524
4,708,170
P a g e 71 |
30. Subsequent events
The Directors are reporting the following subsequent events to the Statement of Financial Position which are
significant to these Financial Statements.
• Malvern International PLC undertook another fund raising in February 2019 which raised £606,000. These
funds were used for working capital for the growth of the organisation.
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. 86%
(2017: 55%) of the Group’s accounts receivables are made up of individual students, 2% (2017: 37%) relates to large
funding organisations such as government related bodies and the balance of 11% (2017: 8%) 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.
2018
Trade payables
Other payables
Due to related parties
Financial liabilities
Convertible Loan Notes
2017
Trade payables
Other payables
Due to related parties
Financial liabilities
Convertible Loan Notes
On demand
or within
one year
£
380,678
569,361
554,694
29,846
-
1,534,579
On demand
or within
one year
£
277,151
307,995
835,853
31,524
-
1,452,523
Within 2 to
5 years
£
-
-
63,957
299,280
363,237
Within 2 to
5 years
£
-
-
-
179,498
1,100,000
1,279,498
P a g e 72 |
Foreign currency risk
(iii)
The Group’s investments in overseas subsidiaries and associated companies which are held for long-term investment
purposes are exposed to currency translation risk. The differences arising from such translation are recorded under
the foreign currency translation reserve. The Group does not use derivative financial instruments to hedge against
the volatility associated with foreign currency transactions as the Directors believe that the risks arising from
fluctuations in foreign currency exchange rates are not significant.
Sensitivity analysis for foreign exchange risk
The following analysis illustrate the effect that specific changes could have had on our income and equity for
exchange movements. This analysis is for illustrative purposes only and is based on the 2018 actual results, 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 31.12.2018
Singapore Dollar
Malaysian Ringgit
At 31.12.2017
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
£
£
270,240
5,770
38,001
26,230
(270,420)
(5,770)
(38,001)
(26,230)
71,465
26,891
36,918
15,448
(71,465)
(26,891)
(36,918)
(15,448)
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 31.12.2018
Assets
Trade and other receivables
Cash and bank balances
Non-financial assets
Total assets
At 31.12.2018
Liabilities
Borrowings
Non-financial liabilities
Total liabilities
Floating
rates
Less than
12 months
£
Non-interest
Bearing
£
-
-
-
-
-
-
-
-
2,305,072
105,380
5,795,046
8,205,498
1,504,732
533,218
745,445
2,783,395
Total
£
2,305,072
105,380
5,795,046
8,205,498
1,504,732
533,218
745,445
2,783,395
P a g e 73 |
(v) Fair Values of financial assets and financial liabilities
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and short-
term borrowings approximate their respective fair values due to the relatively short-term maturity of these financial
instruments. The fair values of other financial assets and liabilities are as disclosed in the respective notes.
(vi) Reconciliation of liabilities arising from financing activities
1 January
2018
Net Financing
Contributions
Interest
paid
Fair value
movement/
interest
accrued
Acquisition
of
subsidiary
Loan note
conversion
31 December
2018
25,314
185,708
995,813
(27,063)
(37,475)
(20,149)
2,698
21,749
20,149
-
-
-
63,008
-
-
-
-
(696,533)
63,957
169,982
299,280
1 January
2017
Net
Financing
Contributions
Interest
paid
29,270
-
-
(18,632)
185,708
1,100,000
14,676
-
-
Fair value
movement/
interest
accrued
-
-
(104,187)
Acquisition
of
subsidiary
Foreign
exchange
movement
31
December
2017
-
-
-
-
-
-
25,314
185,708
995,813
Leasing
Term loan
Convertible
loans notes
Leasing
Term loan
Convertible
loans notes
(vii) 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.
The Group monitors its debt to equity ratio which was calculated as follows.
Total debt
Less: Cash and cash equivalents
Net debt
Total equity
Debt to equity
2018
£
2,748,635
96,573
2,652,062
Group
2017
£
3,736,686
479,565
3,257,121
2018
£
928,575
2,134
926,441
Company
2017
£
1,680,133
403
1,679,730
5,456,870
1,200,518
9,210,125
4,485,786
48.60%
271.31%
10.05%
37.45%
Financial assets are disclosed in notes 17 to 20. The Group's principal financial assets are bank
balances, trade and other receivables.
P a g e 74 |
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
Amount converted in year (note 26)
Amount Transfer to Reserve
Balance at 31/12/2018
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
(£771,898)
28,822
299,280
3%
4%
5%
Of the £1,100,000 Loan Notes brought forward to 2018, £771,898 were converted in June 2018 leaving a balance of
£328,102 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 £328,102 were recorded in the financial report as follows:
Non-Current Liabilities - £299,280
Reserves
-£28,822
P a g e 75 |
33. New Acquisition for the Malvern Group
On 2nd July 2018, The Group announced the acquisition of Communicate English School Limited for a total
consideration of £2,340,000. The Sale and Purchase Agreement was concluded to acquire the entire issued share
capital of Communicate English School Limited through the issue of 13,800,000 new ordinary shares of 1 p each in
Malvern plc at an exercise price of 5 p per share being £690,000 and the balance of £1,650,000 in cash.
The Share Price on 2nd July 2018 closed at 7.00 p per share. This means that the 13,800,000 had a fair value of
£966,000. This increased the fair value of the consideration from £2,340,000 to £2,616,000.
As agreed in the Sales Purchase Agreement, an excess cash payment was made for £364,290 from the cash of
£627,046. This increased the fair value of the consideration from £2,616,000 to £2,908,290 (note 13).
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
Brand1 & 2
Domain Name1 & 2
Customer List1 & 2
Trade and other receivables
Cash and bank balances
Trade and other payables
Net Assets acquired
Consideration/Purchase Price1
Goodwill arising on acquisition
Fair Value
Consideration
£
125,924
427,386
12,242
274,637
77,681
627,046
(340,437)
1,204,479
2,980,290
1,775,811
1 In accordance with IFRS 3, a fair value review of the intangible asset acquired 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 fair value consideration is a pro-rata calculation based on the fair value consideration
of £2,980,290. The breakdown of the intangible asset on the consolidation of the new business is as follows:
2 Charges for amortization of Customer List, Domain Name and Brands acquired will commence from 1 July 2018.
Communicate is an established English Language School in Manchester, UK. It has a very established market in
the Middle East.
P a g e 76 |
The summary financial reporting for Communicate under the Malvern Group is summarized below.
Consolidated Income Statement
Total Income
Total Costs
Profit Before Tax
Tax
Profit for the Year
July 18 to Dec
18
£
680,975
472,105
208,870
39,173
169,697
Statement of Financial Position
31 Dec 2018
Total Assets
Total Liabilities
Net Assets
Share Capital
Total Reserves
Net Equity
34. Contingent Asset
£
511,803
301,488
210,315
100
577,135
577,235
During 2018 the Group suffered a flood at one of its premises in Singapore which led to a disruption of business,
damage to fixtures and fittings and impact on the trading activity of the business. The Directors’ have evaluated the
impact and are seeking remedy through appropriate channels and insurance. They have evaluated their claim at
£330,000. At this stage, no amount has been recognised as an asset and income within the financial statements on the
basis that, whilst an inflow of economic benefit is considered probable, the claim is being pursued through legal
processes, and therefore the outcome is uncertain and therefore, in accordance with IAS37, the realization of income
at this stage is not virtually certain.
P a g e 77 |