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Malvern International Plc
ANNUAL REPORT AND ACCOUNTS 2019
Malvern International
is a global learning and
skills development partner
preparing learners to
meet the demands of a
professional life.
Visit our website for further information
https://www.malverninternational.com
CONTENTS
Overview
At a glance
Strategic Report
Chairman’s statement
Business model
Strategic priorities and market
Operating review
Key performance indicators
Financial review
Risk management
Directors’ section 172(1) statement
Corporate Governance
Board of Directors
Chairman’s corporate governance statement
Corporate social responsibility
Directors’ report
Nomination and Remuneration Committee report
Audit and Risk Committee report
Financial Statements
Auditor’s report
Consolidated statement of comprehensive income
Statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Company statement of changes in equity
Company statement of cash flows
Notes to the financial statements
3
4
7
10
12
14
16
17
19
22
24
25
30
32
36
40
41
46
48
50
51
52
53
54
Overview
For the year ended 31 December 2019
Malvern International is a learning and language skills development partner. Courses are
delivered on sites in London, Brighton, and Manchester, at partner campuses, and online
through the Malvern Online Academy.
Continuing operations1
Revenue
Impairment of intangibles
Amortisation2
Operating loss
Loss for the year
UK
(£)
SINGAPORE
(£)
TOTAL 2019
(£)
4,703,864
2,211,471
232,939
1,802,451
664,786
91,322
6,506,315
2,876,257
324,261
(3,413,621)
(1,859,887)
(5,273,508)
(3,849,431)
(2,036,082)
(5,885,513)
TOTAL 2018
(£)
RESTATED
6,337,321
–
209,536
(340,673)
(212,692)
• Loss from discontinued operation (Malaysia) £2.48m (2018: £0.35m).
• Loss for the year including discontinued operations £8.37m (2018: loss of £0.57m).
• Loss per share for the year of 3.26p (2018: 0.31p)3.
• Cash as at 31 December 2019 was £83,264 (2018: £105,380).
1
2
3
As at 31 December 2019, continuing operations included activities in the UK and Singapore, following the disposal of Malaysia operations during the year.
Of which £23,822 relates to the amortisation of the brand, licences and trademarks relating to SAA Singapore.
Calculated using weighted average number of shares in issue during the period 256,453,628 (2018: 185,344,459).
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 3
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS At a glance
MALVERN INTERNATIONAL is a learning and language skills development partner. Courses are
delivered on sites in London, Brighton, and Manchester, at partner campuses, and online through
the Malvern Online Academy.
We focus on teaching English as a foreign language and preparing overseas students for
university courses in the UK. Courses are delivered on five sites in the UK – London, Manchester,
Brighton, University of East London and Wrexham Glyndwr University. Students have the option
of studying across multiple campuses over the duration of the same course and online through
the Malvern Online Academy.
50,000+
Students Trained
Our mission is to support our students in
their journey to success
5
Destinations
5
Destinations
Our vision is to be a global learning and
skills development partner
50,000+
Students Trained
50,000+
Students Trained
London
120+
London
Nationalities Taught
Online
Language
MALVERN
INTERNATIONAL
Students Trained
50,000+
5
120+
Destinations
Professional and Higher Education
Brighton
Singapore
Nationalities Taught
Following the decision to close SAA Singapore in
+
5
Destinations
+
Manchester
Brighton
120+
Nationalities Taught
London
Manchester
Experience
Juniors
50,000+
Students Trained
5
Destinations
50,000+
University
Pathway
Students Trained
5
Destinations
August 2020, the Company has agreed with the
regulatory education board in Singapore that the
150+
Brighton
Experience
majority of existing students will continue to be
+
120+
Employees
taught to the end of their course, or transferred to
Manchester
London
Nationalities Taught
Singapore
Experience
+
4
London
Destinations
Manchester
Experience
other institutions.
Brighton
150+
Singapore
Employees
Singapore
Online
50,000+
Students Trained
120+
Nationalities Taught
London
120+
Nationalities Taught
Manchester
+
150+
Employees
150+
Employees
Brighton
Online
Online
5
Destinations
London
Manchester
Online
4 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Experience
Manchester
+
Brighton
Singapore
120+
Nationalities Taught
Experience
Brighton
+
150+
Employees
Singapore
Online
Experience
150+
Employees
Singapore
Online
150+
Employees
Online
OUR PORTFOLIO
Pathway:
Locations and brands
Pre-university, foundation and pre-master level courses
UK: Malvern House London, Communicate School
for foreign students joining UK universities
Manchester, Malvern House Brighton, University of East
Language:
English language teaching in the UK
Online:
Language, higher education, and professional education
Junior:
Summer residential language camps in the UK for
secondary school students
London, and Wrexham Glyndwr University
Key partnerships and accreditations:
Accreditations: British Council, English UK, Education
Oversight (Private Further Education)
University partners (Pathway): University of East
London, Wrexham Glyndwr University
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 5
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Strategic Report
6 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Chairman’s statement
For the year ended 31 December 2019
Malvern is in the business of providing
people with English language skills and
preparing overseas foreign-language
students for UK university courses.
In 2019, the Company made considerable strides in
pursuing its strategy, securing more partnerships, offering
more courses, and increasing sales, while continuing to
strengthen its administration function and improving the
systems linked to product quality.
The unprecedented impact of Covid-19 derailed the
Company’s growth plans for 2020, despite starting the
year with a strong forward order book. The closure of
schools in the UK and Singapore had a profound impact
on the Company’s revenues and cash flows. As a result of
this, the Company had to seek additional funding in June
2020, to provide sufficient liquidity and flexibility to allow
the Company to manage through the period of expected
disruption caused by Covid-19.
At the time of this report, following the closure of
Singapore in August 2020, Malvern’s operations are now
based solely in the UK. The business comprises three
language schools - London, Manchester, and Brighton,
the delivery of on-site pre-university courses on behalf of
university partners, online courses and summer language
camps for juniors in a variety of settings.
CLOSURE OF SINGAPORE OPERATIONS
For the purposes of the accounts for the year ended
31 December 2019, the Singapore operations are
treated as continuing operations. In August 2020,
because of the impact of Covid-19, and following
a review, the Board decided to close its Singapore
operations. The Company agreed with the regulatory
education board in Singapore that the majority of
existing students will either be taught to the end of their
course, or transferred to other institutions. The impact
of Covid-19 on the school in Singapore accelerated and
confirmed management's view of its decision to close the
school. The impairments booked reflect the impairment
indicators present at year end and have not arisen as a
result of Covid-19 or the decision to close the school.
RESULTS
Total revenue from continuing operations, which as at
31 December 2019, included the UK and Singapore, for
the full year was £6.51m (2018: £6.34m).
UK revenues grew from £4.38m to £4.70m, while
revenues from SAA Singapore reduced from £1.96m to
£1.80m.
The operating loss from UK and Singapore operations
was £5.27m (2018 restated: loss £0.34m). The results
were significantly impacted due to:
SALE OF MALAYSIA OPERATIONS
Given the prolonged challenging environment in its
Malaysia activities, which absorbed considerable
management time and financial resources, the Board
took the decision to close activities, selling the remaining
assets of the operation post year-end. As such, Malaysia
activities are treated as discontinued activities within the
financial accounts to 31 December 2019.
•
•
the Board’s decision to apply significant write downs
to the value of intangible assets and goodwill of
SAA Singapore, Malvern House London and the
Communicate School of English, Manchester, totalling
£2.88m; and
the amortisation of brand, licences and trademarks of
£324,261, of which £23,822 relates to SAA Singapore
and £67,500 relates to Malvern International Academy
Singapore.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 7
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S STATEMENT CONTINUED
The financial performance of the continuing operations of the Company as at 31 December 2019 can be summarised
as follows:
Revenue
Impairment of intangibles
Depreciation & amortisation
Operating loss
Loss for the year
UK
(£)
4,703,864
2,211,471
656,964
SINGAPORE
(£)
1,802,451
664,786
515,367
TOTAL
(£)
6,506,315
2,876,257
1,172,331
(3,413,621)
(1,859,887)
(5,273,508)
(3,849,431)
(2,036,082)
(5,885,513)
The loss from discontinued operations (Malaysia) was £2.48m (2018: £354,254), resulting in a total loss after tax,
including discontinued operations, of £8.37m (2018: loss of £566,946).²
The loss per share for the year was 3.26p (2018 : loss 0.31p).
In addition to write-offs of goodwill and intangible assets the major balance sheet movements in the period were a
new loan of £2.60m from Boost & Co. and the adoption of IFRS 16 Leases which has resulted in lease liabilities being
recognised together with right-of-use assets. Further details regarding the adoption of IFRS 16 are set out in note 2.
Cash as at 31 December 2019 was £83,264 (at 31 December 2018: £105,380).
FUNDRAISING AND FINANCING
In August 2019, the Company entered into a loan agreement with Boost & Co., with £2.60m drawn at the time of the
announcement.
Since the year end, and as a result of Covid-19, the Company raised a further £1.15m (net) (“the Fundraising”) by way of
placing and subscription to strengthen the balance sheet, and to provide sufficient working capital to support Malvern's
operations until the Company reaches cash flow break even.
In parallel, the Company agreed a restructuring of its existing debt facility with Boost & Co. which provides for a two-
year capital repayment holiday, and interest free period subject to certain performance conditions.
BOARD CHANGES
During 2019, a number of Board changes took place. Two independent Non-Executive Directors were appointed,
Mark Elliott, as Chairman, and Alan Carroll. In addition, Mr Pillai stood down as a Director.
Further changes were made in the first half of 2020, with Messrs Chaudhary, Jayapal and Sithawalla resigning as
Non-Executive Directors. In addition, Sam Malafeh stood down as CEO and has subsequently been succeeded by
Richard Mace.
The Board currently comprises of one Executive Director, Richard Mace, and two independent Non-Executive Directors,
Mark Elliott and Alan Carroll.
APPOINTMENT OF RICHARD MACE, CEO
I would like to take this opportunity to formally welcome Richard Mace as CEO of the Company. Richard agreed to join
Malvern at the end of June 2020, investing a further £100,000 into the business by way of subscription, as part of the
Fundraising. He was previously the founder of the Communicate English School Limited, which operated the Company's
school in Manchester, and which was acquired by Malvern in 2018. Richard continued to run the Manchester school
until leaving the Group in March 2020.
8 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
CHAIRMAN’S STATEMENT CONTINUED
Since his appointment, Richard has been working hard
to re-open the language schools in line with government
guidelines regarding social distancing measures and
hygiene controls. He has also been in regular dialogue
with the Company’s university pathway partners, and
Malvern Junior customers. In addition, Richard has been
reviewing the online offering in order to ensure it is
well positioned to take advantage of the opportunities
available in the current market climate.
Given his recent appointment, Richard will be in
a position to set out his strategic priorities for the
Company in the announcement of the Company’s
interims results of the six months ended 30 June 2020.
As permitted by the inside AIM published on 9 June
2020, the Company will utilise the one-month extension
period for the publication of its interim results which will
now be announced no later than 30 October 2020.
GOVERNANCE
Malvern adheres to the QCA Corporate Governance
Code, which the Directors feel is the most appropriate
governance framework for the Company’s size
and structure.
The Board instigated a number of changes to its
governance structures in 2019 including the instigation
of more regular and structured Board meetings and the
revision of information presented to the Board.
More information can be found in the Corporate
Governance section of this report, and on the
Company’s website.
PEOPLE
vast majority of employees and all Directors. The majority
of the Company’s operating staff were furloughed, while
many teaching staff were redeployed to deliver classes
online. The Board continues to monitor cash balances
and apply strict cost controls.
Manchester, London and Brighton language schools are
now open with around 50 students across the centres,
and enquiries and bookings are starting to pick up. The
governments of the Gulf Cooperation Council countries
are now allowing sponsored and self-funded students
to travel to the UK, and students are beginning to arrive.
All things being equal, we expect student numbers for
the language centres to return to normal levels from
summer 2021.
The summer bookings for the Italian cohort for Malvern
Juniors, which represents a significant proportion
of revenues for the business, have been postponed
until 2021.
Bookings from the Company’s university partner,
University of East London (“UEL)”) are currently ahead of
expectations. The two-week English Kickstarter course
for international students went ahead online and began
on 21 September. The bookings for this course were
ahead of budget. The foundation year students have
until 19th October to enrol, based on deposits the
current indications are that student numbers will be
above forecast and are already considerably higher than
2019 figures.
Wrexham Glyndwr University has also reopened in
September offering blended online and in-class teaching,
with a small number of students starting at this time and
the balance in January.
On behalf of the Company, I would like to take this
opportunity to thank all staff for their dedication in 2019,
and their support and understanding in 2020 during
these very challenging times.
While the Board remains cautious in its outlook,
the return of students following the easing of travel
restrictions is encouraging and demonstrates the
underlying demand for the services we offer.
RESPONSE TO COVID-19 AND
OUTLOOK
Since the outbreak of Covid-19 in 2020, which resulted
in the temporary closure of schools in both UK and
Singapore, the Non-Executive Directors have been in
very regular contact with the Company, and the Board
has been receiving weekly updates with regards to the
Company’s operational process and financial position.
In order to preserve cash, a cost cutting exercise was
implemented, including a reduction in salaries for the
Mark Elliott
Chairman
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 9
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Our business model
By investing in our staff, assets and technology we are providing the skills that our students need to support them
throughout their lives.
GROUP INPUTS
People
The Company employs over 65
professional educators and support staff,
and an additional 40 teachers during the
summer months.
Premises
Malvern’s education centres provide the
focus point for our student body.
Technology
The Company has developed its own
online education platform, offering online
courses and additional learning support.
The Company also invested in a student
management system and accounting
system in the last 2 years.
Financial investment
Access to the capital markets enables the
Company to grow the business through
internal investment on new products, new
locations and acquisitions.
10 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
STAKEHOLDER OUTCOMES
Students
We create value for students by offering
them qualifications and language skills
that support them throughout their lives.
Partners
Our education products and services are
an important student recruitment tool
for our partners and expands their own
geographic reach. We are able to ensure
that students are better prepared and
have the right qualifications and skills in
order to embark on their chosen courses.
Shareholders
Our aim is to deliver long-term
shareholder value through capital gain
and, in time, through the payment of
dividends.
Staff
We offer long-term career opportunities
for our staff in a rewarding and innovative
environment.
HOW WE OPERATE
1. Provide excellent quality, accredited
education
Malvern’s success and growth is reliant on maintaining
its reputation as a quality educator. We ensure all our
staff have access to training and development and we
continually look for ways to improve our educational
services.
2. Form long-term partnerships
The Company looks to improve and expand the range of
products and services offered directly or in collaboration
with its prestigious partners, including universities,
corporate customers and accreditors. Its partnerships
with regional distribution and sales agent networks are
key to student recruitment.
3. Offer flexibility for students
Malvern’s courses are available in multiple locations so
that students can have a variety of experiences during
their learning. Students can also choose the time they
commit to their education, whether it is part-time, full-
time or evening classes.
4. Promote an inclusive community
Many of Malvern’s customers are students living and
learning in a foreign country. They therefore look to
Malvern to help guide them, find accommodation,
organise outings and social events, and to make the
most of their cultural experience. Malvern education
centres aim to be a hub for its student and staff bodies.
5. Grow the student body sustainably
The Company aims to grow its student body organically
by building its reputation as a quality educator, and
by acquiring established complementary education
providers.
6. Control our costs
The Group maintains tight cost controls across all its
operations to ensure efficient use of the resources
available.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 11
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Strategic priorities and
market
As a global learning and skills development partner, the
Group’s vision is to invest in and develop its operating
businesses in the education sector, to establish centres
of excellence, and to deliver long-term growth and
sustainable profit.
In light of recent events, the Company’s strategic
priorities are to:
•
•
re-build student numbers and enrolments in the UK
following the re-opening of schools in early August
2020 and after a long period of closure resulting from
the Covid-19 pandemic;
safeguard the health and safety of staff and students,
following government guidelines regarding social
distancing;
•
•
•
•
strengthen the management structure and appoint a
Chief Financial Officer to the Board of Directors of the
Company;
continue to improve internal systems including
sales, student-bookings, customer relationship
management, finance, and marketing;
build on the online education platform and refine
sales and marketing strategies;
work with existing university partners to deliver pre-
university courses in line with university re-openings;
and
• complete the closure of the Singapore school.
12 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
In September 2019, the UK government restored post-
study work rights, which provides that foreign students
who graduate from a recognised UK university are now
eligible to stay on in the country for two years.
The university sector had long been campaigning for
this important policy shift, being acutely aware that
both Canada and Australia have become much more
competitive in recent years because of their more
welcoming immigration policies. This should benefit
Malvern, in that we would expect an increased in foreign
student enrolments into UK universities, creating greater
demand for our University Foundation courses.
Impact of COVID-19
Covid-19 has had a profound impact on foreign
student exports around the world, affecting Malvern’s
operations. UK schools are starting to reopen under
strict government guidelines. During the stoppage in
face-to-face teaching, teaching was delivered online
where possible. For international students who are
currently in the UK, the UK government announced a
visa extension and teaching centres are required to
provide advice and support to those students unable to
return home.
Universities are now reopening with courses streamed
online and through online learning. Universities are
expecting to reopen fully from Spring 2021.
MARKET DYNAMICS
Latest figures from the Department for Education
show that in 2017, revenue from education-related
exports and transnational education (TNE) was worth
around £21bn to the United Kingdom economy. Higher
education and English Language Training, Malvern’s
areas of focus, account for roughly three quarters of that
total export value, or £16bn.
Source: Department for Education
TNE activity
£2.1bn
£21.4bn
International education
export and TNE activity
in 2017
HIgher
Education
£14.4bn
Education
Product &
Services
£2.1bn
English
Language
Training
£1.6bn
c h o o l
S
£ 1 . 0 b n
Further
Education
£0.3bn
There were more than 485,000 international students
enrolled in UK higher education institutions in 2018/19,
an increase of 6% over the previous year. Around 70% of
these students were from non-EU countries, with China
being the largest market outside of the EU, and the
largest market overall.
Around 57% of English language students currently
originate from the EU. It remains unclear exactly how
the continuing Brexit process will affect the number
of ELT students originating from the EU. However, the
Home Office has indicated that it wishes to increase
student numbers and, from 1 January 2021, 6 month or
11 month short-term study visa (STS) will be required by
EU language students.
Source: https://monitor.icef.com/2020/01/foreign-
enrolment-in-uk-higher-education-up-6-for-2018-19/
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 13
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Operating review
For the year ended 31 December 2019
HIGHLIGHTS
London
•
Expanded UK language schools with opening of
Malvern House Brighton.
• Launched Malvern Academy Online.
Increased the number of programmes offered by
University Pathway for University of East London, and
formed a new partnership with Wrexham Glyndwr
University, Wales.
Sold Malaysian school, resulting in operations being
considered discontinued activities for the purposes of
the financial statements.
Continued to strengthen central office functions,
including sales and marketing.
Brighton
•
•
•
•
•
Started 2020 with strong forward bookings, before
the impact of Covid-19.
Increased the number of students and student weeks
delivered.
ENGLISH LANGUAGE SCHOOLS
Malvern has three English language schools in the UK,
giving international students the choice to study in the
capital, or in one of its two regional centres. If they so
decide, students have the option of changing locations
during their studies, giving them a wider cultural
experience of England. In addition to teaching English,
the schools also arrange accommodation, arrange
cultural excursions, and provide a hub for information,
familiarisation and socialising.
Manchester
Revenues from Communicate, which contributed its
first full year to the Company, following its acquisition in
2018, showed modest year-on-year growth, reflecting
the increased marketing and sales support. The centre
has sufficient capacity to grow for the foreseeable future.
14 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
The performance in London remained flat for the full
year despite a healthy performance during the summer
months. This was the result of lower than expected
enrolments in September – the start of the Autumn
education term – due to unexpectedly reduced bookings
from Europe and South America, following heavy
discounting from competitors in these regions. As soon
as management became aware of the situation, they
worked with the regional sales partners to improve
marketing and offered courses at more competitive
prices. Sales towards the end of the year and into early
2020 saw an improvement, although it was too late to
recover fully the shortfall experienced.
The new Brighton school opened its doors to its
first students in July 2019 following an investment of
£208,000. Starting from a nil base, Q4 2019 focused
efforts on building sales, delivering a modest number of
student weeks during the period.
PROFESSIONAL EDUCATION
Singapore
In 2019, the Singapore operation continued to serve
the “big four” accountancy firms as well as offer a range
of professional and higher education courses. Students
continued to perform highly in the SAA Global Education
Singapore Chartered Accountant qualification, solidifying
its teaching reputation in this area.
The net loss for SAA Singapore was £0.68m (2018:
£0.22m) on revenues of £1.80m (2018: £1.96m).
In August 2020, the Board took the decision to close
the Singapore operations. The activities in Singapore
had been loss making for some time, and due to the
impact of Covid-19, the business was unlikely to turn a
profit in the medium term. Therefore, the Board took the
decision to focus resources on the strongest performing
areas of the Company in the UK. The Company agreed
OPERATING REVIEW CONTINUED
with the regulatory education board in Singapore that
the majority of existing students would be taught to the
end of their course or transferred to other institutions.
Malaysia
At the end of 2019 the Group sold the remaining assets
of the Malaysia business, and as part of the transaction,
the purchaser took over £75,000 loan with AmBank.
UNIVERSITY PATHWAY
In 2019, the Company started offering pre-university
and foundation level courses for foreign students joining
UK universities through its partnership with University
of East London (“UEL”). The courses are designed to
help foreign students familiarise themselves with their
new surroundings ahead of the start of the academic
year, address potential language barriers that they may
encounter in their chosen subjects, and fill any course-
specific knowledge expectations, having come from a
different education system.
Whilst management had an expectation to receive a
reasonable number of students for the first year, student
arrivals were not at the levels expected due to the
delayed approval of student visas. The courses that were
delivered were very well received and more programmes
were added for the next student enrolments. To aid the
growth, Malvern agreed to support UEL in the student
application process going forward.
This area of the business is expected to grow as a result
of a partnership with Wrexham Glyndwr University,
Wales, to deliver the onsite International Foundation
Year and pre-sessional English classes. The first cohort of
students began the foundation programme at Wrexham
Glyndwr on 5th October 2020.
MALVERN JUNIORS
In the first half of 2019, the Company took full
operational control for a nine-year period of a summer
holiday and language camps offering for teens.
Student weeks for 2019 were slightly below expectations
due to the challenges in securing accommodation. With
the sole management of the centres, the Company
was well prepared for 2020 with forward booking at
increased levels than 2019. These bookings have now
been postponed into 2021.
ONLINE
Online education is a key part of Malvern’s diversification
plan, currently offering English language training and
ACCA qualifications to the remaining Singapore students.
Covid-19 provided the impetus to develop Malvern
Online Academy (“MOA”) rapidly into a fully functioning
online school with live classes and student support. Daily
sales are now being recorded and are being supported
both by the Company’s sales and marketing staff, and its
sales agent network.
New student contracts now include a provision for online
learning in the event that schools are forced to close
once again, ensuring that teaching and student numbers
will be able to continue at normal levels.
CENTRAL SERVICES
The Company continued to make improvements to its
central shared services, which includes both back-office
and sales and marketing. The efficiencies gained have
improved internal reporting processes and sales-lead
conversion rates to the benefit of all Malvern’s product
channels.
Sales and marketing
The marketing department operates out of London,
with regional marketing officers covering all the major
territorial regions. In addition to delivering direct
sales, these officers are responsible for managing
independent sales agents, a key part of the Company's
sales strategy. Although sales agents offer their services
for a percentage commission, they offer a breadth
of knowledge and reach into geographies that the
Company would not otherwise be able to access unless
it were to make a significant investment in people and
infrastructure.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 15
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Key performance
indicators
For the year ended 31 December 2019
FINANCIAL KPIs
UK
(£)
SINGAPORE
(£)
TOTAL 2019
(£)
TOTAL 2018
(£) RESTATED
Revenue on continuing operations1
4,703,864
1,802,451
6,506,315
6,337,321
Operating loss on continuing operations
(3,413,621)
(1,859,887)
(5,273,508)
Loss for the year on continuing operations
(3,849,431)
(2,036,082)
(5,885,513)
Loss from discontinued operations2
Loss for the year including discontinued operations
(2,482,788)
(8,368,301)
(340,673)
(212,692)
(354,254)
(566,946)
LOSS PER SHARE3
2019: 3.26p (2018 : 0.31p)
NON-FINANCIAL KPIs
Student weeks delivered (UK only)
2019: 15,239
(2018: 12,609)
Number of students (UK only)
2019: 3,202
(2018: 2,861)
1 As at 31 December 2019, continuing operations included activities in the UK and Singapore.
2 Discontinued operations relate to Malaysia school.
3 Calculated using weighted average number of shares in issue during the period 256,453,628 (2018: 185,344,459).
16 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Financial review
For the year ended 31 December 2019
RESULTS
The revenue performance for the Company is described in the Chairman’s statement.
LOSS AFTER TAXATION AND LOSS PER SHARE
The loss for the year, totalled £8.37m (2018 restated: loss £0.57m), resulting in a loss per share of 3.26p (2018 : loss 0.31p).
DISPOSALS AND INVESTMENTS
During the year, the Company invested £31,000 in the Malvern Online Academy, undertaking several functionality tests,
learning from failures and making improvements.
The Company also invested £208,000 in the opening of its Brighton school, which took around nine months to set up
and gain all the necessary approvals. The school opened its doors to the first students from late July 2019.
At the end of 2019, the Group sold the remaining assets of the Malaysia business for a value of £75,000, in response to
the continued difficult trading conditions and substantial financial resources the business required.
The Company has since closed its Singapore operations following similar challenges, which were compounded further
by the impact of Covid-19.
FINANCIAL POSITION
The Company’s financial position has been impacted by impairments, and increased levels of trade payables.
Impairments include:
IMPAIRMENTS
Impairment of goodwill
Impairment of brand value
Impairment of customer list
Impairment of domain name
Impairment of contract and development assets
UK
SINGAPORE
474,207
120,000
70,579
356,461
747,630
233,441
10,406
863,533
TOTAL
830,668
867,630
304,020
10,406
863,533
Total
2,211,471
664,786
2,876,257
In August 2019, the Company entered into a loan agreement with Boost & Co., resulting in the Company borrowing
£2.60m, which remains outstanding.
Pursuant to recent discussions and to facilitate an equity fundraise, Boost & Co. agreed to a restructuring of the
repayments of its loan. The key features of the agreement are that Boost & Co. has agreed that in the period between
March 2020 and March 2022 (the "Standstill Period") to grant a capital and interest repayment holiday subject to
improved revenue performance triggers. As part of the agreement, the option of the second tranche of up to £4.0m,
which was available to fund potential permitted acquisitions, was cancelled.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 17
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
The loan will continue to amortise on its original terms, however, all capital payments not paid in the Standstill Period,
up to an amount equal to £450,000, are to be paid as a bullet payment on 31 July 2024, or can be paid earlier by the
Company with no penalty.
Pursuant to the Debt Restructuring, the Company has agreed to issue warrants to Boost & Co. over 33,333,333
New Ordinary Shares at an exercise price of 0.15p, at which the price of at which the fundraising in June 2020 was
undertaken. In addition, the exercise price on the warrants granted at the time of the original loan agreement will be
adjusted to an exercise price of 0.15p.
At the same time, the Company raised a further £1.15m (net) by way of Placing and Subscription to strengthen the
balance sheet, and to provide sufficient working capital to support Malvern's planned operations until the Company
reaches cash flow break even.
GOING CONCERN
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above.
In assessing the Group’s ability to continue as a going concern, the Board reviews and approves the annual budget and
longer-term strategic plan, including forecasts of cash flows.
The Board also reviews the Group’s sources of available funds and the level of headroom available against its
committed borrowing facilities and associated covenants.
Whilst there remain significant uncertainties, current trading has given the Board confidence that it is appropriate to
prepare the accounts on a going concern basis, as outlined in the Director’s Report and in note 3(iv).
Operations reopened on a phased basis in August 2020. However, there is no certainty as to how long the Covid-19 will
persist and how quickly business will return to normal levels. The Board has sought deferral agreement with all major
creditors and has been pleased with the support received.
18 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Risk management
For the year ended 31 December 2019
The Board, through the Audit and Risk Management Committee assesses the Company’s risks on an on-going basis and
maintains a risk register which is updated quarterly. Risk governance culture is embedded across the Company. There
are four main types of risks faced by the Company:
•
financial exposures;
•
regulatory and compliance changes;
•
competition and commercial changes; and
•
reputational risks.
There are, from time to time, unprecedented risks that the Company faces outside of normal operations that can
become material, such as health, safety and environmental risks. The current world-wide health risk presented by
Covid-19 presents a significant risk to Malvern’s operations and has therefore been added to the Company’s risk
register as a potential high-impact risk.
FINANCIAL EXPOSURES
RISK LEVEL: HIGH
Description
Mitigation
The Company faces a number of financial
risks which could potentially impact future
operations. These include liquidity risk, credit
risk, and foreign currency risk.
Liquidity and credit risk
The Board monitors options available to the Company to access
borrowing facilities and fundraising activities. These might be attractive
in certain circumstances such as to underpin expansion plans, and
provide additional working capital.
The Company is exposed to credit risk primarily in respect of its trade
receivables, which are stated net of provision for estimated impaired
receivables as set out in note 16 to the financial statements. Exposure
to credit risk is mitigated by evaluation of the granting of credit, close
monitoring, and the management of collections from trade receivables.
Foreign currency risk
The Company reports in UK Sterling with 70% of revenue in 2019
denominated in UK Sterling. For the majority of the territories in which
the Company operates, costs are generally denominated in UK Sterling,
providing a natural hedge.
The Board remains vigilant regarding exchange rate movements. Net
asset exposures arising on conversion are assessed each year and at
the time of reporting the Board has concluded that, for the time being,
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.
Following the closure of SAA Singapore, from 1 January 2021, 100%
of revenue will be denominated in UK sterling, and therefore foreign
currency exchange risk will no longer apply.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 19
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS RISK MANAGEMENT CONTINUED
REGULATORY AND COMPLIANCE CHANGES
RISK LEVEL: MEDIUM
Description
Mitigation
Over the last few years, Malvern has
witnessed regulatory changes and
enforcement, which have had serious
implications to the Company through
diminished student enrolments.
The Board is mindful that its partners and
governing bodies can potentially withdraw
accreditation if the Company does not meet
the required standards.
The management regularly assess exposures in each territory and for
each product offering.
The Company ensures it has the correct accreditations in place in order
to operate. A register of accreditations and renewal dates is maintained.
The management regularly reviews the standards required for each
accreditation and receives updates on any future changes to make plans
and adjustments in order to reach the standards required.
An ongoing program of internal assessment is carried out in order to
ensure the Company maintains standards in an ‘always-ready’ approach
for planned and un-planned assessments by governing bodies. Each
centre has an individual responsible for quality assurance.
The Company has worked towards diversification of its courses and
target groups to reduce the risk of regulatory changes in the operating
or marketing regions.
COMPETITION AND COMMERCIAL CHANGES
RISK LEVEL: MEDIUM
Description
Mitigation
Given the size of the word-wide market
for educational courses, the geographies
in which the Group operates, and the
percentage of the Company’s revenue
derived from English language and
professional qualifications which are
consistently demanded for employment, it
is not perceived by the Board that there is
any abnormal risk from the dominance of
competitors.
However, the Company can face stronger
short-term competition in the form of
intermittent price discounting by its
competitors, which can have an immediate
and negative impact on forward bookings.
The Board regularly assess the portfolio of products available in each
territory and its exposure to changes in consumer demands.
The Board has concluded that in the normal course of operations,
the demand for the vast majority of its courses offered are not
subject to volatility in consumer tastes and that this stability allows for
diversification into new areas of education, should consumer tastes
change.
The management monitors closely forward bookings to identify any
changes to anticipated sales. For short-term fluctuations in competition,
the Company maintains close dialogue with its sales agent partners
and monitors competitor pricing, in order to adjust its own pricing and
remain competitive.
20 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
RISK MANAGEMENT CONTINUED
REPUTATIONAL RISKS
RISK LEVEL: LOW
Description
Mitigation
Maintaining Malvern's reputation as a quality
education provider is vital to the success
of the Company. A loss in confidence from
accreditors, partners and customers could
have an immediate and profound impact
on the business and its ability to recruit and
retain staff.
The Board ensures it has the required accreditation and licenses to
operate (see above for regulatory and compliance changes).
The Company has clear policies on responsible and ethical behaviour
and has a zero-tolerance policy on corruption and bribery. These
policies are displayed in every school and online. The Company provides
induction training and regular training to all staff.
The Company has clear incident management and crisis management
strategies and procedures.
HEALTH, SAFETY OR ENVIRONMENTAL INCIDENT: COVID-19
RISK LEVEL: HIGH
Description
Mitigation
Covid-19 has affected all areas of the
Company and the impact and mitigation
of the risk presented to the Company is
reported in the Chairman’s statement of this
report.
The impact and risk to the Company includes:
•
•
•
infection of its staff or students, potentially
spreading the disease;
a fall in forward-bookings, cancellations,
and delays to course start-dates, resulting
in a negative impact on the Company’s
financial performance in 2020; and
the closure of its schools and operations
preventing normal business activities to
resume, placing significant cash constraints
on the business and leading to the failure
of the business.
The Board is monitoring and following national and international health
guidelines and is providing regular updates to its staff and student body.
The following cost-saving plans have been implemented:
•
the majority of staff and all Directors have agreed to salary
reductions;
•
the majority of administrative staff in the UK have been furloughed;
•
•
rental payments have been delayed and, where possible,
renegotiated; and
existing debt with Boost & Co. has been restructured providing for a
two year capital repayment holiday and interest free period.
In order to provide sufficient working capital and strengthen the balance
sheet, the Company has raised net proceeds of £1.15m by way of a
Placing and Subscription.
The Board has made the assumption that normal levels of business will
return in Summer 2021.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 21
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Directors’ section 172(1)
statement
For the year ended 31 December 2019
EMPLOYEES
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 2019
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 will be 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.
The Nomination and Remuneration Committee oversees
and makes recommendations of executive remuneration.
The Board encourages management to improve
employee engagement and to provide necessary training
in order to use their skills in the relevant areas in the
business. The Board periodically reviews the health and
safety measures implemented in the business premises
and improvements are recommended for better
practices.
The Section 172(1) of the Companies
Act obliges the Directors to promote the
success of the Company for the benefit of
the Company’s members as a whole.
The section specifies that the Directors must act in good
faith when promoting the success of the Company and in
doing so have regard (amongst other things) to:
a. the likely consequences of any decision in the long
term;
b. the interests of the Company’s employees;
c. the need to foster the Company’s business relationship
with suppliers, customers and others;
d. the impact of the Company’s operations on the
community and environment;
e. the desirability of the Company maintaining a
reputation for high standards of business conduct; and
f. the need to act fairly as between members of the
Company.
The Board of Directors are collectively responsible for
the decisions made towards the long-term success of
the Company and how the strategic, operational and
risk management decisions have been implemented
throughout the business is detailed in this Strategic
Report on p. 19 to 21.
The Company’s main stakeholders are identified in
the Business Model on p. 11, being staff (employees),
students (customers), partners (either customers or joint
venture partners) and shareholders.
We value the feedback we receive from our stakeholders
and we take every opportunity to ensure that where
possible their wishes are duly considered in the
Company’s decision making, and the formulation of its
strategy.
22 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
DIRECTORS’ SECTION 172(1) STATEMENT CONTINUED
CUSTOMERS, AGENTS AND PARTNERS
The Board acknowledges that a strong business
relationship with customers, sales agents and partners
is a vital part of the growth. Whilst day-to-day business
operations are delegated to the executive management,
the Board sets directions with regard to new business
ventures and initiatives.
OTHER
Suppliers: The Board upholds ethical business behaviour
across all suppliers and encourages management to seek
comparable business practices from all suppliers doing
business with the Company.
Community and environment: The Board recognises its
responsibility towards the community and environment
and it is Group policy to be a good corporate citizen
wherever it operates.
The Company adopts a proactive approach towards
community education-driven initiatives particularly where
they involve the education of those less fortunate. The
Company is currently involved with Refugee Aid agencies
in the UK, offering English language courses.
The Group’s environmental impact is managed at a school
level, with each operation responsible for applying the
required standards and reducing their own impact. The
Company’s biggest environmental impacts are the use of
energy through the use of electricity and the management
of waste. Each school encourages its students and staff
to reduce the use of energy by switching off unused
appliances and electricity in empty rooms. All schools
have their own recycling sorting points.
More detail can be found in the corporate social
responsibility statement in this report on p. 30.
SHAREHOLDERS
The Board places equal importance on all shareholders
and recognises the significance of transparent and
effective communications with shareholders. As an
AIM listed company there is a need to provide fair and
balanced information in a way that is understandable to
all stakeholders and particularly our shareholders. Details
of how the Company communicates with its shareholders
can be found in the Chairman’s Corporate Governance
Statement on p. 28.
MAINTAINING HIGH STANDARDS OF
BUSINESS CONDUCT
The Company is incorporated in the UK and governed
by the Companies Act 2006. The Company has adopted
the Quoted Companies Alliance Corporate Governance
Code 2018 (the "QCA Code") and the Board recognises
the importance of maintaining a good level of corporate
governance, which together with the requirements to
comply with the AIM Rules, ensures that the interests of
the Company’s stakeholders are safeguarded.
The Board has prompted that ethical behaviour and
business practices should be implemented across
the business. Anti-corruption and anti-bribery training
are compulsory for all staff and contractors and the
anti-bribery statement and policy is contained in the
Company’s Employee Manual. The Company’s expectation
of honest, fair and professional behaviour is reflected by
this and there is zero tolerance for bribery and unethical
behaviour by anyone relating to the Company.
The importance of making all employees feel safe in their
environment is maintained and a Whistleblowing policy is
in place to enable staff to confidentially raise any concerns
freely and to discuss any issues that arise. Strong financial
controls are in place and are well documented.
On behalf of the Board,
Mark Elliott
Chairman
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 23
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Corporate Governance
Board of Directors
For the year ended 31 December 2019
THE BOARD
The Board is responsible for formulating, reviewing and approving the Company’s strategy, budget and
corporate actions.
Mark Elliott, Non-Executive Chairman
Date of appointment: 1 July 2019
Committees: Audit and Risk (Chairman) and Nomination and Remuneration
Mark has had a long executive career in the education, technology and corporate finance sectors,
including finance and management roles operating in Europe, the USA and South Africa. He has
extensive AIM experience having brought two technology companies to the market together with
associated fund raises. He brings with him a strong knowledge in governance, public markets and
investor relations.
External appointments: Chairman of AIM Listed Journeo plc, Chairman of Trustees of Union
Discount Retirement Benefit Scheme and trustee of two charities, the National Benevolent Society
of Watch and Clockmakers and the Metropolitan Drinking Fountain and Cattle Trough Association.
Richard Mace, Chief Executive Officer
Date of appointment: 30 June 2020
Committees: none
Richard Mace was formerly the co-owner of the Communicate School of English, Manchester
which he co-founded in 2013 before it was acquired in July 2018 by Malvern. He was responsible
for overseeing year-on-year growth in the business in terms of student numbers, revenue and
EBITDA. In addition he successfully built a well-trusted brand, established an international B2B
sales agency network, set up digital marketing strategies, introduced and developed IT systems,
and successfully gained British Council and Independent Schools Inspectorate accreditations.
Prior to founding Communicate, Richard worked in telecoms for large organisations such as
Vodafone.
External appointments: none
Alan Carroll, Non-Executive Director
Date of appointment: 1 October 2019
Committees: Nomination and Remuneration (Chairman) and Audit and Risk
Alan has over 25 years’ experience in the information systems industry, including working in a
senior capacity in the development of the Ministry of Defence’s Information System Strategy and
as a senior sales manager and advisor to a number of major software and systems integration
companies. He is the founder and Managing Director of Ultris Limited, a niche software and
services organisation, operating in the confidential government sector. In addition, he is the
senior independent Non-Executive Director at Ideagen plc, a fast growing UK based international
software company. He has been a Board member since Ideagen listed on AIM in July 2012 and has
chaired the audit and remuneration committees throughout this time. He is also a Non-Executive
Director at Goal Group Limited, a private UK listed company. Alan was voted Non-Executive
Director of the year in the May 2019 Money Week Mello awards.
External appointments: Ideagen plc and Goal Group Limited
24 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Chairman’s corporate
governance statement
For the year ended 31 December 2019
DEAR SHAREHOLDER,
As Non-Executive Chairman, I am responsible for
instilling high standards of corporate governance within
the Company. It is my responsibility to ensure the
effectiveness of the Board on all aspects, 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 and relaying any shareholder
concerns to fellow Directors.
The Board is committed to applying high standards
of corporate governance and evolving them as the
business grows and has adopted the Quoted Companies
Alliance Code (“QCA”) to provide a framework against
which to do this, it being the most appropriate
recognised governance code for the size and structure
of the Company.
WORKINGS OF THE BOARD
The Directors consider seriously the effectiveness of
the Board, its Committees and individual performance.
The Board is responsible for formulating, reviewing
and approving the Company’s strategy, budgets and
corporate actions.
As at the date of the report, the Board has three
members, comprising two Non-Executive Directors, and
one Executive Director. Biographies and roles of the
Directors are set out on p.24.
The Directors believe that the Board, as a whole has a
range of commercial and professional skills which enable
it to discharge its duties and responsibilities effectively.
The independent Non-Executive Directors ensure that
independent judgement is brought to Board discussions
and decisions. All Directors are encouraged to use their
independent judgement and to challenge all matters
whether strategic or operational.
In 2019 the Board committed itself to being based in
the UK, it now being the country in which operations are
conducted, with meetings taking place in London.
The Board recognises the need to strengthen the
UK Board with another full-time Executive Director and
is currently seeking a Financial Director.
The Board meets at least 12 times a year, with ad hoc
Board meetings as the business demands, setting
and monitoring Group strategy, reviewing trading
performance and formulating policy on key issues. The
time commitment formally required by the Group is
an overriding principle that each Director will devote
as much time as is required to carry out the roles and
responsibilities that the Director has agreed to take on.
There is a strong flow of communication between
the Directors, and in particular between the CEO
and Chairman. Board meeting agendas are set in
consultation with both the CEO and Chairman, with
consideration being given to both standing agenda
items and the strategic and operational needs of the
business. Comprehensive Board papers are circulated
well in advance of meetings, giving Directors ample time
to review the documentation and enabling an effective
meeting. Minutes are drawn up to reflect a true record
of the discussions and decisions made. Resulting actions
are tracked for appropriate delivery and follow up. The
Board maintains close dialogue by email, telephone and
conference calls between scheduled meetings.
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 Non-Executive Directors
endeavour to ensure that their knowledge of best
practices and regulatory developments is continually up
to date by attending relevant seminars and conferences.
In addition, advice can be sought from the Company
Secretary.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 25
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT CONTINUED
ATTENDANCE AT MEETINGS DURING 2019
BOARD MEETINGS
(13 MEETINGS HELD)
AUDIT AND RISK
COMMITTEE
(8 MEETINGS HELD)
NOMINATION AND
REMUNERATION
COMMITTEE
(1 MEETING HELD)
5
13
11
13
4
3
10
9
–
3
–
7
7
–
1
–
–
–
–
–
1
–
–
1
–
1
–
DIRECTOR
Mark Elliott1
Sam Malafeh2
Haider Sithawalla3
Ramasamy Jayapal4
Nirvana Chaudhary5
Alan Carroll6
Gopinath Pillai7
Navin Khattar8
Wee Hock Kee9
1 Appointed on 1 July 2019
2 Resigned on 25 June 2020
3 Resigned on 30 June 2020
4 Resigned on 14 May 2020
5 Resigned on 8 July 2020
6 Appointed on 1 October 2019
7 Resigned on 1 October 2019
8 Resigned on 31 August 2019
9 Resigned on 18 February 2019
STRATEGY AND RISK MANAGEMENT
A description of the Company’s business model and strategic priorities can be found on pages 10 to 12 and the key
challenges in their execution are detailed in the Chairman’s Statement on pages 7 to 9 and Operational Review on
pages 14 to 15. The Board is responsible for establishing and maintaining the Company’s systems of internal financial
controls and importance is placed on maintaining robust operational controls.
The Audit Committee (see page 40) has the delegated responsibility for the oversight of the Company’s risk
management and internal controls and procedures, and for determining the adequacy and efficiency of internal control
and risk management systems on behalf of the Board. The Board continuously monitors and upgrades its internal
control procedures and risk management mechanisms and conducts an annual review, where it assesses both for
effectiveness. This process enables the Board to determine if the risk exposure has changed during the year and these
disclosures are included in the Annual Report. In setting and implementing the Company’s strategies, the Board, having
identified the risks, seeks to limit the extent of the Company’s exposure to them having regard to both its risk tolerance
and risk appetite. Further details on the Company’s risk management and internal controls can be found on pages 19
to 21.
MATTERS RESERVED FOR THE BOARD
The Board has a formal schedule of matters reserved for its specific approval which includes:
•
•
Strategy and management: review and approval of long-term Group strategic, operational, and financial matters such
as proposed acquisitions and divestments.
Financial reporting and controls: approval of the annual accounts and interim report, the annual budget, significant
transactions, major capital expenditure.
26 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT CONTINUED
•
•
•
Internal controls: ensuring maintenance of a sound
system of internal control and risk management.
ELECTION AND RE-ELECTION OF
DIRECTORS
Finance: raising new capital or major financing
facilities, operating and capital expenditure budgets.
Communications: approval or resolutions put forward
to shareholders, approval of circulars and approval
of press releases concerning matters decided by the
Board.
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
on p.32 and in the separate Notice of Annual General
Meeting sent to all Shareholders.
•
Board membership and other appointments.
BOARD EVALUATION
•
Delegation of authority: division of responsibilities
between the Chairman and Chief Executive officer,
including the Chief Executive’s authority limits.
Establishment of Board committees and approval of
terms of reference of Board committees.
The Board delegates specific responsibilities to two
Committees:
• the Audit and Risk Management Committee; and
• the Nomination and Remuneration Committee.
Both committees have formal written terms of reference.
These terms of reference are available on the Group’s
website.
THE AUDIT AND RISK COMMITTEE
Following the resignation of Nirvana Chaudhary,
the Audit and Risk Committee comprises the two
Non-Executive Directors, Mark Elliott (Chairman) and
Allan Carroll. The Audit and Risk Committee meets at
least three times a year. Details of the responsibilities
of the Audit and Risk Management Committee are
set on page 40. Where necessary, specialist external
consultants are used to assist the Committee. The Audit
and Risk Committee report is set out on p 40.
THE NOMINATION AND
REMUNERATION COMMITTEE
The Nomination and Remuneration Committee
comprises of two Non-Executive Directors, Mark Elliott,
and Alan Carroll. Details of the responsibilities of the
Nomination and Remuneration Committee are set
out on p. 36. Where necessary external recruitment
consultants are used to assist the process. The
Nomination and Remuneration Committee report is set
out on p 36.
Annual appraisals are held of each Director,
providing feedback and reviewing any training or
development needs. Each member of the Board takes
responsibility for maintaining his skill set. All Directors
have the opportunity to undertake relevant training
and attend relevant seminars and forums at the
Company’s expense.
The Board undertakes a Board evaluation at least once
a year. Following the evaluation in 2019, the Board
committed itself to being based in the UK, with meetings
taking place in London. The Board also instigated more
regular and structured Board meetings, a revision of
information presented to the Board, as well as agreed
measures to help further facilitate Non-Executive and
Executive Director dialogue.
The Board are aware of the importance of attaining
greater diversity amongst its members, which
includes roles and experience with other boards
and organisations. This will form a part of any future
recruitment consideration if the Board concludes that
replacement or additional Directors are required.
CORPORATE CULTURE AND SOCIAL
RESPONSIBILITY
The Board recognises that its decisions regarding
strategy and risk will impact the corporate culture of
the Company as a whole and that this will impact the
performance of the Company. The Board is aware that
the tone and culture set by the Board will greatly impact
all aspects of the Company as a whole and the way that
employees behave.
The corporate governance arrangements that the Board
has adopted are designed to ensure that shareholders
have the opportunity to express their views and
expectations for the Company in a manner that
encourages open dialogue with the Board.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 27
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT CONTINUED
The Company’s activities are centred on addressing
customer needs. Therefore, the importance of sound
ethical values and behaviours, as well as open and
respectful dialogue with employees, customers
and other stakeholders, is crucial to the ability of
the Company to successfully achieve its corporate
objectives. The Board places great importance on these
aspects of corporate governance and seeks to ensure
that it flows through all the Company’s activities.
The Board's assessment of the culture within the
Company at the present time is one where there is
respect for all individuals, open dialogue amongst all
levels of staff and individuals, and where there is a
commitment to provide the best service possible to the
Company’s customers.
The Company is fully committed to ensuring that the
highest quality of teaching and education standards are
embedded in the services it provides. The Company
aims to provide the highest of service standards in order
to maintain long-term partnerships with its customers
and sales agents. This is reflected in the growth of the
customer base, and the ability to maintain existing and
form new partnerships that support the overall growth
of the business.
The Company has in place a range of policies to ensure
the highest standards are maintained and that the
Company’s corporate culture is well understood by all
individuals and adopted into everyday behaviours. These
policies form part of the Company’s Employee Handbook
and are updated and reviewed on a regular basis.
Details on corporate social responsibility can be found
on p.30.
INTERNAL CONTROLS
The Directors are responsible for the Group’s system
of internal control and for reviewing its effectiveness.
Internal control systems and procedures are reviewed
annually and are designed to meet the needs of
the Group and the risks to which it is exposed. The
procedures are designed to manage rather than
eliminate risk faced by the Group, and can only provide
reasonable but no absolute assurance against material
misstatement or loss. The key procedures which the
Directors have established with a view to providing
effective internal controls are as follows:
28 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Management structure and delegated
authority
Authority is delegated to the executive management
team through Group authorisation limits on a
structured basis, ensuring that proper management
oversight exists at the appropriate level. The executive
management team comprises the CEO, and other
senior management. Full details and biographies of
the executive management team can be found at
https://www.malverninternational.com/executive-
team/ executive-team-details/. 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. Any key issues from these meetings are
reported to the Group Board.
Control environment
The Group’s control environment is the responsibility
of the Directors and managers at all levels. A review of
the key risks facing the business and the effectiveness
of the Group’s internal controls was last performed
in July 2020. During the year, the Board reviewed and
updated its internal control arrangements to ensure
they remained appropriate.
Monitoring systems used by the Board
The Board reviews the Group’s performance against
budgets on a monthly basis. The Group’s cash flow is
monitored monthly by the Board.
SHAREHOLDER COMMUNICATIONS
The Board attaches great importance to providing
shareholders with clear and transparent information
on the Group’s activities, strategy and financial position,
and 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 Chairman and CEO.
A clearly laid out investor relationship strategy is in place.
The primary communication tool with shareholders
is through the Regulatory News Service, (“RNS”) on
regulatory matters and matters of material substance.
The Company’s website provides details of the
Company’s Annual Report and Notices of Annual General
Meetings (AGM) are available to all shareholders along
with the Interim Report and investor presentations.
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT CONTINUED
In order to gauge shareholder sentiment, the
Company meets with the key institutional shareholders
typically every six months, normally at the time of the
final and interim results and when necessary. The
Company solicits feedback from its larger shareholders
via its NOMAD.
The Board is aware of the need to protect the interests
of minority shareholders, and balancing these interests
with those of more substantial shareholders. 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 at
www.malverninternational.com.
Mark Elliott
Chairman
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 29
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate social responsibility
For the year ended 31 December 2019
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 2019
survey reflected broadly average staff engagement and
satisfaction.
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.
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 underprivileged applicants 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
practise, 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.
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.
30 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
•
Electricity: the Group aims to reduce its energy use
by encouraging staff and students alike to switch
off lights and computers when not in use. Signs
and reminders are posted in rooms requesting that
energy sources are switched off by the last person
leaving a room. In communal areas, movement
sensors, and timed switches have been fitted as
appropriate so that electricity is used only when
required.
ETHICS
Malvern 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 the Company's principles and values which
sets out the standards of behaviour expected from
all employees. 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.
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 is the
responsibility of the CEO and is available on the Group’s
intranet. Client and supplier arrangements are regularly
reviewed and guidance forms part of each employee’s
induction.
The Company 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
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
2019.
•
Supply chain review: the Group continues to take
positive steps to improve supply chain transparency.
Following the annual review of the policy and supply
chain, the Group believes that it operates a supply
chain with a very low inherent risk of slave and human
trafficking potential. The supply chain is mainly made
up of UK based suppliers of professional services,
computer software and equipment, office supplies,
and contractor and associate workers. Nevertheless,
this assessment is kept under continual review and
due diligence is conducted with any new suppliers.
•
Staff training: during 2019 the Group has continued to
provide training to all new employees on the Modern
Slavery Act 2015 and its own Modern Slavery Policy
as part of its on-boarding program to ensure all
employees are aware of their responsibilities.
No instances of modern slavery were reported or
identified in 2019.
GENERAL DATA PROTECTION
REGULATIONS (GDPR)
The Company takes its data protection obligations
seriously. The Company has maintained and makes
available policies on Data Protection, Privacy, Information
Security, Cookies and Data Breach policies to comply
with the regulations. The processing and maintenance of
personal data is managed in line with GDPR regulations
with strict controls and IT security. Data is regularly
updated and obsolete data removed. Training and
guidance on the regulations is provided to all staff and
forms part of each new employee’s induction.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 31
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ report
For the year ended 31 December 2019
The Directors present their report and the audited accounts for the year ended 31 December 2019.
PRINCIPAL ACTIVITIES
The principal activities of Malvern International Plc are
to provide quality education services, and preparing
students and learners to meet the demands of a
professional life. Courses are delivered in the UK and
online, and focus on English language teaching and
preparing students for higher education.
A detailed explanation of the Company’s principal
activities can be found on p. 4 and p. 5.
BUSINESS MODEL
The Company’s business model is to provide:
•
•
language teaching direct to its students through
its three UK based language schools and grow its
language student base through direct sales and via
third party agents; and
form long-term partnerships with higher education
institutions to deliver pre-university foundation
classes on behalf of its partners. We aim to offer
our services more efficiently than our partners can
themselves.
The Company competes in the market by offering
excellent quality and competitive education. The
Company’s growth is driven by organic growth through
the acquisition of new customers and, when appropriate
acquiring established business operating in the same or
related markets.
Additional detail of the Company’s business model can
be found on p. 10. The Company benefits from operating
in a market which has historically shown long-term
growth. More information on the Company's markets
can be found on p. 11.
STRATEGIC PRIORITIES
As a global learning and skills development partner, the
Group’s vision is to invest in and develop its operating
businesses in the education sector, to establish centres
of excellence, and to deliver long-term growth and
sustainable profit.
32 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Each year the Board and management set strategic
priorities and monitor performance against them
throughout the year. In light of recent events, the Board
has reviewed its strategic priorities, which are set out on
p. 12.
REVIEW OF THE BUSINESS AND FUTURE
DEVELOPMENTS
A review of the business and its outlook, including
commentary on the key performance indicators can
be found in the Strategic Report on p. 14 to 18. The
principal risks and uncertainties facing the Company is
included on p. 19. The Company’s social, environmental
and ethical policies are set out in the Chairman’s
corporate governance statement on p. 27. A summary of
the outlook for the Group is given within the Chairman’s
statement on p. 9.
GROUP RESULTS
The Group loss including discontinued operations before
taxation for the year was £8.37m (2018: loss £0.57m).
DIVIDENDS
The Directors do not recommend a final dividend
(2018: nil).
CAPITAL STRUCTURE
The Company has one class of share in issue, ordinary
shares of 1p. The shares are listed on AIM, a sub market
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, nor on voting
rights, nor of any agreements between holders of the
Company’s shares which may result in such restrictions.
DIRECTORS’ REPORT CONTINUED
GOING CONCERN
The financial statements have been prepared on a going
concern basis.
The Board consider the going concern basis to be
appropriate having paid due regard to the Group and
Company’s projected results during the twelve months
from the date the financial statements are approved
and the anticipated cash flows, availability of loan
facilities and mitigating actions that can be taken during
that period.
In making their assessment of going concern the
directors have considered the current and developing
impact on the business as a result of the Covid-19
pandemic. Whilst this had an immediate impact on the
Company’s operations, with closure of its schools in
March and April 2020, the business has sought to adapt
its service offering through on-line learning and the
re-opening of schools. However, there is no certainty
as to how long the Covid-19 will persist and how quickly
business will return to normal levels.
The directors have taken a range of mitigating actions to
protect and manage the short, medium and long term
interests of the business, its employees and students
during this pandemic. Specifically, the directors have
considered the following in the preparation of the
financial statements on a going concern basis:
Profitability
•
•
•
In late 2019, due to difficult trading conditions and
substantial financial resources the business required,
a decision was made to discontinue the Group’s loss-
making operations in Malaysia, with the aim being to
improve the Group’s future profitability.
Following the closure of the UK and Singapore
schools in March/April 2020, operations reopened on
a phased basis in August 2020.
In August 2020, also due to difficult trading conditions
(amplified further by the impact of Covid-19)
combined with the continuing financial resources
required for the business, a further decision was
made to close the Group’s Singapore operations,
with the aim being to improve the Group’s future
profitability.
•
The group has now refocused its activity on the UK
operations having reduced its operational presence
and financial obligations overseas.
•
Profit and cash flow projections for the Group assume
profitable growth in its key operating entities once
operations return to normal.
•
The Group is working on the assumption that levels of
business will return to normal during 2021.
Cash flow
•
•
•
The Group’s main source of funds are internally
generated funds and new capital injections. It is
possible that the Group may continue to require
further funding and capital injections in the future and
there will be some reliance placed on their ability to
do so, if required.
The Group undertook a Placing in February 2019
raising £606,000 before expenses. A further £1.15m
(net) was raised by way of a Placing and Subscription
in June 2020. The proceeds of the Fundraising in June
2020 are being used to supplement the Company's
working capital resources and strengthen the
Company's balance sheet with a view to providing
sufficient liquidity and flexibility to allow the Company
to manage through the period of expected disruption
caused by Covid-19.
The Group entered into a loan agreement with Boost
& Co Ltd. in August 2019 with £2.60m drawn at 31
December 2019. The funds were used to repay a
shareholder loan and provide working capital for
the growth of the organisation. In May 2020, the
existing debt with Boost & Co. has been restructured
providing for a two year capital repayment holiday
and interest free period. As part of the restructuring
agreement, the option of the second tranche of
up to £4.0m, which was available to fund potential
permitted acquisitions, was cancelled.
•
The Board has sought deferral agreement with
all major creditors and has been pleased with the
support received.
The above factors, combined with the continued risk
of Covid-19, highlight a material uncertainty as to the
company’s ability to continue as a going concern. Whilst
these material uncertainties exist, current trading has
given the Board confidence that it is appropriate to
prepare the accounts on a going concern basis. The
financial statements do not include any adjustments that
may be required in the event that the company could
not continue as a going concern.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 33
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS DIRECTORS’ REPORT CONTINUED
SUBSEQUENT EVENTS
Details of the subsequent events can be found in note 28 of the financial statements.
DIRECTORS
Biographical information for each of the Directors is set out on p.24, together with details of the date of appointment,
membership of the Board committees and any external appointments.
The Company’s Articles of Association requires that each Director retire from office and seek reappointment at the third
AGM after the general meeting at which they were last appointed.
DIRECTORS’ INTERESTS IN SHARES
The Directors’ beneficial interest in the ordinary share capital of the Company are set out within the remuneration
report on p. 39.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2019 the Company was aware of the following major shareholders representing 3% or more of
voting rights attached to the issued Ordinary Share capital of the Company.
AURORA NOMINEES LIMITED Des:2234100
PERSHING NOMINEES LIMITED Des:WRCLT
Mr Richard Mace
HSBC CLIENT HOLDINGS NOMINEE (UK) LIMITED Des:731504
SPREADEX LIMITED
HARGREAVES LANSDOWN (NOMINEES) LIMITED Des:HLNOM
HARGREAVES LANSDOWN (NOMINEES) LIMITED Des:15942
KSP INVESTMENTS pte ltd
CG Corp
NUMBER OF
ORDINARY
SHARES
0.1P
PERCENTAGE
HELD
126,784,998
10.52%
116,485,767
86,361,334
78,902,700
68,074,983
61,302,066
44,477,079
43,292,405
40,091,122
9.67%
7.17%
6.55%
5.65%
5.09%
3.69%
3.59%
3.32%
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.
CORPORATE SOCIAL RESPONSIBILITY
The Group recognises its corporate social responsibilities and reports on these in a separate statement of social,
environmental, and ethical policies on p. 30.
This statement covers the Group’s Employment Policies, Environmental Policy and Health and Safety Policy.
POLITICAL DONATIONS
There were no political donations made by the Group during the year (2018: none).
34 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
DIRECTORS’ REPORT CONTINUED
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; and
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 and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The Directors 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
also 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
AUDITOR
Pursuant to section 489 of the Companies Act 2006,
resolutions will be proposed at the 2020 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. Each Director has confirmed that
they have 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,
Mark Elliott
Chairman
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 35
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Nomination and Remuneration
Committee report
For the year ended 31 December 2019
The Nomination and Remuneration Committee is a
standing committee of the Board of the Company and is
comprised of two Non-Executive Directors, Alan Carroll
(Chairman) and Mark Elliott.
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:
•
•
to consider the nomination and appointment,
increments and bonus plans of the Group CEO,
subsidiary General Manager and Group senior
management team members;
to review any letter of resignation from the Group
CEO or Directors of the Company, and any questions
of resignation or dismissal;
•
•
•
•
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;
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;
to consider any other functions as may be agreed
between the Committee and the Board; and
review the Board and Board Committees
effectiveness. The Committee members keep
themselves fully informed of all relevant
developments and best practice by reference to the
QCA’s Remuneration Committee guide.
ATTENDANCE AT MEETINGS
Details of attendance at meetings by the committee
members can be found on page 26.
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 on p. 38.
36 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOMINATION AND REMUNERATION COMMITTEE REPORT CONTINUED
SHARE OPTION SCHEME
The Company’s plans to create an Executive Share Option Plan 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 and are entitled to be reimbursed for reasonable expenses
incurred by them in carrying out their duties as Directors of the Company.
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.
DIRECTORS’ SERVICE CONTRACTS
Contractual arrangements for current Directors are as follows:
Richard Mace
Contractual arrangements for current Non-Executive Directors are as follows:
CONTRACT
DATE
NOTICE
PERIOD
30 June 2020
6 months
Mark Elliott
Alan Carroll
DATE OF
LETTER OF
APPOINTMENT
1 July 2019
1 October 2019
NOTICE
PERIOD
APPOINTMENT
TERM
1 Month
1 Month
3 years
3 years
The Directors are required to retire by rotation and the appointment of new Directors has to be approved at the next
AGM subsequent to their appointment by the Board. No Directors are retiring by rotation in 2020.
Other than the notice periods afforded to some of the Directors, there are no special provisions for compensation
in the event of loss of office. The Remuneration Committee considers the circumstances of individual cases of early
termination and determines compensation payments accordingly.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 37
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOMINATION AND REMUNERATION COMMITTEE REPORT CONTINUED
DIRECTORS’ REMUNERATION
Details of individual Directors emoluments and remuneration who served in 2019 are as follows:
SALARY
AND FEES
£
18,250
200,000
–
–
–
5,750
–
–
–
BENEFITS
£
PENSION
£
SHARE
BASED
PAYMENTS
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
2019
£
18,250
TOTAL
2018
£
–
200,000
103,000
–
–
–
5,750
–
–
–
224,000
–
–
–
–
–
–
11,000
114,000
Mark Elliott¹
Sam Malafeh2
Haider Sithawalla3
Ramasamy Jayapal4
Nirvana Chaudhary5
Alan Carroll6
Gopinath Pillai7
Navin Khattar8
Wee Hock Kee9
1 Appointed on 1 July 2019
2 Resigned on 25 June 2020
3 Resigned on 30 June 2020
4 Resigned on 14 May 2020
5 Resigned on 8 July 2020
6 Appointed on 1 October 2019
7 Resigned on 1 October 2019
8 Resigned on 31 August 2019
9 Resigned on 18 February 2019
EXECUTIVE DIRECTORS’ SHARE OPTIONS
As at 31 December 2019 the Company did not have any share option schemes.
NON-EXECUTIVE DIRECTORS’ ANNUAL FEES
The below presents the annual fees to be paid to the current Non-Executive Directors
Mark Elliott
Alan Carroll
FEES £
50,000
30,000
38 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOMINATION AND REMUNERATION COMMITTEE REPORT CONTINUED
DIRECTORS’ INTEREST 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:
DIRECT INTERESTS
NAME OF DIRECTOR
Alan Carroll
Sithawalla Haider1
Sam Malafeh2
Ramasamy Jayapal3
Nirvana Chaudhary4
Gopinath Pillai5
1 Resigned on 30 June 2020
2 Resigned on 25 June 2020
3 Resigned on 14 May 2020
4 Resigned on 8 July 2020
5 Resigned on 1 October 2019
INDIRECT INTERESTS
NAME OF DIRECTOR / COMPANY
KSP Investments PTE Limited1
CG Corp2
AT
BEGINNING OF
THE YEAR/
AT DATE OF
APPOINTMENT
700,000
1,500,000
9,000,000
1,453,131
–
AT END OF THE
YEAR
700,000
1,519,000
9,000,000
1,453,131
–
400,000
400,000
AT
BEGINNING OF
THE YEAR/
AT DATE OF
APPOINTMENT
AT END OF
THE YEAR
43,292,405
43,292,405
40,091,122
40,091,122
1
2
Gopinath Pillai and Mr Sithawalla Haider have an indirect interest through KSP Investments Pte Ltd.
Nirvana Chaudhary has an indirect interest through CG Corp.
Alan Carroll
Chairman of the Nomination and Remuneration Committee
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 39
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Audit and Risk Committee report
For the year ended 31 December 2019
The Audit and Risk Management Committee is a
sub-committee of the Board and comprises two
Non-Executive Directors, with Mark Elliott as Chairman.
The Audit and Risk Management Committee meets
at least three times a year. The external auditors and
Executive Director 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 Director, 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 assists the Board 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;
presenting a balanced and understandable
assessment of the Group’s position and prospects;
establishing a formal and transparent arrangement
for maintaining an appropriate relationship with the
Company's auditors and overseeing, appraising the
quality of audit conducted by the Company's external
auditors and reviewing the independence of the
external auditors; and
•
determining the adequacy of the Group's
administrative, operating, accounting and financial
controls and internal controls.
ATTENDANCE AT MEETINGS
Attendance at the meetings can be found in the table on
p.26.
40 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
MATTERS CONSIDERED
During the year, the Committee considered the following
matters:
•
•
•
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 2019;
• reviewed the Group’s Risk Register; and
•
reviewed the external auditor’s Audit Plan in relation
to the year ended 31 December 2019.
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.
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 points raised in the paper. The details
of the paper have been laid out in the directors’ report.
Mark Elliott
Chairman of the Audit and Risk Committee
7 October 2020
Financial statements
Auditor’s report
For the year ended 31 December 2019
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 2019, which comprise:
•
•
•
•
•
the Group consolidated statement of comprehensive income for the year ended 31 December 2019;
the Group and parent Company statements of financial position as at 31 December 2019;
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, and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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 2019 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
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 41
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS AUDITOR’S REPORT CONTINUED
whole to be £55,000 (2018: £60,000) and £18,000 (2018: £16,000) respectively. In determining 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 £2,750. 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 the component auditor, covering two countries (UK
and Singapore) in which the Group has operations. Operations in UK and Singapore were considered to be significant
components. In addition, we considered appropriate audit procedures in relation to the discontinued activity in Malaysia
following the sale of the business in December 2019.
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 component 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.
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 team 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 reviewed the
work of the component auditor in Singapore and discussed matters with management. 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 (xxvi).
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. Whilst in the year ended 31 December 2018
there was the acquisition of the Communicate English School Limited, there have been no acquisitions during 2019, and other
than the discontinuance of the business in Malaysia during 2019, there have been no other changes in the Group’s overall
operations during the current year that significantly impacted our audit. Therefore, other than there being no acquisition
related audit risk considerations in 2019, 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.
42 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
AUDITOR’S REPORT CONTINUED
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).
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; and
•
Completeness of revenue
HOW THE SCOPE OF OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
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.
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);
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 had not
been met at the year end; and
Where appropriate we directed focus on and reviewed
the work undertaken by the component auditors on
revenue recognition and deferred income
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 and
where appropriate reviewed the impairment charges made
by management in the year.
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.
We reviewed the appropriateness and reasonableness of
impairment charges made by management in the year.
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.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 43
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS AUDITOR’S REPORT CONTINUED
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.
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 35, 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.
44 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
AUDITOR’S REPORT CONTINUED
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.
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
7 October 2020
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 45
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement of
comprehensive income
for the year ended 31 December 2019
Revenue
Sale of services
Total Revenue
Cost of services sold
Gross Profit
Other income
Salaries and employees’ benefits
Amortisation
Depreciation of plant and equipment
Other operating expenses
NOTE
2019
£
2018
RESTATED*
£
5
6
7
14
12
9
6,506,315
6,506,315
6,337,321
6,337,321
(4,070,600)
(3,729,089)
2,435,715
2,608,232
177,423
(1,881,606)
(324,261)
(848,070)
53,777
(988,423)
(209,536)
(92,344)
(1,956,452)
(1,712,379)
Impairment of intangible asset & goodwill
14, 15
(2,876,257)
Operating Loss
Finance costs
Loss before tax
Income tax (charge)/credit
Loss for the year from continuing operations
Discontinued Operation
Loss for the year
Attributable to:
Equity holders of the Company
8
10
(5,273,508)
(422,005)
(5,695,513)
(190,000)
(5,885,513)
(2,482,788)
(8,368,301)
(8,368,301)
(8,368,301)
–
(340,673)
(22,847)
(363,520)
150,828
(212,692)
(354,254)
(566,946)
(566,946)
(566,946)
* 2018 comparatives have been restated to exclude Malaysia operations following the disposal in 2019
46 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Consolidated statement of
comprehensive income (continued)
for the year ended 31 December 2019
Loss after 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
Loss per share from continuing operations attributed to equity holders of the
Company (in pence)
Basic
Diluted
Loss per share from discontinued operations attributed to equity holders (in pence)
Basic and diluted
2019
£
2018
RESTATED*
£
(8,368,301)
(566,946)
(316,716)
(150,165)
(8,685,017)
(717,111)
(8,685,017)
(717,111)
–
–
(3.26)
(3.26)
(0.31)
(0.31)
(0.97)
(0.19)
* 2018 comparatives have been restated to exclude Malaysia operations following the disposal in 2019
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 47
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement
of financial position
as at 31 December 2019
NOTE
GROUP
2019
£
2018
£
COMPANY
2019
£
2018
£
367,999
544,888
–
–
–
1,419,350
8,100,495
–
–
–
2,884,562
261,736
1,419,350
2,250,018
–
190,000
–
–
–
–
–
–
–
–
4,912,511
6,699,860
6,154
751,333
665,035
–
–
83,264
1,505,786
8,205,646
–
6,131,204
1,419,350
8,100,495
6,220
1,041,712
1,263,360
–
56,679
105,380
2,473,351
8,604,555
–
–
85,378
–
–
864
–
–
61,368
2,591,269
58,667
2,134
86,242
2,713,438
1,505,592
10,813,933
TOTAL ASSETS
Non-Current Assets
Property, plant, and equipment
Investment in subsidiaries
Intangible assets
Intangible assets – Development assets
Goodwill
Deferred tax asset
Right-of-use assets
Current Assets
Inventories
Trade receivables
Other receivables and Prepayments
Amounts due from subsidiaries
Amounts due from related parties
Cash and cash equivalents
Total Assets
12
13
14
14
15
10
2
16
17
18
19
48 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Consolidated statement
of financial position (continued)
as at 31 December 2019
EQUITY AND LIABILITIES
Non-Current Liabilities
Leasing
Term loan
Warrants
Convertible loan notes
Lease liabilities
Current Liabilities
Trade payables
Contract liabilities
Other payables and accruals
Amounts due to subsidiary
Amounts due to related parties
Convertible loan notes
Financial Liabilities
Provision for income tax
Lease liabilities
Total Liabilities
NOTE
GROUP
2019
£
24
24
24
24
2
20
21
22
23
24
2
–
2,438,573
75,640
–
4,580,165
7,094,378
985,056
756,425
689,169
–
46,646
316,587
–
10,279
604,863
3,409,025
10,503,403
2018
£
63,957
140,135
–
299,280
–
COMPANY
2019
£
2018
£
–
2,438,573
75,640
–
–
–
–
–
299,280
–
503,372
2,514,213
299,280
380,677
653,220
569,361
–
554,694
–
29,846
92,225
–
–
292,815
957,402
32,691
316,587
–
–
–
129,983
601,348
297,197
–
–
2,280,023
2,783,395
1,599,495
4,113,708
1,028,528
1,327,808
Equity attributable to equity holders of the
Company
Share capital
Share premium
Retained earnings
Translation reserve
Capital reserve
Convertible loan reserve
Total equity
Total Equity and Liabilities
25
26 (i)
26 (ii)
26 (iii)
26 (v)
30
9,363,236
5,431,449
9,211,736
5,016,849
9,363,236
5,431,449
9,211,736
5,016,849
(17,564,398)
(9,196,097)
(17,431,623)
(4,771,282)
272,574
589,290
170,560
28,822
170,560
28,822
–
–
–
–
28,822
28,822
(2,297,757)
5,821,160
(2,608,116)
9,486,125
8,205,646
8,604,555
1,505,592
10,813,933
The Loss for the financial year dealt with in the financial statements of the Parent’s Company as of the 31 December
2019 was a Loss of £12,660,341 (2018: Loss £337,415).
The financial statements were approved by the Board of Directors on 7 October 2020 and were signed on its behalf by:
Richard Mace
Director
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 49
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement
of changes in equity
for the year ended 31 December 2019
SHARE
CAPITAL
£
SHARE
PREMIUM
£
RETAINED
EARNINGS
£
TRANS-
LATION
RESERVE
£
CAPITAL
RESERVE
£
CONVERT-
IBLE LOAN
RESERVE
£
ATTRIBUT-
ABLE TO
EQUITY
HOLDERS
OF THE
COMPANY
£
TOTAL
£
Balance at 1 January 2018 7,919,356
896,111
(8,629,151)
739,455
170,560
104,187
1,200,518
1,200,518
Convertible loan reserve
Direct costs relating to
issue of shares
Total comprehensive
income for the year
(324,780)
(566,946)
(150,165)
New Share Issue
1,292,380
4,445,518
(75,365)
(75,365)
(75,365)
(324,780)
(324,780)
(717,111)
(717,111)
5,737,898
5,737,898
9,211,736
5,016,849
(9,196,097)
589,290
170,560
28,822
5,821,160
5,821,160
Balance at 31 December
2018 / 1 January 2019
Direct costs relating to
issue of shares
Total comprehensive
income for the year
(39,900)
(8,368,301)
(316,716)
(39,900)
(39,900)
(8,685,017)
(8,685,017)
606,000
606,000
New Share Issue
151,500
454,500
Balance at 31 December
2019
9,363,236
5,431,449 (17,564,398)
272,574
170,560
28,822
(2,297,757)
(2,297,757)
50 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Consolidated statement
of cashflows
for the year ended 31 December 2019
Cash Flows from Operating Activities
Loss after income tax from
Continuing activities
Discontinued activities
Adjustments for:
Amortisation of intangible assets
Depreciation of tangible assets
Impairment of intangible assets
Fair value movement on warrants
Fair value movement on convertible loan reserve
Loss on disposal of tangible assets
Loss on disposal of discontinued operations
Impairment of other receivables
Impairment of trade receivables
Finance cost
Adjustments for deferred tax
Interest paid
Tax paid
Changes in working capital:
Decrease in stocks
Decrease/(increase) in receivables
Increase/(decrease) in payables
Decrease in amounts due to related parties
Net cash flows used in operating activities
Cash Flows from Investing Activities
Purchase of software
Purchase of intangible asset
Purchases of property, plant, and equipment
Acquisition of Subsidiary, net of cash acquired
Net cash used in investing activities
Cash Flows from Financing Activities
Finance leases
New equity issued1
Term Loan
Net cash generated by financing activities
Net Change 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 equivalent at the end of the year
2019
£
2018
£
(5,885,513)
(2,482,788)
(212,692)
(354,254)
324,261
848,070
2,876,257
(197,640)
17,307
21,180
1,133,034
95,643
189,990
422,005
190,000
(404,715)
(81,946)
217,940
129,050
–
–
–
–
–
–
–
22,847
(150,827)
(22,847)
–
(2,934,855)
(370,783)
71
9,900
1,127,843
(508,048)
(994,593)
(633,393)
–
(2,305,089)
(1,998,769)
–
(5,946)
(245,112)
(260,231)
(72,040)
(302,058)
–
(1,387,244)
(317,152)
(1,955,479)
(502,584)
566,100
2,537,706
2,601,222
(21,019)
105,380
(1,097)
83,264
(19,371)
3,675,220
(20,721)
3,635,128
(319,120)
479,565
(55,065)
105,380
1 This includes cash arising from shares issued during the year. None of the shares issued arose from non-cash
transactions (2018: £1,461,898) 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.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 51
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Company statement
of changes in equity
for the year ended 31 December 2019
SHARE
CAPITAL
£
SHARE
PREMIUM
£
RETAINED
EARNINGS
£
CONVERT-
IBLE LOAN
RESERVE
£
TOTAL
£
Balance at 1 January 2018
7,919,356
896,111
(4,433,867)
104,187
4,485,787
Total comprehensive income for the year
–
(324,780)
(337,415)
(75,365)
(737,560)
New Share Issues
Total transactions with owners
1,292,380
4,445,518
–
–
–
–
–
–
5,737,898
–
Balance at 31 December 2018/1 January 2019
9,211,736
5,016,849
(4,771,282)
28,822
9,486,125
Direct costs relating to issue of shares
Total comprehensive income for the year
(39,900)
(12,660,341)
New Share Issues
151,500
454,500
(39,900)
(12,660,341)
606,000
Balance at 31 December 2019
9,363,236
5,431,449 (17,431,623)
28,822
(2,608,116)
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its own income statement.
52 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
Company statement
of cashflows
for the year ended 31 December 2019
Cash Outflows from Operating Activities
Loss before income tax
Adjustments for: Adjustment made in prior year retained earnings
Impairment on investments
Fair value movement on warrants
Fair value movement on convertible loan notes
Finance cost
Interest paid
Decrease/(Increase) in amounts due from subsidiaries
Change in working capital
Increase in receivables
Increase in payables
Decrease in amounts due to related parties
Net cash used in operating activities
Cash Flows from Financing Activities
New equity issued1
Term Loan
Net cash used in financing activities
Cash Flows from Investing Activities
Acquisition of subsidiaries
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
2019
£
2018
£
(12,660,341)
(337,415)
7,161,369
(197,640)
17,307
120,642
(103,352)
–
–
–
20,149
(20,149)
2,897,488
(1,660,892)
(2,764,527)
(1,998,307)
(1,674)
162,832
(564,001)
(41,218)
16,036
–
(3,167,370)
(2,023,489)
566,100
3,675,220
2,600,000
3,166,100
3,675,220
(1,650,000)
–
(1,650,000)
(1,270)
2,134
1,731
403
864
2,134
1 This includes the cash arising from shares issued during the year. None of the shares issued arose from non-cash
transactions (2018: £1,461,898) 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.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 53
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the Financial Statements
for the year ended 31 December 2019
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 100 Avebury Boulevard, Milton Keynes, MK9 1FH.
Its principal place of business is in Singapore till 30 June 2019 and in London from 1 July 2019. 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
IFRS16
This is the first set of the Group’s annual financial statements in which IFRS 16 Leases have been applied. The Company has adopted
the IFRS 16 modified retrospective approach from 1 January 2019 but has not restated comparatives for the 2018 reporting period,
as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening statement of financial position on 1 January 2019.
The Company previously classified leases as operating or finance lease based on its assessment of whether the lease transferred
substantially all the risks and rewards of ownership. Under IFRS 16, the Company recognises right-of-use assets and the
corresponding lease liabilities for most leases by recording them on the balance sheet.
At the date of initial application:
•
•
lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s
incremental borrowing rate at the date of initial application.
right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of
initial application.
In applying IFRS 16 on transition, the Company has used the following practical expedients permitted by the standard:
•
•
•
The Company has elected not to reassess whether a contract is or contains a lease as defined in IFRS 16 at the date of initial
application. For contracts entered into before the transition date, the Company relied on its assessment made when applying
IAS 17 and IFRIC 4.
For the majority of leases, reliance has been placed on previous assessments of whether leases are onerous under IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
Accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term
leases. The Company has elected not to recognise the right-of-use assets and lease liabilities for short-term leases that have
a term of 12 months or less or leases that are of low value. Lease payments associated with these leases are expensed on a
straight-line basis over the lease term.
At inception or on assessment of a contract that contains a lease component, the Company allocates the consideration in the
contract to each lease and non-lease component based on their relative stand-alone prices. However, for leases of properties,
the Company elected not to separate non-lease components and will instead account for the lease and non-lease component as
a single lease component.
The Company’s leases primarily relate to properties and office equipment. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. Property leases will often include extension and termination options,
open market rent reviews, and uplifts.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the individual lessee company’s incremental borrowing rate considering the duration of the lease.
The lease liability is subsequently measured at amortised cost using the effective interest method, with the finance cost charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. It
is remeasured when there is a change in future lease payments arising from a change in index or rate, or if the Group changes its
assessment of whether it will exercise an extension or termination option. The lease liability is recalculated using a revised discount
rate if the lease term changes as a result of a modification or re-assessment of an extension or termination option.
54 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred. The right-of-use asset is typically
depreciated on a straight-line basis over the lease terms. The right of use assets recognised at transition is equal to the present value
of the lease obligations discounted at the incremental borrowing rate at the date to transition. The incremental borrowing rates used
for discounting at the date of transition for Singapore property is 6.50%, UK property is 5.95% and UK equipment is 12.17%.
The table below summarises the IFRS 16 impact on transition for lease liabilities and the corresponding right-of-use assets along
with the movement from 1 January 2019 to 31 December 2019:
Right-of-use asset
Lease Liability:
- Current Lease Liability
- Non-Current Lease Liability
Rental lease expense under IAS 17 (Excl VAT/GST)
Replaced by:
Depreciation of right-of-use asset
Finance charges on lease liability
Total expense to profit and loss
Net increase in Expenses
AS AT
31 DECEMBER
2019
£
AS AT
1 JANUARY
2019
£
4,912,511
5,623,656
604,863
4,580,165
5,185,028
347,678
5,275,978
5,623,656
YEAR
ENDED
31 DECEMBER
2019
£
744,091
(716,583)
(301,363)
(1,017,946)
273,855
The following is a reconciliation of total operating lease commitments at 31 December 2018 (as disclosed in the financial
statements to 31 December 2018, restated) to the lease liabilities recognised at 1 January 2019:
Total operating lease commitments disclosed at 31 December 2018 (restated)
Total finance lease commitments disclosed at 31 December 2018
Recognition exemptions:
- Leases with remaining lease terms of less than 12 months
Additions of lease liability for group due to lease extensions as of 1 Jan 2019
Additions of lease liability for group from new leases as of 1 Jan 2019
Operating lease liabilities before discounting
Discounted using borrowing rates at 1 January 2019
Total lease liabilities recognised under IFRS 16 at 1 January 2019
Of which are:
Current lease liability
Non-current lease liability
AMOUNT
£
4,860,674
63,957
–
1,647,614
286,624
6,858,869
5,623,656
5,623,656
347,678
5,275,978
5,623,656
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 55
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The operating lease commitments disclosed at 31 December 2018 per the Annual Report 2018 were £5,063,912 including
Malaysian entities lease liability of £203,238.
The changes in accounting policy affected the following items in balance sheet on 1 January 2019.
Assets (excluding Malaysia)*
Property plant and equipment’s
Cash and Cash Equivalents
Trade and Other Receivables
Right-of-use-assets
Prepayments
Liabilities (excluding Malaysia)*
Leasing
Lease liability
Trade payables
Contract liabilities
Other payables (accrued)
CARRYING
AMOUNT AT 31
DECEMBER 2018
£
IFRS 16
ADJUSTMENTS
£
CARRYING
AMOUNT AT 1
JANUARY 2019
£
460,034
89,224
727,433
(63,957)
–
–
396,077
89,224
727,433
–
5,623,656
5,623,656
311,116
–
311,116
63,957
(63,957)
–
–
5,623,656
5,623,656
379,785
645,574
398,626
–
–
–
379,785
645,574
398,626
* 2018 comparatives have been restated to exclude Malaysia operations following the disposal in 2019.
3. SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Preparation
These Financial Statements of the Group and Company are prepared on a going concern basis, under the historical cost
convention (with the exception of goodwill) and in accordance with International Financial Reporting Standards (IFRS) and
IFRIC interpretations issued by the International Accounting Standards Board (IASB) and adopted by the 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.
(ii) Basis of consolidation
The Group financial statements consolidate the accounts of Malvern International plc and all of its subsidiary undertakings
made up to 31 December 2019. The Consolidated Statement of Comprehensive Income includes the results of all subsidiary
undertakings for the period from the date on which control passes. Control is achieved where the Company (or one of its
subsidiary undertakings) obtains the power to govern the financial and operating policies of an investee entity so as to derive
benefits from its activities.
(iii) Adoption of new and revised International Financial Reporting Standards
This is the first set of the Group’s annual financial statements in which IFRS 16: Leases has been applied. At the date of
approval of these Financial Statements, the Directors have considered IFRS Standards and Interpretations, which were in issue
not yet effective but have not been applied in these financial statements.
Several 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 or amendments to standards issued not yet
effective that will have a material effect on the financial statements.
56 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(iv) Going concern
The financial statements have been prepared on a going concern basis.
The Board consider the going concern basis to be appropriate having paid due regard to the Group and Company’s projected
results during the twelve months from the date the financial statements are approved and the anticipated cash flows,
availability of loan facilities and mitigating actions that can be taken during that period.
In making their assessment of going concern the directors have considered the current and developing impact on the
business as a result of the Covid-19 pandemic. Whilst this had an immediate impact on the Company’s operations, with closure
of its schools in March and April 2020, the business has sought to adapt its service offering through on-line learning and the
re-opening of schools. However, there is no certainty as to how long the Covid-19 will persist and how quickly business will
return to normal levels.
The directors have taken a range of mitigating actions to protect and manage the short, medium and long term interests of
the business, its employees and students during this pandemic. Specifically, the directors have considered the following in the
preparation of the financial statements on a going concern basis:
Profitability
•
In late 2019, due to difficult trading conditions and substantial financial resources the business required, a decision was
made to discontinue the Group’s loss-making operations in Malaysia, with the aim being to improve the Group’s future
profitability.
•
•
•
•
Following the closure of the UK and Singapore schools in March/April 2020, operations reopened on a phased basis in
August 2020.
In August 2020, also due to difficult trading conditions (amplified further by the impact of Covid-19) combined with the
continuing financial resources required for the business, a further decision was made to close the Group’s Singapore
operations, with the aim being to improve the Group’s future profitability.
The group has now refocused its activity on the UK operations having reduced its operational presence and financial
obligations overseas.
Profit and cash flow projections for the Group assume profitable growth in its key operating entities once operations
return to normal.
•
The Group is working on the assumption that levels of business will return to normal in during 2021.
Cash flow
•
The Group’s main source of funds are internally generated funds and new capital injections. It is possible that the Group
may continue to require further funding and capital injections in the future and there will be some reliance placed on their
ability to do so, if required.
•
•
The Group undertook a Placing in February 2019 raising £606,000 before expenses. A further £1.15m (net) was raised
by way of a Placing and Subscription in June 2020. The proceeds of the Fundraising in June 2020 are being used to
supplement the Company's working capital resources and strengthen the Company's balance sheet with a view to
providing sufficient liquidity and flexibility to allow the Company to manage through the period of expected disruption
caused by Covid-19.
The Group entered into a loan agreement with Boost & Co Ltd. in August 2019 with £2.60m drawn at 31 December 2019.
The funds were used to repay a shareholder loan and provide working capital for the growth of the organisation. In May
2020, the existing debt with Boost & Co. has been restructured providing for a two year capital repayment holiday and
interest free period. As part of the restructuring agreement, the option of the second tranche of up to £4.0m, which was
available to fund potential permitted acquisitions, was cancelled.
•
The Board has sought deferral agreement with all major creditors and has been pleased with the support received.
The above factors, combined with the continued risk of Covid-19, highlight a material uncertainty as to the company’s ability to
continue as a going concern. Whilst these material uncertainties exist, current trading has given the Board confidence that it is
appropriate to prepare the accounts on a going concern basis. The financial statements do not include any adjustments that
may be required in the event that the company could not continue as a going concern.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 57
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(v) Basis of Combination
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.
(vi) Subsidiary Company
Investment in subsidiaries is stated in the financial statements of the Company at cost less any provision for impairment
losses. The financial statements of subsidiaries acquired are consolidated in the financial statements of the Group from the
date that control commences until the date control ceases, using the acquisition method of accounting.
(vii) Functional and Presentational Currency
The consolidated financial statements have been presented with Pounds 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, 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 statement of financial position 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:
1 Pound Sterling to Singapore Dollar
Closing rate
Average rate
1 Pound Sterling to Malaysian Ringgit
Closing rate
Average rate
58 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
2019
2018
1.770
1.742
5.394
5.306
1.737
1.795
5.280
5.375
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(ix) Property, Plant and Equipment
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.
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:
Classroom and office equipment
3 - 10 years
Motor vehicle
5 years
(x) Intangible 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.
Software is amortised over a period of 3-5 years.
(xi) Intangible assets – development assets
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.
(xii) Impairment of tangible and intangible assets excluding goodwill
An assessment is made at balance sheet date as to 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 contingent liabilities
recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any.
For the purposes 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.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 59
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(xiv) Financial assets, loans and receivables
Financial assets
Financial assets are recognised on the statement of financial position 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 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 and subsequently 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’, related parties, and cash and cash equivalents included in the Consolidated Statement of Financial Position.
(xv) Impairment of financial assets
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 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.
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 16.
(xvi) Revenue Recognition
Revenue is recognised on the following basis:
Courses are provided over time based on period stated on the contract with students. As such revenue for various services is
recognised in the following way:
•
•
•
Course/accommodation fees – revenue is spread over the duration of the course as stated in the contract, as this fairly
represents the value of services provided. Deposits received in respect of future courses/accommodation fees are treated
as deferred income at the point of receipt. Contract liabilities relate to course and accommodation fees received in
advance and are recognised in the income statement based on classes conducted and accommodation provided.
Registration/application fees - revenue is spread over the duration of the course as stated in the contract, as this fairly
represents the value of services provided
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.
(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.
60 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(xx) Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax movements.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates and tax laws that
have been enacted or substantively enacted in countries where the Company and its subsidiaries operate by the statement of
financial position.
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. 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 statement of financial position 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 statement of financial position
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) 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.
(xxii) 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 because of services rendered by employees up to the year end.
(xxiii) Equity instruments
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are
deducted against share premium.
Where ordinary shares will be issued as part of deferred purchase consideration then:
•
•
where the number of shares to be issued has been fixed, then such deferred consideration will be classified as equity
where the number of shares to be issued is dependent on certain performance criteria being met, then such deferred
consideration will be classified as liability at inception.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 61
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(xxiv) Borrowing Costs
Borrowing costs incurred to finance the development of property, plant and equipment are capitalised during the period 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.
(xxv) 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.
(xxvi) Warrants
In certain circumstances the group will issue warrants over shares. The warrants currently in issue are carried at fair
value through profit and loss (FVPL), and are categorised under level 3 of the fair value hierarchy. The judgements and
estimates made in respect of calculating the fair value for these warrants are disclosed further in this section.
(xxvii) Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the
related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed
below.
Estimates
Estimation of useful lives of assets
The group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written
down.
Goodwill and other indefinite life intangible assets
The group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and
growth rates of the estimated future cash flows. The specific estimates used in calculating impairment are detailed in note 15 .
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to the group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal
or value-in-use calculations, which incorporate a number of key estimates and assumptions. The specific estimates used in
calculating impairment are detailed in note 14 .
62 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 grouping the trade receivables based on shared
characteristics, including line of business.
Fair value of warrants
The Group and Company is required to fair value the warrants at the date of inception and at each subsequent statement of
financial position date. This involves a number of key estimates and assumptions to calculate fair value. The specific estimates
used in calculating fair value are detailed in note 24.
Judgements
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.
IFRS16 leases
This is the first set of the Group’s annual financial statements in which IFRS 16 Leases have been applied. Specific judgement is
required in determining the initial lease liability, as detailed in note 2 above.
Warrants
The Group determines the fair value of warrants using appropriate modelling. Judgement is required in determining a model
to use to fair value warrants. Based on the nature of warrants, the Group has determined that Black Scholes model is an
appropriate model to use. Management have assessed the terms of the warrants and concluded that there is no fixed for
fixed element and as such have classified the warrants as a liability and not as equity.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 63
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. (A) SEGMENTAL INFORMATION
The Group organises its operations based on geographical locations, as the services provided are similar in each jurisdiction
ie educational and language courses. During the year, the company sold its Malaysia operations. As such the segmental
information below is reported for UK and Singapore, with Malaysia reported as discontinued operations.
The segmental analysis is as follows:
2019
Revenue from external customers
4,703,864
1,802,451
UK
£
SINGAPORE
£
DISCONTINUED
OPERATIONS
£
Depreciation and amortisation
Impairment of Intangibles
Profit/(Loss) before taxation
Taxation charge
Discontinued operations
Profit/(Loss) for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
(3,849,431)
(2,036,082)
(2,482,788)
(8,368,301)
(2,482,788)
(2,482,788)
656,964
2,211,471
515,367
664,786
(3,659,431)
(2,036,082)
(190,000)
–
–
–
4,007,083
7,094,348
2,541,092
2,779,211
3,409,055
1,736,851
TOTAL
£
6,506,315
1,172,331
2,876,257
(5,695,213)
(190,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
(354,254)
(354,254)
–
–
–
6,786,294
10,503,403
4,277,943
£
6,337,321
302,708
(363,520)
150,828
(212,692)
(354,254)
(566,946)
8,240,265
2,783,396
2,662,955
2018
£
£
Revenue from external customers
4,379,667
1,957,654
Depreciation, write-offs and amortisation
Profit/(Loss) before taxation
Taxation credits
Profit/(Loss) from continuing operations
Discontinued operations
Profit/(Loss) for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
193,789
98,225
150,828
249,053
–
108,919
(461,745)
–
(461,745)
–
249,053
(461,745)
3,924,136
1,099,408
2,524,028
4,316,129
1,683,988
138,927
64 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(B) DISCONTINUED OPERATIONS
On 31 December 2019, the group announced its sale of business of Malaysia with effect from 1 Jan 2020 and is reported in the
current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the
date of disposal is set out below.
i) Financial performance of discontinued operations.
The financial performance of the discontinued operations presented are for the year ended 31 December 2019 and
31 December 2018
Revenue
Other Income
Expenses
Profit before tax
Income tax expenses
Profit after income tax of discontinued operation
(Loss) on disposal of subsidiary
Impairment of brand value and licenses
(Loss) from discontinued operations
Exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net cash generated by subsidiary
ii) Details of the sale/disposal of the subsidiary
2019
£
508,772
33,225
2018
£
1,073,320
85,467
(1,192,805)
(1,513,041)
(650,808)
(354,254)
(5,399)
(656,207)
(375,270)
(1,031,477)
(1,451,311)
(2,482,788)
(385,600)
(385,600)
(389,336)
–
–
(354,254)
(354,254)
(354,254)
280,922
280,922
(24,054)
(82,671)
(27,744)
(389,336)
(134,469)
Consideration received or receivable:
Fair value of consideration
Carrying amount of net assets sold
(Loss) on sale of subsidiary before income tax and reclassification of foreign currency translation reserve
Reclassification of foreign currency translation reserve
(Loss) on disposal of subsidiary
2019
£
–
10,330
10,330
(385,600)
(375,270)
At the end of 2019 the Group sold the remaining assets of the Malaysia business, and as part of the transaction, the purchaser
took over £75,000 of a loan with AmBank.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 65
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
iii) The Details of sale/disposal of the subsidiary
The carrying amounts of assets and liabilities as at the date of sale (31 December 2019)
Property, plant and equipment
Trade receivables
Total assets
Trade creditors
Total liabilities
Net assets
5. SALE OF SERVICES
Course fees
Accommodation fees
Application fees, registration and examination fees
Training fees, course materials and others
6. OTHER INCOME
Contribution from ACCA towards marketing activities
Rental and related income
Consultancy Income
2019
£
54,901
225,864
280,765
(291,095)
(291,095)
(10,330)
2019
£
4,778,612
1,208,394
142,219
377,090
2018
RESTATED*
£
4,252,142
1,897,648
45,308
142,223
6,506,315
6,337,321
2019
£
34,736
142,687
–
177,423
2018
RESTATED*
£
–
43,135
10,642
53,777
66 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7. SALARIES AND EMPLOYEES’ BENEFITS
Staff salaries and related costs
Social security costs – staff
Directors’ remuneration (executive directors)
Directors’ fees (non-executive directors)
Social security costs – Directors
Staff training and welfare
Pension
Highest paid director
Remuneration and benefits
Average number of employees
Lecturers
Marketing staff
Operational and administration staff
2019
£
1,487,101
100,953
200,000
24,000
–
32,535
37,017
2018
RESTATED*
£
750,429
82,886
103,078
10,916
10,944
11,806
18,364
1,881,606
988,423
200,000
103,078
NUMBER
NUMBER
79
23
72
174
105
24
72
201
The average number of employees is calculated based on the number of full or part time employees on the payroll each month.
8. FINANCE COSTS
Interest on leases (IFRS 16)
Interest on Term Loan
Interest on Convertible Loan Note
2019
£
301,363
107,518
13,124
422,005
2018
RESTATED*
£
2,698
–
20,149
22,847
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 67
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
Office and equipment rental*
Administrative and marketing expenses
Expected credit losses – trade receivables
Uncollectible other receivables written off
Fair value movement on warrants
Fair value movement on convertible loan notes
2019
£
35,000
55,664
–
1,338,787
189,990
95,643
(197,640)
17,307
2018
RESTATED*
£
34,000
32,673
927,953
699,753
18,000
–
–
–
*
Following the implementation of IFRS16, this is now reported under depreciation/interest expense, as explained in note 2.
10. INCOME TAX
Tax credit/(expense) attributable to the results is made up of:
Current year tax
Deferred taxation Credit/(Charge)
2019
£
–
(190,000)
(190,000)
2018
RESTATED*
£
(61,798)
190,000
128,202
The reconciliation of the current year tax expense and the product of accounting profit multiplied by the statutory tax rate is
as follows:
Accounting loss before tax from continuing operations
Loss before tax from discontinued operations
Loss before tax
Income tax at the statutory rate
Adjustments of income tax in respect of prior years
Deferred tax asset not recognised
Current year adjustment to deferred tax asset
Income tax (charge)/credit attributable to continuing
operations
Income tax attributable to discontinued operations
Income tax (charge)/credit in the consolidated
statement of comprehensive income
2019
£
(5,885,513)
(2,482,788)
(8,368,301)
(1,589,977)
1,589,977
(190,000)
(190,000)
–
(190,000)
%
19.0
–
2018
£
(212,692)
(354,254)
(566,946)
96,381
54,447
–
–
150,828
150,828
%
17.0
–
68 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
2019
£
2018
£
190,000
(190,000)
–
–
–
–
–
190,000
190,000
190,000
–
190,000
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
2019
£
552,474
3,278,131
3,830,605
2018
£
552,474
3,715,124
4,267,598
Deferred tax assets have not been recognised as it is not sufficiently certain that taxable profit will be available against which
these available tax losses can be utilised in the future.
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 £8,368,301 (2018: loss of £566,946) and the weighted average number of ordinary shares in
issue during the year of 256,453,628 shares (2018: 185,344,459 shares).
Calculations for dilutive EPS have not been made in respect of the convertible loan notes (note 30) on the basis the impact
would be anti-dilutive.
There were no outstanding options in 2019 (2018: nil).
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 69
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. PROPERTY, PLANT, AND EQUIPMENT
LEASEHOLD
PROPER-
TY AND
IMPROVE-
MENTS
CLASS-
ROOM AND
OFFICE
EQUIPMENT
MOTOR
VEHICLE
RIGHT OF USE ASSETS
TOTAL
EQUIPMENT
PROPERTY
£
£
£
Cost
Opening balance, 01 Jan 2018
500,076
2,228,160
40,958
Additions
Disposals
Acquisition-Subsidiary
284,444
19,014
(2,322)
–
–
178,603
–
–
–
Closing balance, 31 Dec 2018
782,198
2,425,777
40,958
£
–
–
–
–
£
–
–
–
–
£
2,769,194
303,458
(2,322)
178,603
3,248,933
Additions
Disposals
Exchange differences
Closing balance, 31 Dec 2019
Accumulated depreciation
Opening balance, 01 Jan 2018
Charge for the year
Disposals
Acquisition-Subsidiary
–
72,040
–
92,037
5,531,619
5,695,696
(170,604)
(1,550,087)
(40,958)
(9,820)
11,144
601,774
958,874
–
–
–
–
–
–
(1,761,649)
1,324
92,037
5,531,619
7,184,304
471,909
2,037,169
16,747
104,010
14,160
8,293
(922)
–
–
52,679
–
–
–
–
–
–
–
–
–
–
–
–
2,523,238
129,050
(922)
52,679
2,704,045
Closing balance, 31 Dec 2018
487,734
2,193,858
22,453
Charge for the year
Disposals
Exchange differences
Closing balance, 31 Dec 2019
Net book value
At 31 December 2019
At 31 December 2018
61,081
70,406
–
12,883
703,700
848,070
(149,540)
(1,480,814)
(22,453)
2,693
7,231
401,968
790,681
199,806
168,193
–
–
–
–
–
–
(1,652,807)
(5,438)
4,486
12,883
698,262
1,903,794
79,154
4,833,357
5,280,510
294,464
231,919
18,505
–
–
544,888
70 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. INVESTMENT IN SUBSIDIARY COMPANIES
COMPANY
Investment in subsidiaries
Unquoted equity shares, at cost
As at the beginning of the year
Additions*
Loan Capitalization of SAA-GE
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
2019
£
2018
£
10,725,495
480,225
–
–
7,115,081
2,980,290
630,124
–
11,205,720
10,725,495
2,625,000
2,625,000
–
7,161,370
9,786,370
1,419,350
–
–
2,625,000
8,100,495
* During the 2019 financial year, Loan to SAAGE Singapore was capitalised for £480,225
Although Malaysia operations were sold during the year, the investments in Malaysia were held through Malvern International
Academy Pte Ltd, a company registered in Singapore. Investments in Malaysia have been fully impaired on 31 December 2019.
** The business and financial performance of Singapore operations have not been as expected, and the operations in this
jurisdiction continue to make losses. As such Investment in SAA Global Education Center Pte Ltd and Malvern International
Academy Pte Ltd has been fully impaired
Investment relating to Malvern House Group £2,076,557 and Communicate English School £1,560,940 has been impaired on
31 December 2019.
The company owns 100% share capital of the following companies:
Malvern International Academy Pte Ltd (Singapore)
Malvern Language Academy Pte Ltd (Singapore)
SAA Global Education Centre Pte Ltd (Singapore)
Communicate English School Limited (UK)
Malvern House Group Limited (UK)
Smart Eduprocess Group Sdn Bhd (Malaysia)
AEC Eductech Sdh Bhd (Malaysia)
Malvern House International Limited (UK) is 100% owned by Malvern House Group Limited.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 71
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. INTANGIBLE ASSETS
Intangible assets are summarised as follows:
LICENCES
BRANDS
CUSTOMER
LIST
DOMAIN
NAME
DEVELOP-
MENT
ASSETS
CONTRACT
ASSETS
ACQUISITION COSTS
£
£
£
Opening balance, 01 Jan 2018
868,006
3,900,000
88,223
Additions
–
427,386
274,637
Closing balance, 31 Dec 2018
868,006
4,327,386
362,860
Additions
–
–
Disposal – discontinued
operations
(868,006)
(1,687,500)
–
–
£
–
12,242
12,242
–
–
£
1,505
260,231
261,736
£
–
–
–
TOTAL
£
4,857,734
974,496
5,832,230
172,809
508,000
680,809
–
–
(2,555,506)
Closing balance, 31 Dec 2019
–
2,639,886
362,860
12,242
434,545
508,000
3,957,533
Accumulated amortisation
Opening balance, 01 Jan 2018
128,290
2,345,648
Charge for the year
8,405
186,369
Closing balance, 31 Dec 2018
136,695
2,532,017
–
22,554
22,554
36,286
–
612
612
–
–
–
–
–
–
2,473,938
217,940
2,691,878
1,224
15,000
64,012
324,261
207,739
–
–
867,630
304,020
10,406
419,545
443,988
2,045,589
Charge for the year
Impairment in respect of
continuing operations
Disposal - discontinued
operations
(136,695)
(967,500)
–
–
–
–
(1,104,195)
Closing balance, 31 Dec 2019
Net book value, 31 Dec 2019
–
–
2,639,886
362,860
12,242
434,545
508,000
3,957,533
–
–
–
–
Net book value, 31 Dec 2018
731,311
1,795,369
340,306
11,630
261,736
–
–
–
3,140,352*
*In the PY comparatives, £5,946 of Software was included in the balance sheet that has now been fully amortised.
In accordance with IAS 36, the Board has reviewed all ongoing cash generating units, and have carried out full impairment of
the carrying value of the assets as at 31 Dec 2019. The impairment is in relation to Singapore and UK operations.
Singapore
Singapore operations have been making losses in recent years, and management has assessed that the cash flows generated
from this business does not support the carrying value of intangibles. As such management has decided to impair the carrying
value of all intangibles in relation to Singapore business.
UK
The new management have reassessed the carrying value of intangibles on the basis of UK business performance, and
whilst the UK business has been performing relatively better than Singapore, management has assessed that the cash flow
generated by UK business does not support the specific intangibles that had been recognised and therefore have taken the
decision to impair these intangibles.
In order to arrive at the above impairment decisions, the recoverable amount of these CGUs was based on estimated future
cash flows discounted at entity’s cost of capital.
The key assumptions used in the estimation of the recoverable amount are set out below:
The discount rate is based on the company’s existing debt facility interest rate of 10%.
The cash flow projections included specific estimates for five years.
* Trademark, with carrying cost and accumulated amortisation of £22,579 has been removed from the above table.
72 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. GOODWILL
Cost
Balance as at the beginning of the year
Additions
Impairment
Balance as at the end of the year
2019
£
2018
£
2,250,018
474,207
–
1,775,811
(830,668)
–
1,419,350
2,250,018
Goodwill has arisen on acquisition in 2018 of Communicate English School Ltd (UK Operations), and in 2017 on acquisition of
SAAGE (Singapore operations). Of the brought forward carrying value of £2,250,018 at the start of the year, £474,207 relates to
SAAGE and £1,775,811 relates to Communicate.
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.
Singapore Operations
As mentioned above in note 14, Singapore operations have been making losses in recent years, and management has
assessed that the cash flows generated from this business does not support the carrying value of intangibles. As such
management has decided to impair the carrying value of £474,207 in relation to this business.
Communicate (UK Operations)
The recoverable amount of this CGU is £356,461 less than the carrying value of £1,775,811. As such, goodwill has been
impaired by £356,461, leaving a carrying value of £1,419,350. The following assumptions were used to calculate the amount
recoverable:
•
•
•
Discounted Cash Flow model produced modelling cashflow for Communicate over 5 years
Terminal value applied to cashflow from year 6 onwards
Discount rate of 10% applied reflecting the cost of borrowing to the group
• Growth rate of 3.4% applied reflecting the industry growth rates adjusted for group expectations
•
Sensitivities around the model: a 0.1% increase in the growth rate reduces the potential impairment by approximately
£100k; a 0.1% increase in the discount rate has an impact of approximately £24k increase in impairment
•
Assumed return to trading levels of around 90% by January 2021
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 73
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. TRADE RECEIVABLES
Trade Receivables
2019
£
2018
£
751,333
1,041,712
At 31 December 2019, 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
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
2019
£
203,978
547,355
–
2018
£
273,681
363,161
404,870
751,333
1,041,712
2019
£
2018
£
174,688
183,492
385,031
34,163
157,451
751,333
133,547
(133,547)
751,333
404,436
20,441
433,343
1,041,712
141,027
(141,027)
1,041,712
The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as
at 31 December 2019:
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
GROSS
CARRYING
AMOUNT
LOSS
ALLOWANCE
0%
174,688
0%
0%
385,031
34,163
NET
CARRYING
AMOUNT
174,688
385,031
34,163
46%
290,998
(133,547)
157,451
884,880
(133,547)
751,333
74 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
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 reversed during the year – Discontinued operations
Expected credit losses during the year
Receivables written off during the year as uncollectible
Balance as at the end of the year
2019
£
141,027
(11,686)
(90,590)
189,990
(95,194)
133,547
2018
£
102,040
92,305
(53,318)
–
–
141,027
Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with
the group, and a failure to make contractual payments for a period of greater than 120 days past due.
These are no contract assets within trade and other receivables.
17. OTHER RECEIVABLES AND PREPAYMENTS
Rent deposits
Prepayments
Other debtors
GROUP
COMPANY
2019
£
268,207
332,333
64,495
665,035
2018
£
344,242
722,205
196,913
1,263,360
2019
£
–
17,800
67,578
85,378
2018
£
–
11,839
49,529
61,368
Included within the above balance are provisions of £95,643 relating to the recoverability of related party and other
receivables.
18. DUE FROM RELATED PARTIES
Due from related parties
Non-trade
GROUP
2019
£
2018
£
COMPANY
2019
£
2018
£
–
56,679
–
58,667
The related party balances above were netted off as part of the KSP transaction disclosed in note 23.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 75
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. CASH AND CASH EQUIVALENTS
GROUP
COMPANY
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
20. TRADE PAYABLES
Trade payables are denominated in the following
currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
21. CONTRACT LIABILITIES
2019
£
83,264
–
83,264
21,751
61,513
–
83,264
GROUP
2019
£
293,320
691,736
–
985,056
2018
£
96,573
8,807
105,380
36,562
53,076
15,742
105,380
2018
£
181,194
199,483
–
380,677
2019
£
864
–
864
864
–
864
COMPANY
2019
£
–
–
–
–
2018
£
2,134
–
2,134
–
2,134
–
2,134
2018
£
–
–
–
–
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 in the subsequent financial year.
The amount of £756,425 (2018: £653,219 ) recognised in contract liabilities at the beginning of the period has been recognised
as revenue for the period ended 31 December 2019
Contract liabilities denominated in the following currencies:
Singapore Dollar
Pound Sterling
Malaysian Ringgit
Opening balance
Deferred income recognised during the year
Course fees received in respect of subsequent financial year
Closing balance
76 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
2019
£
327,197
429,228
–
756,425
2018
£
451,133
194,440
7,647
653,220
2019
£
653,220
(653,220)
756,425
756,425
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. OTHER PAYABLES AND ACCRUALS
Other payables
Accrued expenses
23. DUE TO RELATED PARTIES
Due to related parties
Non-trade
Amounts due to related parties are denominated in the
following currencies:
Singapore Dollar
Pound Sterling
Total
Due to related parties
KSP Investments Pte Ltd
Dr Sam Malafeh
During the year,
GROUP
COMPANY
2019
£
258,694
430,475
689,169
2018
£
268,008
301,353
569,361
2019
£
192,793
100,022
292,815
2018
£
96,805
33,178
129,983
GROUP
2019
£
2018
£
COMPANY
2019
£
2018
£
46,646
554,694
32,691
297,197
3,955
42,691
46,646
218,824
335,870
554,694
–
32,691
32,691
GROUP
COMPANY
2019
£
–
46,646
46,646
2018
£
516,021
38,673
554,694
2019
£
–
32,691
32,691
–
297,197
297,197
2018
£
297,197
–
297,197
a)
KSP Investments Pte Ltd, a Company of which two of the Directors were also shareholders during 2019, received a repayment
of £564,001 to clear amount owed to them. The outstanding balance as at 31 December 2019 is £0 (2018: £516,021).
b) All amounts due to related parties were unsecured, interest-free, and due within the next twelve months.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 77
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. FINANCIAL LIABILITIES
Non-current liabilities
Finance lease obligations
Convertible Loan Notes
Term Loan
Warrants
Lease
Current liabilities
Convertible Loan Notes
Lease
Trade and other payables
Related parties
Total
GROUP
2019
£
–
–
2,438,573
75,640
4,580,165
7,094,378
316,587
604,863
1,674,225
46,646
2,642,321
9,736,699
2018
£
63,957
299,280
140,135
–
–
COMPANY
2019
£
–
–
2,438,573
75,640
–
2018
£
–
299,280
–
–
–
503,372
2,514,213
299,280
–
–
974,038
554,694
1,528,732
2,032,104
316,587
–
292,815
32,691
642,093
3,156,306
–
–
129,983
297,197
427,180
726,460
Convertible Loan Notes
At 31 December 2019, the Group has obligation for £316,587. (See Note: 30).
Term Loan
In August 2019, Malvern received a Term Loan from BOOST & CO for £2,600,000. This loan carries an interest rate as the
higher of (a) 10% per annum, or (b) 8% per annum plus LIBOR. The loan will be repaid over 60 months on a fixed monthly
instalment basis. However, as part of fundraising in June 2020, the Company has agreed a restructuring of its existing debt
with Boost & Co. which provides for a two-year capital repayment holiday and interest free period subject to performance
conditions.
As part of the transaction around the disposal of Malaysia operations, the company retained half of loan with AmBank, whereas
the other half of the loan was taken over by the purchaser. The loan is to be repaid over the length of the loan term ending Dec
2024, with repayment starting from Jan 2021. The value of half of the loan, together with interest capitalisation is £94,563.
Warrants
As part of the term loan, BOOST & CO was issued warrants over 12,167,131 shares. These warrants are exercisable at the Strike
Price at any time over the following 10 years since the inception of term loan in August 2019.
As at the date of financial position, the Company has fair valued these warrants at £75,640*. The following estimates were used
to calculate this fair value:
•
•
•
•
Annualised volatility of 109% and 85% at the inception of term loan and at the year end respectively, calculated using share
price volatility over a preceding 3 year period.
Maturity of 10 years applied, reflecting the duration over which BOOST & CO could exercise these warrants.
Risk free rate of 0.50%, being the Yield on UK 10 year Government bonds.
Strike price of £0.0256, being the 28 day average share price preceding the date (ie 27 Aug 2019) of drawdown
* a reasonable change in assumption used in calculating the fair value of the warrant will not lead to a material change.
78 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. SHARE CAPITAL
ALLOTTED, CALLED UP AND FULLY PAID
NO OF
ORDINARY
SHARES
NOMINAL
VALUE OF
ORDINARY
SHARES
NO OF
DEFERRED
SHARES
NOMINAL
VALUE OF
DEFERRED
SHARES
NOMINAL
VALUE OF ALL
SHARES
At 31 December 2018 1p ordinary
shares and 1p deferred shares
Additions during the year –
21 February 2019 1p ordinary shares
At 31 December 2019 1p ordinary
shares and 1p deferred shares
243,426,293
7,001,797
44,198,781
2,209,939
9,211,736
15,150,000
151,500
–
–
151,500
258,576,293
7,153,297
44,198,781
2,209,939
9,363,236
During February 2019, 15,150,000 1 p ordinary shares were issued as a fund raising at 4 p each
Deferred shares have no rights attached to them.
26. 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
2019
£
5,016,849
454,500
(39,900)
5,431,449
2018
£
896,111
4,445,518
(324,780)
5,016,849
The share premium reserve arises where shares have been issued at a price more than the nominal value of 1 p (formerly 5 p
until the division of the shares in June 2018) less any costs of the issue.
(ii) Retained earnings
At the beginning of the year
Profit / (Loss) for the year
At the end of the year
GROUP
2019
£
(9,196,097)
(8,368,301)
(17,564,398)
2018
£
(8,629,151)
(566,946)
(9,196,097)
COMPANY
2019
£
(4,771,282)
(12,660,341)
(17,431,623)
2018
£
(4,433,867)
(337,415)
(4,771,282)
Retained earnings represent the accumulated surplus or deficit of distributable reserves.
(iii) Translation reserve
At the beginning of the year
Translation difference on discontinued operations
Translation differences on continuing operations
At the end of the year
GROUP
2019
£
589,290
(385,600)
68,884
272,574
2018
£
739,455
–
(150,165)
589,290
COMPANY
2019
£
–
–
–
–
2018
£
–
–
–
–
The translation reserve arises from translation differences arising from converting subsidiary operations’ income statements
and statements of financial positions at the prevailing rates of exchange.
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 79
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(iv) Convertible loan reserve
At the beginning of the year
Changes in the present value
At the end of the year
GROUP
COMPANY
2019
£
28,822
–
28,822
2018
£
104,187
(75,365)
28,822
2019
£
28,822
–
28,822
2018
£
104,187
(75,365)
28,822
The convertible loan reserve arose on the issue of convertible loans notes in November 2017 (note 30).
(v) Capital reserve
The capital reserve arose on the merger of the Company, then AEC Plc, and AEC Edu Group Pte Limited in 2004.
27. RELATED PARTY TRANSACTIONS
There were no transactions of income/(expenses) with related parties, except the ones mentioned in notes 18 and 23.
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:
2019
Sam Malafeh
Mark Elliott
Allan Carroll
2018
Sam Malafeh
Wee Hock Kee
2019
£
2018
£
200,000
24,000
224,000
FEES
£
–
18,250
5,750
24,000
–
10,916
10,916
103,078
10,916
113,994
TOTAL
£
200,000
18,250
5,750
224,000
103,078
10,916
113,994
SALARY &
BONUS
£
200,000
–
–
200,000
103,078
–
103,078
28. SUBSEQUENT EVENTS
The Directors are reporting the following subsequent events to the Statement of Financial Position which are significant to
these Financial Statements.
Since the year end, it has become clear that the spread of Covid-19 will have a material impact on many economies globally
both through the effects of the virus itself and the measures taken by governments to restrict its spread. Given the significant
impact of Covid-19 on the company’s operations and working capital, the company undertook a fundraising in June 2020,
which raised £1,155,000.
Following a review of the operations, the board has decided to close its Singapore operations. The company has agreed with
the regulatory education board in Singapore that the majority of existing students will either be taught to the end of their
course or transferred to other institutions.
In addition, the company has agreed a restructuring of its existing debt with Boost & Co. which provides for a two-year capital
repayment holiday and interest free period subject to performance conditions.
80 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29. 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.
The group holds the following financial instruments:
2019
Financial assets at amortised cost
Cash and cash equivalent
Trade receivables
Other debtors
Total financial assets
Financial liabilities at amortised cost
Trade and other payables
Due to Related Parties
Borrowings
Lease liabilities
Convertible loan Note
Financial liabilities at FVPL
Warrants
Total financial liabilities
Net position
NOTES
POUND
STERLING
SINGAPORE
DOLLAR
19
16
24
24
24
24
24
24
61,513
547,355
64,495
673,363
1,220,033
42,691
2,438,573
3,175,719
316,587
75,640
7,269,243
(6,595,880)
21,751
203,978
–
225,729
454,192
3,955
–
2,009,309
–
–
2,467,456
(2,241,727)
TOTAL
POUND
STERLING
83,264
751,333
64,495
899,092
1,674,225
46,646
2,438,573
5,185,028
316,587
75,640
9,736,699
(8,837,607)
(i) Credit risk
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. 65% (2018: 86%) of the Group’s accounts
receivables are made up of individual students, 12% (2018: 2%) relates to large funding organisations such as government
related bodies and the balance of 23% (2018: 11%) to other organisations. All trading activities are concentrated in South East
Asia and Europe. The analysis of aging debtors is provided in Note 16.
(ii) Liquidity risk
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
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 81
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Company can be required to pay.
2019
Trade payables
Other payables and Accruals
Due to related parties
Term Loan
Lease Liabilities
Convertible Loan Notes
Warrants
2018
Trade payables
Other payables and Accruals
Due to related parties
Finance leases
Convertible Loan Notes
ON DEMAND
OR WITHIN ONE
YEAR
£
WITHIN
2 TO 10 YEARS
£
985,056
689,169
46,646
–
604,863
316,587
–
2,642,321
–
–
–
2,438,573
4,580,165
–
75,640
7,094,378
ON DEMAND
OR WITHIN ONE
YEAR
£
WITHIN
2 TO 5 YEARS
£
380,678
569,361
554,694
29,846
–
1,534,579
–
–
–
63,957
299,280
363,237
(iii) Foreign currency risk
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.
At 31.12.2019
Singapore Dollar
Malaysian Ringgit
At 31.12.2018
Singapore Dollar
Malaysian Ringgit
10% WEAKENING OF GBP
10% STRENGTHENING OF GBP
IMPACT ON
EQUITY
£
IMPACT ON
INCOME/
RESERVES
£
IMPACT ON
EQUITY
£
IMPACT ON
INCOME/
RESERVES
£
126,039
–
270,240
5,770
88,346
–
38,001
26,230
(126,039)
(88,346)
–
–
(270,420)
(5,770)
(38,001)
(26,230)
(iv) Interest rate risk
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 2019, 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.
82 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
At 31.12.2019
Assets
Trade and other receivables
Cash and bank balances
Total assets
At 31.12.2019
Trade and other payables
Due to related parties
Borrowings
Lease liabilities
Warrants
Convertible loan notes
Total liabilities
FLOATING
RATES
LESS THAN
12 MONTHS
£
FIXED RATE
INTEREST
BEARING
NON-INTEREST
BEARING
£
TOTAL
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,438,573*
5,185,028
–
316,587
7,940,188
1,416,368
83,264
1,499,632
1,674,225
46,646
–
–
75,640
–
1,416,368
83,264
1,499,632
1,674,225
46,646
2,438,573
5,185,028
75,640
316,587
1,796,511
9,736,699
*This loan carries an interest rate as the higher of (a) 10% per annum, or (b) 8% per annum plus LIBOR.
(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
2019
RECOGNITION
AT FAIR VALUE
NET
FINANCING
CASHFLOWS
INTEREST PAID
FAIR VALUE
MOVEMENT
RECLASSIFIED
INTEREST
ACCRUED
31 DECEMBER
2019
CASH
NON-CASH
Term loan
Warrants
169,982
–
2,524,581
(100,094)
(273,280)
–
273,280
Convertible loans
notes
IFRS 16 - Lease
Liability*
299,280
5,623,656
–
–
–
–
(744,091)
–
–
–
(197,640)
17,307
4,100
–
–
–
–
117,384
2,438,573
–
–
75,640
316,587
301,363
5,185,028
*£63,957 has been included within the opening of IFRS 16 lease liability which was disclosed as finance lease in prior year
financial statement.
1 JANUARY
2018
25,314
185,708
NET
FINANCING
CASHFLOWS
INTEREST
PAID
INTEREST
ACCRUED
(24,365)
(15,726)
(2,698)
(21,749)
2,698
21,749
995,813
–
–
–
ACQUISITION
OF
SUBSIDIARY
63,008
–
–
LOAN NOTE
CONVERSION
31 DECEMBER
2018
–
–
63,957
169,982
(696,533)
299,280
Leasing
Term loan
Convertible loans
notes
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 83
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(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
2019
£
GROUP
2018
£
2019
£
2,514,213
2,748,635
2,514,213
Less: Cash and cash equivalents
(83,264)
(96,573)
(864)
COMPANY
2018
£
928,575
(2,134)
926,441
Net debt
Total equity
Debt to equity
2,430,949
(2,297,757)
–
2,652,062
5,456,870
48.60%
2,513,349
(2,608,116)
9,210,125
–
10.05%
Financial assets are disclosed in notes 16 to 20. The Group’s principal financial assets are bank balances, trade and other
receivables.
30. 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 2017
Balance at 31/12/2017
Amount converted in 2018
Fair value adjustment
Balance at 31/12/2018
Fair value adjustment
Balance at 31/12/2019
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
17,307
316,587
3%
4%
5%
31. 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 £2,980,290.
84 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
2
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:
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.
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
STATEMENT OF FINANCIAL POSITION
Total Assets
Total Liabilities
Net Assets
Share Capital
Total Reserves
Net Equity
JULY 2018 TO
DEC 2018
£
680,675
(472,105)
208,870
39,173
169,697
31 DEC 2018
£
511,803
301,488
210,315
100
577,135
577,235
MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019 85
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes
86 MALVERN INTERNATIONAL PLC ANNUAL REPORT AND ACCOUNTS 2019
SHAREHOLDER INFORMATION
ADVISERS AND REGISTRARS
Registered office
100 Avebury Boulevard
Milton Keynes
United Kingdom
MK9 1FH
Head office
200 Pentonville Road
London
N1 9JP
Website
www.malverninternational.com
Registered number
05174452
Listing information
AIM:MLVN
Date of Annual General Meeting
15 October 2020
Nominated adviser and broker:
W H Ireland Limited
24 Martin Lane
London
EC4R 0DR
Company Secretary & Solicitors
Shoosmiths LLP
100 Avebury Boulevard
Milton Keynes
United Kingdom
MK9 1FH
Auditor
Crowe U.K. LLP
55 Ludgate Hill
London
EC4M 7JW
Registrar
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Financial PR
Communications Portfolio Limited
4th Floor
South quay building
189 Marsh Wall
Isle of Dogs
London E14 9SH
Shareholder enquiries
Our website contains a wide range of information
of interest to investors, including: latest news, press
releases and Annual Reports. For further information
please contact info.plc@malvernplc.com
Perivan 257705