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Malvern
International Plc
Annual Report 31 December 2020
Contents
Overview
Highlights
Strategic Report
Chairman’s statement
Our market
At a glance
Business model
Our strategic priorities
Operating review
Key performance indicators
Financial review
Risk management
Directors’ section 172(1) statement
3
5
7
8
10
12
14
16
18
20
23
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
26
29
34
36
40
43
45
Financial Statements
Auditor’s report
Consolidated statement of
comprehensive income
49
Consolidated statement of financial position 51
Consolidated statement of changes in equity 53
54
Consolidated statement of cash flows
55
Company statement of changes in equity
56
Company statement of cash flows
57
Notes to the financial statements
Shareholder information
89
Visit our website for further information
https://www.malverninternational.com
Highlights
For the year ended 31 December 2020
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.
“2020 was undoubtedly a very challenging year for Malvern with long periods of school closures, and social
distancing and global travel restrictions impacting student numbers, bookings and course delivery. However,
there remains strong demand for Malvern’s education products. The performance of the University Pathways
division in the last quarter of 2020 gives us confidence in our ability to grow this area of the business, and we
have continued to strengthen our relationships with our partners and develop new courses. The continued
rollout of the UK vaccination programme makes us hopeful that the UK will greenlight more nations to allow
international travel to the UK to reopen. On this basis, we expect the language business division to continue
to build during the course of the year and return to pre-pandemic levels in 2022. For these reasons, combined
with a significantly stronger and experienced management team in place, we remain positive about the
outlook for the Company.”
REVENUE(£m)
REVENUE(£m)
2019
2019
Restated 4.70
Restated 4.70
Richard Mace, Chief Executive Officer
Continuing operations1
REVENUE (£M)
REVENUE(£m)
REVENUE(£m)
2019
Restated 4.70
2019
Restated 4.70
1.90
2020
1.90
Operating loss(£m)
OPERATING LOSS (£M)
Operating loss(£m)
3.86
3.86
2020
2019
Restated
2019
Restated
2020
2020
Profit/(Loss) for the year(£m)
1.33
1.33
2020
2020
1.90
1.90
Operating loss(£m)
Operating loss(£m)
2019
2019
Restated
Restated
3.86
3.86
2020
2020
LOSS FOR THE YEAR (£M)
Profit/(Loss) for the year(£m)
Profit/(Loss) for the year(£m)
2019
2019
Restated 4.33
Restated 4.33
2020
2020
1.33
1.33
1.66
1.66
LOSS PER SHARE2
Profit/(Loss) per share2(£m)
Profit/(Loss) per share2(£m)
2019
2019
Restated
Restated
1.69
1.69
pence
pence
2020
2020
0.23 pence
0.23 pence
Profit/(Loss) for the year(£m)
1
2019
Restated 4.33
2019
Restated 4.33
2020
As at 31 December 2020, continuing operations included activities in the UK only, following the closure of the Singapore operations during
the year. The loss from discontinued activities in Singapore was £0.48m (2019: £1.55m), and the loss per share from discontinued activities was
0.06 pence (2019: 0.60 pence). This resulted in a total loss including discontinued operations of £2.14m (2019: £8.37m) and a total loss per share
including discontinued operations of 0.29 pence (2019: 3.26 pence). Further information relating to the discontinued operation for the period
1.66
to the date of the closure is set out in note 4(b) of the financial statements.
1.66
Profit/(Loss) per share2(£m)
2 Calculated using weighted average number of shares in issue during the period 735,661,044 (2019: 256,243,628).
Profit/(Loss) per share2(£m)
1.69
pence
1.69
pence
0.23 pence
0.23 pence
Malvern International Plc Annual Report and Accounts 2020 3
2020
2019
Restated
2019
Restated
2020
2020
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Strategic
Report
4 Malvern International Plc Annual Report and Accounts 2020
Chairman’s statement
For the year ended 31 December 2020
Introduction
2020 was undoubtedly a very challenging year
for Malvern with long periods of school closures,
and social distancing and global travel restrictions
impacting student numbers, bookings and course
delivery. The unprecedented events had a profound
impact on revenues and cash flow.
Revenues reduced 60% to £1.90m from continuing
operations (2019 restated: £4.70m). Strong cost
control measures were put in place to minimise losses
and ensure the continuity of the business. The impact
of these decisions resulted in an operating loss before
impairments of £1.33m (2019 restated: loss £1.18m)
and a total operating loss of £1.33m (2019 restated:
loss £3.86m).
The total loss for the year after discontinued
operations was £2.14m (2019: £8.37m). This resulted
in a loss per share of 0.29 pence (2019 restated: Loss
3.26 pence).
Financing
The prolonged situation necessitated the Group to
seek additional funding to provide sufficient cash
resources to trade through the year, while building
on the opportunities being created by the new
management team in the second half.
The Company raised £1.15m (net) by way of a
placing and subscription in June 2020 and at the
same time agreed the restructuring of its existing
debt facility with Boost & Co., providing a two year
capital repayment holiday and interest free period
subject to certain performance conditions. Since
the year end Malvern raised a further £1.60m after
expenses by way of placing and subscription.
Staff
I would like to take this opportunity to thank every
one of our members of staff and the teaching
faculty who have risen to the challenges of
adapting to remote teaching and continuing to
deliver quality education to our student body. We
were able to limit redundancies largely to support
staff working in our schools by taking advantage of
government support schemes where possible.
strategic goals, the Company introduced an EMI
share option scheme in 2020. The EMI Options
represented 8.5% of the existing share capital of the
Company at the time that they were awarded to
key members of staff and will vest after three years
once defined share price levels have been attained
for 40 consecutive business days.
Board and executive management
Richard Mace was appointed as CEO of the
Company in June 2020 having previously founded
Communicate English School Limited which was
acquired by Malvern in 2018. The Board currently
comprises of one Executive Director, Richard Mace,
and two independent Non-Executive Directors,
Mark Elliott and Alan Carroll.
Since joining the Company, Richard Mace has
made a number of appointments at senior level
to strengthen the executive management team
and introduce the skills and experience needed
to develop sales and strengthen operations. New
appointments include a Group Head of Finance,
Head of Global Sales and Marketing and a new role
of UEL Centre and Development Director, to reflect
the strong growth in that area of the business. More
information can be found in the operational review.
Company reorganisation
In August 2020, the Group announced closure
of Singapore operations and this is reported in
the current period as a discontinued operation.
Financial information relating to the discontinued
operation for the period to the date of the closure is
set out in note 4(b).
Malvern’s operations are now based solely in the UK.
The business comprises three language schools, on-
site pre-university and in-sessional courses on behalf
of university partners, and summer language camps
for juniors in a variety of settings. In addition, the
Group has expanded on its online offering, providing
a range of stand-alone remote and hybrid learning
experiences as well as providing teaching remotely
when required to existing in-class students. The
divisions share back-office administrative, finance,
sales and marketing resources.
To retain, incentivise and align the interests of
employees with certain performance targets and
The Board has reviewed its strategy and has
identified the significant opportunities that are
Malvern International Plc Annual Report and Accounts 2020 5
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Chairman’s statement continued
available in the growth of English Language training
(“ELT”) and in supporting international students into
higher education in the UK.
Governance
The Group recognises the importance that
environmental, social and governance matters
contribute to the long-term sustainability of the
business. Given its size, Malvern is not required
to disclose its GHG emissions and carbon data
at present. However, the management team is
currently in the process of assessing ways it can
capture the data required to report on its carbon
footprint and set targets for reducing its energy
consumption and energy intensity.
The Company is incorporated in the UK and
governed by the Companies Act 2006. Where
considered appropriate the Company follows
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.
Outlook
We now have an excellent management team in
place who are ensuring we are well prepared for
the return of international travel.
There is a significant backlog of demand for
face-to-face language tuition in the UK and it is
important that safe travel is available by the early
autumn to facilitate this. We are expecting the
number of university students to grow substantially
post pandemic, however online tuition may
continue into the 2021-2022 academic year.
The worldwide handling of the pandemic presents
evolving scenarios to us and so we will provide
updates when meaningful developments occur.
In the meantime, we continue to build a resilient
structure to enable foreign language students
worldwide to benefit from the training we are able
to provide to them in the UK.
Mark Elliott
Chairman
18 June 2021
6 Malvern International Plc Annual Report and Accounts 2020
Our market
For the year ended 31 December 2020
Markets
Long-term growth prospects for UK international
education
Despite the hiatus of 2020, the long-term prospects
for UK International Education remain strong. With
the Covid-19 vaccine rollout progressing well in the
UK, we expect the Government to be reviewing
options for international students to arrive in the
UK during 2021. We believe this reopening is likely
to be followed by a period of strong demand
from students who have either delayed course
starts or resume their education. To add to this,
the pandemic resulted in a number of ELT closures
and mergers with a reported 60 fewer accredited
centres in the UK than there were in March 2020,
providing opportunities for Malvern to grow its
market share and strengthen its position.
To add to this, the UK Government recognises the
value of the international student market to the UK
economy, publishing an update to its international
education strategy in February 2021 to support
recovery and growth. Its intention is to increase
education exports to £35 billion per year and
to increase the numbers of international higher
education students studying in the UK to 600,000 per
year by 2030. This commitment provides significant
opportunities for Malvern across its ELT and Pathways
businesses.
Prior to the Covid-19 pandemic, the UK hosted
around 560,000 international students, an increase
of around 12% since 2018/19 academic year and
in 2018 – the most recent ‘normal’ comparable
year - contributed £23.3bn to the UK economy. To
encourage growth and recovery, improved visa
conditions have been introduced to encourage ELT
in the UK. Students from Saudi Arabia and China,
two key markets for Malvern, are able to study for
up to six months on a visitor visa, and from 2021
Europeans can come and study in the UK for six
months without a visa.
In addition the market for the Pathways business
is also being supported through the introduction
of a new Graduate route for international
students, which will provide a period of 2 years
for undergraduate or masters’ students (3 years
if studying at PhD level) to stay in the UK to work,
or look for work, after they have completed their
degree in the UK.
It is against this backdrop that Malvern has set
its strategic priorities: to take advantage of the
opportunities available in its three areas of business:
Juniors, ELT and the University Pathways.
Figure 1: Non-UK domiciled students in UK higher education providers
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300
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Source: Higher Education Statistics Agency (HESA)
Malvern International Plc Annual Report and Accounts 2020 7
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
At a glance
Every student is unique.
We offer something for each one.
50,000+
Students Trained
Malvern International is a learning and
language skills development partner.
We offer international students essential
academic and English language skills,
cultural experiences and the support they
need to thrive in their academic studies,
daily life and career development.
120+
50,000+
Nationalities Taught
Students Trained
+
Experience
120+
Nationalities Taught
+
150+
Employees
Experience
150+
Employees
8 Malvern International Plc Annual Report and Accounts 2020
5
Destinations
5
Destinations
50,000+
Students Trained
London
5
Destinations
Manchester
120+
Nationalities Taught
London
Brighton
+
6Study locations
Manchester
Experience
Singapore
Brighton
150+
Employees
Online
Singapore
Online
London
Manchester
Brighton
Singapore
Online
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University Pathways
Malvern House Schools
Offering
British Council accredited, English UK registered
schools in London, Brighton and Manchester.
Description
A range of interactive language programmes
ranging from General English to CLIL teaching
programmes.
Courses
General English, English for professionals, exam
preparation for IELTS and Cambridge
Locations
Malvern House London
Communicate School Manchester
Malvern House Brighton
Offering
On and off-campus university pathway
programmes helping students progress to a
range of universities.
Description
Pre-university, foundation and pre-masters level
courses for international students joining UK
universities.
Courses
Undergraduate and Postgraduate Foundation
programmes in:
• Business and management,
• Accounting and finance,
• Humanities and social science, and
• Engineering and Science
International Year One in business
and engineering
In-sessional and pre-sessional
courses
Locations
University of East London
Wrexham Glyndwr University
NCUK, Malvern House London
Central
services:
Shared business systems
for student recruitment,
admissions and
quality
assurance.
Malvern Online Academy
Juniors and summer camps
Offering
A British Council accredited online school, offering
supported tuition to students from around the world.
Description
Online, remote and blended English language,
higher education, and professional education.
Courses
General English, English for Juniors preparation for
IELTS
Offering
English language and travel experience for
secondary school students.
Description
Fully-immersive summer residential language
camps and bespoke group programmes for 13
to 18 year olds.
Courses
General English and cultural experiences
Delivery options
Full time, part time, One to one
Locations
Summer study centres
Malvern International Plc Annual Report and Accounts 2020 9
Malvern International Plc Annual Report and Accounts 2020 9
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Business model
For the year ended 31 December 2020
We are a student-centred organisation, putting the needs and academic progression
of our students first. In doing so, our business is able to thrive, providing new
opportunities to form partnerships, provide employment and career opportunities,
and deliver value to our investors.
Group inputs
What we offer
People
The Group employs over 100
members of staff.
Premises
Malvern’s education centres
provide a high quality focus
point for our student body.
Technology
Malvern has developed its own
online education platform,
offering online courses and
additional learning support.
The Group also invested in a
student management system
and accounting system in the
last 2 years.
Financial Investment
Access to the capital
markets enables the Group
to grow the business through
internal investment on new
products, new locations and
acquisitions.
Excellent quality, accredited education
Long-term partnerships
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.
Flexibility for students
An inclusive community
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.
Sustainable growth in student numbers
Strong cost control
The Group aims to grow its student body
organically by building its reputation as a
quality educator, and by acquiring established
complementary education providers and
providing an unrivalled student experience.
Underpinned by
A strong culture
of innovation and
efficiency with no
compromise to the
quality of education.
Targeting profitable
markets while
maintaining student
nationality mix.
The Group 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 network are key to student recruitment.
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, to make the most of their cultural
experience. Malvern education centres aim to be
a hub for its student and staff bodies.
The Group maintains tight cost controls across
all its operations to ensure efficient use of the
resources available.
Varied courses and
Embedded quality
high-quality and results-
control processes,
driven teaching.
formalised risk
management and
strong IT infrastructure.
10 Malvern International Plc Annual Report and Accounts 2020
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.
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.
The Group aims to grow its student body
organically by building its reputation as a
quality educator, and by acquiring established
complementary education providers and
providing an unrivalled student experience.
Underpinned by
A strong culture
of innovation and
efficiency with no
Targeting profitable
markets while
maintaining student
compromise to the
nationality mix.
quality of education.
What we offer
Stakeholder outcomes
Excellent quality, accredited education
Long-term partnerships
Students
The Group 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 network are key to student recruitment.
We create value for students
by offering them qualifications
and language skills that
support them throughout their
lives. We are strongly student-
centred ensuring continued
progression in learning.
Flexibility for students
An inclusive community
Partners
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, to make the most of their cultural
experience. Malvern education centres aim to be
a hub for its student and staff bodies.
Sustainable growth in student numbers
Strong cost control
The Group maintains tight cost controls across
all its operations to ensure efficient use of the
resources available.
Varied courses and
high-quality and results-
driven teaching.
Embedded quality
control processes,
formalised risk
management and
strong IT infrastructure.
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.
Malvern International Plc Annual Report and Accounts 2020 11
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Our strategic priorities
For the year ended 31 December 2020
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.
Strategic priorities for 2020
Progress
Strategic priorities for 2021
Work with existing university
partners to deliver pre-university
courses in line with university re-
openings.
• University Pathways students for
September 2020 entry double the
numbers in 2019 with a total of
167 students from January 2021.
• New courses offered at UEL
and NCUK accreditation will
support the rebuilding of student
numbers during 2021.
• New centre director appointed at
• Continue to develop
UEL.
• Awarded status of NCUK delivery
centre – off-campus pathway.
relationships with UEL, NCUK and
Wrexham Glyndwr University.
• Build sales from Chinese market
with the introduction of a new
sales team.
• Continue to explore new
partnership opportunities and
broaden scope of existing
partnerships.
Re-build language student
numbers and enrolments in the UK.
• Language schools were required
• Until international travel opens
to remain closed throughout most
of 2020 and did not reopen until
March 2021.
• 80% of the existing language
students who were already in the
UK transitioned to online study via
Malvern Online Academy (MOA).
we will be focused on targeting
the students within the UK.
• Aim to build sales for H2 2021 with
a view to return to pre-pandemic
levels from 2022.
Build on the online education
platform and refine sales and
marketing strategies.
• Reviewed the branding
positioning, pricing, and sales
and marketing strategy for MOA.
• MOA refocused in 2020 to
provide remote lesson to existing
students affected by Covid-19.
• Expand the range of courses
offered to include add-on
subscription-based lessons to
support in-class teaching and
follow-on courses for students
that have completed class-
based studies.
• Review the technology platform
to grow the variety of courses
that can be offered and how
they are delivered.
12 Malvern International Plc Annual Report and Accounts 2020
Our strategic priorities continued
Strategic priorities for 2020
Progress
Strategic priorities for 2021
Strengthen the management
structure and appoint a Chief
Financial Officer to the Board of
Directors of the Company.
• Executive Management
Team strengthened with key
appointments across the
Company.
• Identify additional skills gaps at
senior management level and
provide training as required.
Improve internal systems including
sales, student-bookings, customer
relationship management,
finance, and marketing.
Safeguard the health and safety
of staff and students, following
government guidelines regarding
social distancing.
• Given the continued uncertainty
caused by the pandemic, the
Board took the decision to
postpone the appointment of
a CFO to the Board, instead
appointing a Group Head
of Finance to the Executive
Management Team.
• Company reorganisation
completed.
• Significantly strengthened
executive management team
with the appointment of a Group
Head of Finance, UEL Centre and
Development Director and Head
of Global Sales and Marketing.
• Establish a Chinese market
focused sales function with
particular focus on Juniors and
NCUK students.
• Build on new branding and
develop the Company image
and perception amongst key
partners and students.
• Restructured sales team and
• Appoint a Group Head of
agent network.
Operations.
• Company branding and identity
refreshed.
• All government guidelines
• Continue to follow health and
hygiene government guidelines
where required.
• Promote success of UK’s
vaccination programme to
students looking to access
programmes in our centres.
relating to Covid-19 hygiene and
social distancing rules followed
as required.
• UK schools were closed when
required with teaching delivered
remotely or through blended
learning.
• PPE and sanitising equipment
provided at all locations with
posters and reminders relating
to social distancing and hygiene
guidance displayed in all public
areas.
• Additional health and hygiene
training provided to staff.
• Additional support provided to
students during the year.
Malvern International Plc Annual Report and Accounts 2020 13
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Operating review
For the year ended 31 December 2020
Summary
• Language schools closed for long periods in
2020 due to Covid-19 and international travel
restrictions, affecting forward sales bookings.
• Courses for existing students delivered online
through Malvern Online Academy.
• Grew and strengthened relationship with UEL,
doubled student numbers on previous year and
added new courses.
• Awarded NCUK delivery centre status in
December 2020.
• All Malvern Junior camps cancelled in 2020.
University Pathways
Despite the uncertainty surrounding course start
dates, the University Pathways division made
considerable progress in 2020. In total, students
for the September 2020 intake at University of
East London (UEL) and Wrexham Glyndwr were
double the previous year at around 170 students,
and approximately 25% above management
expectations, driven largely by UEL.
The partnership with UEL was strengthened with
increasing student numbers, two new courses
validated and the appointment of an experienced
centre director. The two new courses, International
Year One in Computer Science and International
year One in Hospitality Management, will be
introduced from September 2021.
The successful application to become a NCUK
accredited delivery centre from our London
Kings Cross school is a significant achievement
for Malvern. A consortium of leading universities
dedicated to giving international students
guaranteed access to universities worldwide, NCUK
prepares international students for undergraduate
study at a UK university and guaranteed progression
options to over 20 leading partner universities
in the UK, as well as established universities in
USA, Canada, Australia and New Zealand. From
September 2021, Malvern will accept international
and EU students on their nine month NCUK
International foundation programme, providing a
valuable new revenue stream.
14 Malvern International Plc Annual Report and Accounts 2020
English language schools
The English language schools remained closed for
extended periods in 2020, significantly affecting our
performance during the year. Around 80% of existing
students received online tuition in a mix of remote
and live-streamed classes, with balance choosing to
postpone their courses until such time that face to
face teaching resumed.
The Manchester, London and Brighton schools
reopened in March 2021, with sales, whilst
international travel remains restricted, focused
on students already in the UK. At present we are
expecting student numbers to return to former
pandemic levels in 2022.
To support student numbers and sales margins, the
Group is adopting the proven recruitment model
used by our Communicate Manchester centre, to
increase the number of Middle Eastern students and
direct sales.
Malvern Juniors
Due to Covid-19, all of our Junior language camps
were cancelled in 2020.
We maintained regular dialogue with our Italian
cohorts, which were postponed into 2021 and began
developing new sales channels. In addition we
had over £1.0m in pre-booking from the Hungarian
government English language scholarship scheme,
Tempus. This programme will now be running for five
years from 2022 to 2027 and our sales and marketing
team are in the process of building bookings.
We recognise that the biggest source of Junior
students are Italy and China, together holding
Operating review continued
45% of the UK market share in total. While we have
strong success with the Italian market, we identified
opportunities to build on sales coming from China.
In line with the investment in a sales team in China
detailed below, and market recovery, Malvern Juniors
intends to run four summer centres in 2022, and in 2023
seven summer centres and one low season centre.
Malvern Online Academy (MOA)
Online education remains a key part of Malvern’s
diversification plan. During 2020, online teaching
was refocused towards teaching English language
students that were unable to attend in-class study.
In order to preserve student numbers in the event of
further lock-downs, all new student contracts now
include a provision for online learning in the event
that schools are forced to close.
With this shift in focus in 2020 to meet the immediate
needs of the business, further development of MOA
was put on hold. The addition of new courses,
market positioning, pricing and the business model
is currently being reviewed in the context of
developments in the last 18 months and a greater
acceptance and adoption of online learning.
Central services
The Group continued to make improvements to its
central shared services, which includes both back-
office and sales and marketing. We have appointed
a new Head of Finance, are seeking to appoint
a Head of Operations, and have reorganised
our internal functions to establish clear reporting
structures and areas of responsibility.
Sales and marketing
The Group has restructured the sales and marketing
team and adopted the student sales model
used by its Manchester school for all centres. The
model focuses on a combination of B2B and B2C
recruitment models. B2C sales are generated by
well-trained front office staff and investment in SEO,
AdWords and targeted social media spend. The
B2B sales focuses on agencies and relationships with
embassies focused on geographies that provide
profitable growth opportunities. Direct sales is
supported by strong branding and visibility on agency
and association websites.
To drive the sales and marketing function, we have
appointed a new Head of Sales and Marketing. This is
supported by refreshed Group branding that is more
modern and appealing to our target audiences.
Going forward we will be increasing our sales focus
on the Chinese market, establishing a Chinese
sales team to take advantage of the significant
opportunity this market presents across all areas of
the business, but in particular University Pathways and
Malvern Juniors.
Richard Mace
Chief Executive Officer
18 June 2021
Malvern International Plc Annual Report and Accounts 2020 15
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Key performance indicators
For the year ended 31 December 2020
2019
Restated 4.70
REVENUE(£m)
2020
1.90
Operating loss(£m)
FINANCIAL KPIs - CONTINUING OPERATIONS1
2020
1.33
2019
Restated
3.86
REVENUE (£M)
REVENUE(£m)
2019
Restated 4.70
2020
1.90
Operating loss(£m)
3.86
1.33
Profit/(Loss) for the year(£m)
Performance: Revenues were significantly down year
2019
on year due to the Covid-19 pandemic and prolonged
Restated
periods of school closures. Existing students who
2020
were affected by the lock-downs were transferred
to online teaching where possible. However at the
outset of the pandemic, students were able to choose
2019
whether to continue or delay their education, and the
Restated 4.33
continued uncertainty led to a significant reduction
in course bookings. From August 2020, a provision has
2020
been introduced to transfer all new students to online
teaching in the event of further lock-downs, protecting
revenue streams. The revenue for the year including
2019
Restated 4.70
discontinuing activity was £2.55m (2019: £7.01m).
1.69
2019
1.90
pence
Restated
2020
Profit/(Loss) per share2(£m)
REVENUE(£m)
1.66
2020
OPERATING LOSS (£M)
Operating loss(£m)
0.23 pence
2019
Restated
3.86
2020
LOSS FOR THE YEAR (£M)
Profit/(Loss) for the year(£m)
2019
Restated 4.33
2020
REVENUE(£m)
1.66
1.90
Profit/(Loss) per share2(£m)
1.69
Operating loss(£m)
pence
2019
Restated 4.70
Performance: The loss for the year from continuing
2020
operations reduced significantly due to the
2019
reduction in operating loss performance as well
Restated
as losses attributed to activities in Malaysia which
2019
2020
Restated
were treated as discontinued operations in the
2019 accounts. The loss for the year including
2020
discontinued activity was £2.14 m (2019: £8.37m).
0.23 pence
1.33
3.86
Profit/(Loss) for the year(£m)
2019
Restated 4.33
2020
1.66
LOSS PER SHARE
Profit/(Loss) per share2(£m)
2019
Restated
1.69
pence
1.33
2020
0.23 pence
Profit/(Loss) for the year(£m)
Performance: The operating loss reduced significantly
2019
Restated 4.33
due to tight cost controls in 2020 and the Board’s
decision to apply significant write downs to the
2020
value of intangible assets and the amortisation of
certain brand, licences and trademarks impacting
the result in 2019. The operating loss for the year
including discontinuing activity was £1.70m (2019:
2019
Restated
£5.90 m).
Profit/(Loss) per share2(£m)
1.69
pence
1.66
Performance: The loss per share is calculated using
weighted average number of shares in issue during
the period 735,661,044 (2019: 256,243,628). The
increase in the loss per share can be attributed to
the events of 2020. The total loss per share including
discontinued activity was 0.29 pence (2019:
3.26 pence).
2020
0.23 pence
1
As at 31 December 2020, continuing operations included activities in the UK only, following the closure of the Singapore operations during
the year. Further information relating to the discontinued operation for the period to the date of the closure is set out in note 4(b) of the
financial statements.
16 Malvern International Plc Annual Report and Accounts 2020
Key performance indicators continued
NON-FINANCIAL KPIs – UK ONLY
STUDENT WEEKS DELIVERED
NUMBER OF STUDENTS
2019
18,671
2020
10,835
2019
15,239 (82%)
2020
4,128 (38%)
2019
3,290
2020
476
3,432 (18%)
2019
3,202 (97%)
6,708 (62%)
2020
340 (71%)
88 (3%)
172 (29%)
English Language Teaching
University Pathways
English Language Teaching
University Pathways
Performance: Student weeks are defined as the total
number of weeks delivered to students who undergo
a minimum of 10 hours per week including in-class
and online courses. The overall number of students
weeks delivered was affected by Covid-19, school
closures and the cancellation of Juniors camps in 2020.
However there was significant growth from University
Pathways which nearly doubled year on year and grew
significantly as a proportion of total business.
Performance: The number of students is calculated as
the number of students who have undergone tuition
for a minimum of 10 hours per week during the course
of the year. The overall number of students weeks
delivered was affected by Covid-19, school closures
and the cancellation of Juniors camps in 2020.
University Pathways student numbers have grown
significantly since 2018 with UEL being the main source
of increase in Pathway students. The first intake at
Wrexham Glyndwr took place in September 2020.
NCUK first intake will be in 2021. All Pathways students
for the 2020-21 academic year have studied online to
date. Some face-to-face study is likely to take place for
the final two months of the academic year in late May
and June 2021.
Malvern International Plc Annual Report and Accounts 2020 17
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Financial review
For the year ended 31 December 2020
FINANCIAL REVIEW
Performance and discontinued operations
In August 2020, the Group announced the closure of Singapore operations. This is reported in the current
period as a discontinued operation. Financial information relating to the discontinued operation for the period
to the date of the closure is set out in note 4(b).
Revenues reduced 60% to £1.90m from continuing operations (2019 restated: £4.70m). Strong cost control
measures were put in place to minimise losses and ensure the continuity of the business. The impact of these
decisions resulted in an operating loss of £1.33m (2019 restated: loss £1.18m) and a total operating loss of
£1.33m (2019 restated: loss £3.86m).
The total loss for the year from continuing operations is £1.66m (2019: £4.33m). This resulted in a loss per share of
0.23 pence (2019 restated: loss 1.69 pence).
Financial position
As a result of the decision to cease trading in Singapore during the year, £1.9m in right of use assets were
disposed of. Cash and cash balances as at 31 December 2020 were £103,609 (2019: £83,264).
Financing
In order to provide sufficient working capital to support Malvern’s operations, the Company came to an
agreement to restructure the loan repayments on a £2.60m borrowing provided by Boost & Co. granting a
capital and interest repayment holiday, in exchange for the issue of warrants over 33,333,333 New Ordinary
Shares.
At the same time, the Company raised a further £1.15m (net) by way of a placing and subscription to
strengthen the balance sheet and to provide working capital to support Malvern's planned operations through
the Covid period as it was then anticipated to be.
Subsequent events
To ensure Malvern has the cash resources to trade through the continuing difficulties caused by Covid-19 and
to build on the very significant progress that it has made in many areas of its business since the June 2020, the
Company raised a further £1.60m (net) by way of Placing and Subscription in April 2021.
The closure of the Singapore school was completed in August 2020 and all operations in the territory have
now ceased (liquidation commenced in April 2021). Malvern is now entirely focused on the UK international
education market, where the Directors believe there is ample opportunity grow the business and take
advantage of the long-term market growth prospects.
EMI scheme
To retain, incentivise and align the interests of employees with certain performance targets and strategic
goals, the Company introduced an EMI share option scheme in 2020. The EMI Options represented 8.5% of
the existing share capital of the Company at the time they were granted to key members of staff and will vest
after three years once defined share price levels have been attained for 40 consecutive business days. More
detail can be found in note 30 of the financial statements.
18 Malvern International Plc Annual Report and Accounts 2020
Financial review continued
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 and the future prospects gives the Board
confidence that it is appropriate to prepare the accounts on a going concern basis, as outlined in note 2(iv) of
the financial statements.
While University Pathways courses went ahead from September 2020, and English language schools reopened
fully from March 2021, there is no guarantee that the Covid-19 pandemic will not continue to persist and how
quickly business will return to normal levels. The Board continues to manage all major creditors via deferral
agreements where possible and maintains tight cost control.
Daniel Fisher
Group Head of Finance
18 June 2021
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Risk management
For the year ended 31 December 2020
The Board, through the Audit and Risk Management Committee assesses the Group’s risks on an on-going
basis and maintains a risk register which is updated quarterly. Risk governance culture is embedded across the
Group. There are four main types of risks faced by the Group:
• financial exposures;
• regulatory and compliance changes;
• competition and commercial change; and
• reputational risks.
There are, from time to time, unprecedented risks that the Group faces outside of normal operations that can
become material, such as health, safety and environmental risks.
Financial exposures
Description
The Group faces a number of financial
risks which could potentially impact future
operations. These include liquidity risk,
credit risk, and foreign currency risk.
Risk level: high l
Mitigation
Liquidity and credit risk
The Board monitors options available to the Group to access
borrowing facilities and fundraising activities. These might be
attractive in certain circumstances to provide additional working
capital and fund growth opportunities.
The Group 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 of 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
Since the start of 2021, the Group reports in UK Sterling with 100% of
revenue in 2020 denominated in UK Sterling and therefore foreign
currency exchange risk no longer applies.
20 Malvern International Plc Annual Report and Accounts 2020
Risk management continued
Regulatory and compliance changes
Risk level: low
Description
From time to time, Malvern is subject to
regulatory changes and enforcement,
which can have a significant impact to
the Group 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.
Mitigation
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.
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 to ensure
the Group 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 Group has worked towards diversification of its courses and
target groups to reduce the risk of regulatory changes.
Competition and commercial changes
Risk level: low
Description
While the Board does not perceive
there to be any abnormal risk from the
dominance of competitors or changes to
consumer demand, the Group can face
strong short-term competition in the form
of intermittent price discounting, which
can have an immediate and negative
impact on forward bookings.
Mitigation
Management monitors closely forward bookings to identify
any changes to anticipated sales. For short-term fluctuations in
competition, the Group maintains close dialogue with its sales
agent partners and monitors competitor pricing, in order to adjust
its own pricing and remain competitive.
The Board regularly assess the portfolio of products available and
its exposure to changes in consumer demands.
The demand for the majority of the courses Malvern offers are not
subject to volatility in consumer tastes and this stability allows for
diversification into new areas of education.
In 2020 around 60 accredited English language centres closed as a
result of the Covid-19, and therefore the Group is likely to face less
competition in the short to medium term.
Malvern International Plc Annual Report and Accounts 2020 21
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Risk management continued
Reputational risks
Description
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.
Risk level: low
Mitigation
The Board ensures it has the required accreditation and licenses to
operate (see above for Regulatory and compliance changes).
The Group 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 Group
provides induction training and regular training to all staff.
The Group has clear incident management and crisis
management strategies and procedures.
Health, safety or environmental incident: Covid-19
Risk level: high
Description
Covid-19 has affected all areas of the
Group and the impact and mitigation
of the risk presented to the Company
is reported in the outlook section of the
Chairman’s statement of this report.
The impact and risk to the Group includes:
• infection of its staff or students;
Mitigation
The Board monitors and follow national and international health
and safety guidelines and provides regular updates to its staff and
student body.
In order to preserve cash, the following cost-saving plans were
implemented in 2020 and into 2021:
• the majority of staff and all Directors agreed to salary reductions;
• the Group took advantage of government support schemes
• a fall in forward-bookings,
where they were available;
cancellations, and delays to course
start-dates, resulting in a negative
impact on the Group’s financial
performance; and
• rental payments were and, where possible, renegotiated; and
• the existing debt with Boost & Co. was restructured providing for
a two year capital repayment holiday and interest free period.
• the closure of schools and operations,
significantly reducing revenues and
placing significant cash constraints on
the business.
• the Company raised a total of £2.75m (net) by way of two
fundraising rounds in June 2020 and March 2021 in order to
provide sufficient working capital until such time that business
returns to normal levels.
22 Malvern International Plc Annual Report and Accounts 2020
Directors’ section 172(1) statement
For the year ended 31 December 2020
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.
The Company’s main stakeholders are identified
in the Business Model on page 10, 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.
Employees
As an educational 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 Group incentivises employees through share-
based incentives and the payment of bonuses and
commissions linked to performance objectives.
Where appropriate these objectives are be linked
to profitability and performance targets. 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 and any long-term
share-based incentives. 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.
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.
Malvern International Plc Annual Report and Accounts 2020 23
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
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 seeks to ensure that ethical behaviour
and business practices are 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
Group’s Employee Manual. The Group’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
Group.
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 Board
Mark Elliott
Chairman
Directors’ section 172(1) statement continued
Suppliers: The Board upholds ethical business
behaviour across the Group and encourages
management to seek comparable business
practices from all suppliers doing business with the
Company.
Community: 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 Group adopts a proactive approach towards
community education-driven initiatives particularly
where they involve the education of those less
fortunate. The Group 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 page 34.
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 page 29.
24 Malvern International Plc Annual Report and Accounts 2020
Corporate
Governance
Malvern International Plc Annual Report and Accounts 2020 25
OVERVIEW Board of Directors
For the year ended 31 December 2020
The Board
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budget and corporate
actions.
Mark Elliott, Non-Executive Chairman
Date of appointment: 01 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 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: 02 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, Ultris Limited and Goal Group Limited
26 Malvern International Plc Annual Report and Accounts 2020
Board of Directors continued
Executive Management Team (EMT)
In addition to the CEO, the EMT consists of senior members of Malvern’s management team. Each member
is involved in operations and has significant experience in working the international education sector. The
CEO, UEL Centre and Development Director and Head of Sales and Marketing, Head of Juniors and General
Manager of London and Brighton are collectively responsible for business development.
The Company has made a number of important appointments and changes to its organisational structure to
clarify roles and responsibilities, improve lines of communication and flow of information between the Board,
the operational divisions, business development, sales and marketing and finance. Until such time that an
appropriate candidate is appointed, the Head of Operations role being carried out by the CEO, Head of
Juniors and General Manager of London and Brighton.
The EMT is in daily communication and meets fortnightly formally to discuss progress against set objectives,
raise any concerns and potential risks to the business, business development and performance against internal
budgets. Any material concerns are raised and communicated to the Board and, where necessary, are
discussed at scheduled Board meetings.
Board
EMT
CEO
Head of
Operations
General
Manager of
London and
Brighton
Head of Juniors
UEL Centre and
Development
Director
Head of Sales
and Marketing
Group Head of
Finance
Shared business systems, for admissions, support and quality control
Junior Centres
Language schools
London
Brighton
Manchester
Malvern Online
Academy
UEL
Wrexham
Glyndwyr
NCUK
Malvern International Plc Annual Report and Accounts 2020 27
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Board of Directors continued
Simon Fitch, UEL Centre and Development Director
Date of appointment: 7th January 2021
Simon is accountable for the provision of high quality, student-centred, operations at our UEL International
Study Centre, and for supporting a range of internal and external developments within the Group.
Simon has spent his career in a range of educational settings, and has senior level experience in universities,
schools and pathway organisations, including having previously directed a Foundation Student Centre. Simon
is also a board member of FOCUS, an organisation devoted to simplifying the relocation journey for families
and students coming to the UK.
Ashleigh Veres, Group Head of Sales and Marketing
Date of appointment: 6th January 2020
With more than 11 years in student recruitment and marketing, Ashleigh works diligently to develop and
execute sales strategy for the Group.
Working closely with our university partners to realise shared goals, and with a keen focus on the development
of partnerships with internationally-focused partners, Ashleigh is a strong advocate for the opportunities that
international education provides students.
Ashleigh is responsible for leading the Global Recruitment Unit and managing the marketing for the
organisation.
Daniel Fisher, Group Head of Finance
Date of appointment: 18th January 2021
Daniel has over 13 years of experience of successfully leading Finance teams. Daniel led an SME in Australia
through a successful IPO as Head of Finance. His listed company experience at group level also includes
management of audits for a multinational SME and merger and acquisition transactions.
Kris Hall, General Manager of London and Brighton
Date of appointment: 7th August 2017
With a focus on ensuring the success of two of our schools and working on key projects within the organisation,
Kris has a strong operational background in managing the complexities of running language schools. Kris is
passionate about student welfare, and works with his teams diligently to embed practices across the schools.
Kris completed his postgraduate studies at the University of Westminster where he studied Health and Social
Care Management, and has been a senior manager in the Private Sector, Third Sector and Education Sector
for over 20 years. Kris is the Safeguarding Lead at an organisational level.
Emiliano Sallustri, Head of Juniors
Date of appointment: 1st January 2019
Emiliano is the strategic lead for the development and execution of Malvern’s Junior and Summer Camp
offering. With a strong background in the travel language industry, Emiliano works closely with key sponsors
and partners to ensure that we offer exciting and innovative learning opportunities for individuals and groups.
Emiliano ensures that all Malvern Summer and Juniors programmes run smoothly and deliver exceptional
customer experience.
28 Malvern International Plc Annual Report and Accounts 2020
Chairman’s corporate governance statement
For the year ended 31 December 2020
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. The Company 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 page 26.
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 the majority
of 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.
However, following the unprecedented events of
2020, this has been put on hold until such time that a
formal search can be undertaken.
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.
The frequency of communications at Board level
has been significantly higher in 2020 than any
previous year, as the Board sought to understand
the implications of the Covid-19 pandemic and
its response. In addition, the Board were in regular
consultation with regards to the Company’s cash
resources in order to monitor and manage cash
outflows. As a result the Board implemented strict
cash control measures across the Group.
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.
Malvern International Plc Annual Report and Accounts 2020 29
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Chairman’s corporate governance statement continued
Attendance at meetings during 2020
Director
Mark Elliott
Alan Carroll
Richard Mace1
Sam Malafeh2
Haider Sithawalla3
Ramasamy Jayapal4
Nirvana Chaudhary5
1 Appointed on 30 June 2020
2 Resigned on 25 June 2020
3 Resigned on 30 June 2020
4 Resigned on 14 May 2020
5 Resigned on 8 July 2020
Board meetings
(12 meetings held)
Audit and risk
committee
(4 meetings held)
Nomination and
remuneration
committee
(3 meeting held)
12
12
6
6
6
5
3
4
4
0
0
0
0
0
3
3
0
0
0
0
0
Strategy and risk management
A description of the Group’s business model and
strategic priorities can be found on pages 10 and 12
and the key challenges in their execution are
detailed in the Chairman’s Statement on page 5
and Operational Review on page 14. The Board
is responsible for establishing and maintaining
the Group’s systems of internal financial controls
and importance is placed on maintaining robust
operational controls.
The Audit and Risk Committee (see page 43) has
delegated responsibility for the oversight of the
Group’s risk management and internal controls and
procedures and for determining the adequacy and
efficiency of internal control and risk management
systems. 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 Group’s strategies,
the Board, having identified the risks, seeks to limit
the extent of the Group’s exposure to them having
regard to both its risk tolerance and risk appetite.
Further details on the Group’s risk management and
internal controls can be found on pages 20 to 22.
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
• Internal controls: ensuring maintenance of
a sound system of internal control and risk
management
• Finance: raising new capital or major financing
facilities, operating and capital expenditure
budgets.
30 Malvern International Plc Annual Report and Accounts 2020
Chairman’s corporate governance statement continued
• Communications: approval or resolutions put
forward to shareholders, approval of circulars and
approval of press releases concerning matters
decided by the Board.
• Board membership and other appointments
• 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.
Audit and Risk Committee
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 43. Where necessary, specialist external
consultants are used to assist the Committee. The
Audit and Risk Committee report are set out on
page 43.
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 page 40. Where necessary external
recruitment consultants are used to assist the
process. The Nomination and Remuneration
Committee report are set out on page 40.
Election and re-election of Directors
Directors appointed since the last annual General
Meeting, and those retiring by rotation will submit
themselves for election or re-election at the next
Annual General Meeting, as set out in the Directors’
report in on page 36 and in the separate Notice of
Annual General Meeting sent to all Shareholders.
Board evaluation
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 are aware of the importance of attaining
greater diversity amongst its members, which
includes roles and experience with other boards
and organisations. This form part of any 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
greatly impacts all aspects of the Company 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.
The Group’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 successful achieve its corporate
Malvern International Plc Annual Report and Accounts 2020 31
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Chairman’s corporate governance statement continued
objectives. The Board places great importance
these aspects of corporate governance and
seeks to ensure that it flows through all the Group’s
activities.
The Board assessment of the culture within the
Group at the present time is one where there is
respect for all individuals, open dialogue amongst
all levels of staff and individuals, and a commitment
to provide the best service possible to the Group’s
customers.
The Group is committed to ensuring that the highest
quality of teaching and education standards
are embedded in the services it provides. The
Group aims to provide the highest levels 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 Group has in place a range of policies to ensure
the highest standards are maintained and that the
Group’s corporate culture is well understood by all
individuals and adopted into everyday behaviours.
These policies form part of the Group’s Employee
Handbook and are updated and reviewed on a
regular basis.
Details on corporate social responsibility can be
found on page 34.
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:
Management structure and delegated
authority
Authority is delegated to the executive
management team (EMT) through Group
authorisation limits on a structured basis, ensuring
that proper management oversight exists at the
appropriate level. The EMT comprises the Chief
Executive Officer, UEL Centre and Development
Director, Head of Sales and Marketing and. Group
Head of Finance General Manager of London and
Brighton and Head of Juniors. Biographies of the
Executive Management Team can be found on
pages 26 to 28 along with an organisational chart.
EMT meetings are held fortnightly 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
Group 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.
32 Malvern International Plc Annual Report and Accounts 2020
Chairman’s corporate governance statement continued
The Group’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.
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 Nominated Adviser.
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 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
18 June 2021
Malvern International Plc Annual Report and Accounts 2020 33
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Corporate social responsibility
For the year ended 31 December 2020
Employment policies
As an educational 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 Director,
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 moderate
staff engagement and satisfaction.
Health and 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.
Covid-19
In 2020, the Company ensured that all required
social distancing and hygiene guidelines were
34 Malvern International Plc Annual Report and Accounts 2020
followed in order to protect staff and students
from contracting and spreading the coronavirus.
Remote, online and blended teaching was provided
during school closures and there were regular
communications to staff and students outlining
expectations and health and safety protocols. When
schools were reopened, reminders in the form of
posters were displayed in public areas. PPE and
sanitising equipment was provided for the use of all,
and additional cleaning at schools was introduced.
Social responsibilities
It is Group policy to be a good corporate citizen
wherever it operates. As part of the Group’s social
responsibility, it provides scholarships and free courses
to those underprivileged applications and local
communities. For instance, in London, free space is
offered to the local refugee council for its members
to attend English Language training classes.
Environmental policy
While Malvern International Plc’s operations by their
very nature have minimal environmental impact, the
Group recognises its responsibilities to protect and
sustain the environment and its resources. The Group’s
policy is to meet or exceed the statutory requirements
in this area, and it has adopted a code of good
environmental 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-payslips, electronic expense claims,
electronic books and notes to students.
• 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
Corporate social responsibility continued
have been fitted as appropriate so that electricity
is used only when required.
At present the Company is not required to
publish details of its carbon emissions. However,
management is currently in the process of assessing
the ways it can capture the data required to report
on its carbon footprint and set targets for reducing
its energy consumption and energy intensity.
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.
Ethics and values
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 we expect from all our
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.
In 2021 the Company reviewed and formalised
the values it believes underpin the culture of the
business, these are:
• Malvern’s approach should always reflect its
deep commitment to, and understanding of its
students, staff and partners, and their aspirations,
expectations and success.
• The Company has an embedded culture of
flexibility and accountability. It should act with
integrity and seek partnerships with organisations
who share its values.
• The Company aims for excellence in every aspect
of its operations, building on its rich history to
underpin the current and future provision of high
quality learning teaching and student support.
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.
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.
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 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.
During 2020 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 2020.
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 form
part of each new employee’s induction.
Malvern International Plc Annual Report and Accounts 2020 35
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Directors’ report
For the year ended 31 December 2020
The Directors present their report and the audited accounts for the year ended 31 December 2020.
Principal activities
The Principal activities of Malvern International Plc
is to provide quality education services, 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 pages 8 and 9.
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 pages 5
to 19. The principal risks and uncertainties facing the
Company is included on pages 20 to 22. A summary
of the outlook for the Group is given within the
Chairman’s statement on page 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 that our partners can
themselves.
We compete 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 page 10. The Company benefits
from operating in a market which has historically
shown long-term growth. More information on our
markets can be found on page 7.
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.
Each year the Board and management set strategic
priorities, monitors performance against them
throughout the year. The strategic priorities are set
out on pages 12 and 13.
36 Malvern International Plc Annual Report and Accounts 2020
Group results
The Group loss including discontinued operations
before taxation for the year was £2.14m (2019:
loss £8.37m).
Dividends
The Directors do not recommend a final dividend
(2019: nil).
Capital structure
The Company has ordinary shares of 0.1p and
deferred shares of 5p, 1p and 0.1p in issue. The
shares are listed on AIM, a sub market of the London
Stock Exchange. Holders of ordinary shares are
entitled to vote at Company meetings, to receive
dividends and to the return of their capital in the
event of liquidation.
Holders of deferred shares have limited rights.
Limitations on the rights of deferred shares include,
no entitlement to vote at general meetings and
deferred shares are not freely transferrable.
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.
Directors’ report continued
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 has been very
disruptive to the Company's operations, including
the closure of its schools for a large part of 2020,
the business was able to adapt its service offering
through on-line learning. 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 August 2020, 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 Singapore,
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.
Following the closure of the UK schools for
large parts of 2020, operations reopened in
March 2021. As a result of the success of the
UK's vaccination program, the government is
gradually opening up internationally travel.
A number of embassy sponsored students from
the Middle East are currently attending face-to-
face classes in each of the Group's centres. The
advanced vaccine rollout in some areas of the
Middle East is expected to result in more students
being able to travel in the short to medium term.
Profit and cash flow projections for the Group
assume profitable growth in its key operating
entities once operations return to normal. A large
part of this assumed growth is driven by the more
profitable pathways division of the Group, which
now includes the newly acquired partnership
with NCUK.
•
The Group is working on the assumption that
student numbers will increase throughout the
second half of 2021, before returning to normal
business in 2022.
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 and Subscription
in June 2020, raising £1.15m (net). The proceeds
of this Fundraising were used to supplement
the Company's working capital resources and
strengthen the Company's balance sheet.
The Group undertook a further Placing and
Subscription in March 2021, raising £1.58m
(net). The proceeds of this fundraise will provide
sufficient liquidity and flexibility to allow the
Company to manage through the period of
expected disruption caused by Covid-19, and to
contribute to planned growth initiatives.
•
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 2020 37
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Directors’ report continued
Subsequent events
Details of subsequent events can be found in the
Financial Review on page 18 and in note 27 of the
financial statements.
Directors
Biographical information for each of the Directors
is set out on page 26, 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. The Company’s Articles of
Association require that one third of the Directors
retire from office at each Annual General Meeting
and each Director shall retire from office at least
once every three years. Being the longest in office
since his last election Mark Elliott retires by rotation
in 2021 in accordance with Article 89 and offers
himself for re-election as a Director of the Company
in accordance with Article 91.
Directors’ interests in shares
The Directors’ beneficial interest in the ordinary
share capital of the Company are set out within the
remuneration report on page 42.
Substantial shareholders
As at 31 December 2020 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
HSBC Client Holdings Nominee (UK) Limited
Pershing Nominees Limited
Mr Richard Mace
Barnard Nominees Ltd
Spreadex Limited
Interactive Investor Services Nominees Limited Des:SMKTISAS
Interactive Investor Services Nominees Limited Des:SMKTNOMS
Hargreaves Lansdown (Nominees) Limited
KSP Investments Pte Limited
Barclays Direct Investing Nominees Limited
CG Corp
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 page 34.
38 Malvern International Plc Annual Report and Accounts 2020
Number of
ordinary shares
0.1p
Percentage
held
126,784,998
10.52%
94,449,920
90,317,767
86,361,334
74,500,000
68,074,983
52,586,452
48,115,664
44,477,079
43,292,405
40,460,233
40,091,122
7.84%
7.50%
7.17%
6.18%
5.65%
4.36%
3.99%
3.69%
3.59%
3.36%
3.32%
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 (2019: none).
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
Directors’ report continued
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.
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.
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
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
In 2020 the Board undertook a formal tender process
for the role of external auditor and appointed Cooper
Parry Group Limited (Cooper Parry) as its new auditor
from 18 January 2021 in order to conduct the audit of
the Company’s financial statements for the financial
year to 31 December 2020. Cooper Parry replaced
Crowe UK LLP, who resigned after confirming that
there were no reasons or matters connected with
their ceasing to hold office as auditors which they
considered should be brought to the attention of
members or creditors of the Company.
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
18 June 2021
Malvern International Plc Annual Report and Accounts 2020 39
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Nomination and Remuneration Committee report
For the year ended 31 December 2020
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 30.
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 in the
table opposite.
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.
40 Malvern International Plc Annual Report and Accounts 2020
Nomination and Remuneration Committee report continued
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
2 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. The Company’s Articles of Association require
that one third of the Directors retire from office at each Annual General Meeting and each Director shall
retire from office at least once every three years. Being the longest in office since his last election Mark Elliott
retires by rotation in 2021 in accordance with Article 89 and offers himself for re-election as a Director of the
Company in accordance with Article 91.
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.
Directors’ remuneration
Details of individual Directors emoluments and remuneration who served in 2020 are as follows:
Mark Elliott1
Richard Mace2
Alan Carroll3
Sam Malafeh4
Haider Sithawalla5
Ramasamy Jayapal6
Nirvana Chaudary7
Salary
and fees
£
39,942
38,542
21,900
126,304
–
–
–
226,688
Benefits
£
Pension
£
Other
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
66,666
–
–
–
Share
based
payments
£
23,847
–
13,894
Total
2020
£
63,789
38,542
35,794
Total
2019
£
18,250
–
5,750
–
–
–
–
192,970
200,000
–
–
–
–
–
–
66,666
37,741
331,095
224,000
1 Appointed on 1 July 2019
2 Appointed on 30 June 2020
3 Appointed on 2 October 2019
4 Resigned on 25 June 2020
5 Resigned on 30 June 2020
6 Resigned on 14 May 2020
7 Resigned on 8 July 2020
Malvern International Plc Annual Report and Accounts 2020 41
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Nomination and Remuneration Committee report continued
Share Option Scheme
In order to retain, incentivise and align the interests of employees with certain performance targets and
strategic goals, the Company introduced an EMI share option scheme in 2020. The Company awarded over
102,750,000 ordinary share options to Richard Mace and certain employees of the Company. The EMI options
granted represent 8.5 per cent of the existing issued share capital of the Company. Of the total EMI options
granted, 29,500,000 were granted to Executive Director, Richard Mace.
The EMI options will vest after three years once defined share price levels have been attained for
40 consecutive business days. Half of the individual EMI options awards will vest when the mid-market share
price of the Company reaches 0.5 pence and the remaining half will vest when the mid-market share price of
the Company reaches 0.9 pence.
The exercise price of the EMI Options is 0.15 pence each.
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
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
Mark Elliott
Richard Mace1
Alan Carroll
Sithawalla Haider2
Sam Malafeh3
Ramasamy Jayapal4
1 Appointed 30 June 2020
2 Resigned on 30 June 2020
3 Resigned on 25 June 2020
4 Resigned on 14 May 2020
Indirect Interests
Name of Director / Company
KSP Investments PTE Limited1
CG Corp2
Marzena Mace
At beginning of the Year/
At date of Appointment
At end of the
Year
–
–
700,000
1,500,000
10,332,000
86,361,334
8,063,333
1,500,000
9,000,000
20,133,333
1,453,131
500,000
At beginning of the Year/
At date of Appointment
At end of
the Year
43,292,405
40,091,122
–
–
–
6,900,000
1
2
Mr Sithawalla Haider, who resigned as Directors of the Company in 2020, had an indirect interest through
KSP Investments Pte Ltd.
Nirvana Chaudhary, who resigned as Director of the Company in 2020, had an indirect interest through
CG Corp.
42 Malvern International Plc Annual Report and Accounts 2020
Audit and Risk Committee report
For the year ended 31 December 2020
The Audit and Risk Management Committee is a
sub-committee of the Board and comprises two Non-
Executive Directors, with Mark Elliott as Chairman.
• reviewed the annual and interim report and
financial statements of the Group, and the clarity
of disclosures made;
The Audit and Risk Management Committee meets
at least three times a year. The external auditors and
Executive Directors attend when appropriate at the
invitation of the Committee. The external auditors
meet separately with the Audit Committee on request,
without the presence of the Executive Directors, to
ensure open communication. The primary objectives
of the Committee are to assist the Board in discharging
its statutory duties and responsibilities relating to
accounting and financial reporting practices of the
Group and to assist the Board in their responsibilities
to identify, assess and monitor key business risks to
mitigate adverse impacts on achieving strategic
objectives with a view to safeguard shareholders’
investments and the Group’s assets. In addition, the
Committee 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 page 30.
Matters Considered
During the year, the Committee considered the
following matters:
• review of the monthly management accounts,
• 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 2020,
• reviewed the Group’s Risk Register,
• reviewed the external auditor’s Audit Plan in
relation to the year ended 31 December 2020.
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, is provided by the external
auditor each year. Through the review, it was
recommended to the Board and the Company
to undertake a formal tender process for the role
of external auditor in 2020. The tender took into
consideration the price, sector experience, quality,
efficiency of auditors’ bids. In 18 January 2021 the
Company appointed Cooper Parry Group Limited
(Cooper Parry) as its new auditor in order to conduct
the audit of the Company’s financial statements for
the financial year to 31 December 2020. Cooper
Parry replaced Crowe UK LLP, who resigned after
confirming that there were no reasons or matters
connected with their ceasing to hold office as
auditors which they considered should be brought
to the attention of members or creditors of the
Company.
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 with managements
approach and findings.
Malvern International Plc Annual Report and Accounts 2020 43
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Financial
Statements
Auditor’s report
For the year ended 31 December 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 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 31st December 2020 which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements
of Changes in Equity, the Consolidated and Company Statements of Cash Flows, and notes to the financial statements,
including significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
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 31st December
2020 and of the group’s loss for the year then ended;
•
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
•
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 company 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 as
applied to listed entities, 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 2 (iv) in the financial statements, which indicates that the current and developing impact
on the business of the Covid-19 pandemic has caused significant disruption. As stated in note 2 (iv), these events
or conditions, indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment
of the entity’s ability to continue to adopt the going concern basis of accounting included:
•
•
•
reviewing management's cash flow forecasts for a period of 12 months from the date of approval of these
financial statements;
applying reasonable "worst case" sensitivities to management's forecasts and assessing remaining cash headroom
within those scenarios; and
reviewing post year end results to the date of approval of these financial statements and assessing them against
original budgets.
From our work we noted that the group has positive cash balances and forecasts indicate that the group will
continue to be able to meet its liabilities as they fall due as long as borders to the UK open as planned and students
are allowed to return.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Our approach to the audit
We adopted a risk based audit approach. We gained a detailed understanding of the Group’s business, the
environment it operates in and the risks it faces. The key elements of our audit approach were as follows:
Of the Group’s six reporting components, we subjected three to audits for Group reporting purposes. The components
within the scope of our work covered: 100% of group revenue, 96% of group loss before tax and 100% of group net assets.
Malvern International Plc Annual Report and Accounts 2020 45
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Auditor’s report continued
In order to address the matters described in the Key audit matters section we performed focused audit procedures
over these areas, including reference to external market data and publicly available market information in relation
to assumptions used.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) we identified, including 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.
Key audit matter
Revenue recognition
How the scope addressed this matter
The Group operating revenues arise from the provision
of education services and have a number of related
income streams that are recognised as outlined in
note 2 (xvi).
We have performed a walkthrough testing of the
sales process to understand the sales system and key
controls within the revenue cycle and to assess revenue
recognition policies used by the group;
Due to the timing of course payments there is often
an element of deferred income due to differences
between the timings of cash flows and provision of
services. As a result there is some complexity with regard
to revenue recognition for the group.
A sample of course bookings throughout the year has
been vouched from the booking system to attendance
records, sales invoices and to nominal postings, including
recalculating any deferred income required at year end
across the trading subsidiaries;
Going concern
The Group is heavily affected by the Covid-19
pandemic and resulting restrictions, in particular the
current restrictions on travel into and out of the UK which
has severely impacted student numbers attending
college courses.
We tested for understatement of deferred income
in sales transaction testing and for overstatement of
deferred income in valuation testing of liabilities.
Manual journals impacting revenue nominal codes have
been selected for further testing when certain risk criteria
have been met.
Obtained the assessment made by management and
the Board regarding the Group’s ability to continue as a
going concern.
Reviewed the assumptions used in their assessment and
sensitised key assumptions used.
Reviewed debt agreements currently in place to agree
covenants and repayment terms.
Recalculated covenant compliance in the year and
assessed forecast covenant compliance.
Discussed with management and the Board any
additional industry factors or other issues which could
impact the Group’s ability to continue as a going concern.
Reviewed relevant disclosures included in the Annual
Report for consistency with our knowledge of the business.
Our application of materiality
The materiality for the Group financial statements as a whole was set at £32,000. This has been determined with
reference to the benchmark of the Group’s revenue which we consider to be an appropriate measure for a group
of companies such as these. Materiality represents 1% of Group revenue as presented in the Consolidated Statement
of Other Comprehensive Income.
The materiality for the parent company financial statements as a whole was set at £29,000. This has been
determined with reference to the parent company’s net assets, which we consider to be an appropriate measure
for a holding company with investments in trading subsidiaries. Materiality represents 1% of net assets as presented on
the face of the parent company’s Statement of Financial Position.
46 Malvern International Plc Annual Report and Accounts 2020
Auditor’s report continued
Performance materiality
Performance materiality is the application of materiality at the individual account or balance level. It is set at an
amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group’s
overall control environment, our judgement was that performance materiality should be set at 70% of overall
materiality, namely £22,000. We have set performance materiality at this percentage based on our assessment of the
likelihood of misstatements. Audit work at component locations for the purpose of obtaining audit coverage over
significant financial statement accounts is undertaken based on a percentage of total performance materiality. The
performance materiality set for each component is based on the relative scale and risk of the component to the
Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range
of performance materiality allocated to components was £20,000 to £11,000.
Other information
The other information comprises the information included in the annual report other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the
annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the 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 strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept, 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 directors
As explained more fully in the directors’ responsibilities statement set out on page 23, 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 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 company or to cease operations, or have no realistic alternative but to do so.
Malvern International Plc Annual Report and Accounts 2020 47
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Our assessment focused on key laws and regulations the company has to comply with and areas of the financial
statements we assessed as being more susceptible to misstatement. These key laws and regulations included but
were not limited to compliance with the Companies Act 2006, International Financial Reporting Standards (IFRSs) as
adopted by the European Union, and relevant tax legislation.
We are not responsible for preventing irregularities. Our approach to detecting irregularities included, but was not
limited to, the following:
•
•
obtaining an understanding of the legal and regulatory framework applicable to the entity and how the entity is
complying with that framework;
obtaining an understanding of the entity’s policies and procedures and how the entity has complied with these,
through discussions and sample testing;
•
obtaining an understanding of the entity’s risk assessment process, including the risk of fraud;
•
designing our audit procedures to respond to our risk assessment; and
•
performing audit testing over the risk of management override of controls, including testing of journal entries and
other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the
normal course of business and reviewing accounting estimates for bias.
A further description of our responsibilities is available 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 auditors' 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
Katharine Warrington
(Senior Statutory Auditor)
for and on behalf of
Cooper Parry Group Limited
Chartered Accountants and Statutory Auditor
Sky View
Argosy Road
East Midlands Airport
Castle Donington
Derby
DE74 2SA
18 June 2021
48 Malvern International Plc Annual Report and Accounts 2020
Consolidated statement of
comprehensive income
for the year ended 31 December 2020
Revenue
Sale of services
Total Revenue
Cost of services sold
Gross Profit
Other Income
Salaries and employees’ benefits
Share based payments
Amortisation
Depreciation of plant and equipment
Other operating expenses
Impairment of intangible asset & goodwill
Operating Loss
Finance costs
Loss before tax
Income tax charge
Loss for the year from continuing operations
Loss from Discontinued Operation
Loss for the year
Attributable to:
Note
2020
£
2019
RESTATED1
£
5
6
7
30
12
9
8
10
1,901,307
1,901,307
4,703,864
4,703,864
(1,016,393)
(3,020,949)
884,914
418,363
1,682,915
85,504
(1,095,012)
(1,117,978)
(169,278)
–
(414,349)
(19,192)
(232,939)
(424,026)
(950,745)
(1,153,097)
–
(2,685,679)
(1,326,107)
(3,864,492)
(302,066)
(280,003)
(1,628,173)
(4,144,495)
(31,300)
(190,000)
(1,659,473)
(4,334,495)
4(b)
(480,092)
(4,033,806)
(2,139,565)
(8,368,301)
Equity holders of the Company
(2,139,565)
(8,368,301)
1 2019 comparatives have been restated to exclude Singapore operations following the closure in 2020.
Malvern International Plc Annual Report and Accounts 2020 49
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement of
comprehensive income (continued)
for the year ended 31 December 2020
Loss for the year
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation movements
Total comprehensive income for the year
Continuing operations
Discontinued operations
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
2020
£
2019
RESTATED
£
(2,139,565)
(8,368,301)
15,575
(316,716)
(2,123,990)
(8,685,017)
(1,659,473)
(4,334,495)
(464,517)
(4,350,522)
(2,123,990)
(8,685,017)
–
–
(0.23)
(0.23)
(1.69)
(1.69)
(0.06)
(1.57)
50 Malvern International Plc Annual Report and Accounts 2020
Consolidated statement
of financial position
as at 31 December 2020
Note
Group
2020
£
2019
£
Company
2020
£
2019
£
TOTAL ASSETS
Non-Current Assets
Property, plant, and equipment
Goodwill
Investment in subsidiaries
Right-of-use assets
Total non-current assets
Current Assets
Inventories
Trade receivables
Other receivables and prepayments
Amounts due from subsidiaries
Amounts due from related parties
Cash and cash equivalents
Total current assets
12
15
13
12
16
17
18
–
2,612,614
4,112,745
–
1,033,105
162,093
–
–
80,781
367,999
1,419,350
1,419,350
–
–
–
–
–
1,419,350
1,419,350
4,912,511
6,699,860
–
–
1,419,350
1,419,350
6,154
751,333
665,035
–
–
–
–
53,214
527,749
–
8,948
103,609
83,264
1,298,807
1,505,786
589,911
–
–
85,378
–
–
864
86,242
–
Assets classified for disposal
4b(iv)
1,846
–
–
Total Assets
5,413,398
8,205,646
2,009,261
1,505,592
Malvern International Plc Annual Report and Accounts 2020 51
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement
of financial position (continued)
as at 31 December 2020
Note
Group
2020
£
2019
£
Company
2020
£
2019
£
EQUITY AND LIABILITIES
Non-Current Liabilities
Term loan
Warrants
Convertible loan notes
Lease liabilities
Total non-current liabilities
Current Liabilities
Trade payables
Contract liabilities
Other payables and accruals
Amounts due to subsidiary
Amounts due to related parties
Convertible loan notes
Provision for income tax
Lease liabilities
Total current liabilities
23
23
23
3
19
20
21
22
23
3
2,532,115
2,438,573
2,432,115
2,438,573
63,701
272,817
2,491,486
5,360,119
603,631
676,287
1,229,743
–
40,000
50,000
10,279
350,829
75,640
–
4,580,165
7,094,378
985,056
756,425
689,169
63,701
272,817
–
75,640
–
–
2,768,633
2,514,213
182,274
–
140,219
–
1,035,546
46,646
316,587
10,279
604,863
40,000
50,000
–
–
–
–
292,815
957,402
32,691
316,587
–
–
2,960,769
3,409,025
1,448,039
1,599,495
Liabilities directly associated with assets
classified for disposal
4b(iv)
216,737
–
–
–
Total Liabilities
8,537,625
10,503,403
4,216,672
4,113,708
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
24
25
25
25
25
29
10,309,811
9,363,236
10,309,811
5,782,394
5,431,449
5,782,394
9,363,236
5,431,449
(19,703,963)
(17,564,398)
(18,328,438)
(17,431,623)
288,149
170,560
28,822
272,574
170,560
28,822
–
–
–
–
28,822
28,822
(3,124,227)
(2,297,757)
(2,207,411)
(2,608,116)
5,413,398
8,205,646
2,009,261
1,505,592
The loss for the year as per the financial statements of the parent company at 31 December 2020 was
£896,815 (2019: Loss £12,660,341).
The financial statements were approved by the Board of Directors on 18 June 2021 and were signed on its
behalf by:
Richard Mace
Director
52 Malvern International Plc Annual Report and Accounts 2020
Consolidated statement
of changes in equity
for the year ended 31 December 2020
Share
Capital
£
Share
Premium
£
Retained
Earnings
£
Translation
Reserve
£
Capital
Reserve
£
Attribut-
able To
Equity
Holders of
the
Company
£
Convert-
ible Loan
Reserve
£
Total
£
9,211,736
5,016,849
(9,196,097)
589,290
170,560
28,822
5,821,160
5,821,160
Balance at
1 January 2019
Direct costs relating to
issue of shares
Total comprehensive
income for the year
Balance at
31 December 2019
Direct costs relating to
issue of shares
Total comprehensive
income for the year
Share based payments
(inc EMI options)1
Balance at
31 December 2020
New Share Issue
151,500
454,500
–
–
–
–
(39,900)
–
–
–
(8,368,301)
(316,716)
–
–
–
–
–
–
(39,900)
(39,900)
(8,685,017)
(8,685,017)
606,000
606,000
9,363,236
5,431,449 (17,564,398)
272,574
170,560
28,822
(2,297,757)
(2,297,757)
New Share Issue
833,333
416,667
–
–
(122,250)
–
–
–
(2,139,565)
15,575
113,242
56,528
–
–
–
–
–
–
–
–
–
–
–
–
(122,250)
(122,250)
(2,123,990)
(2,123,990)
1,250,000
1,250,000
169,770
169,770
10,309,811
5,782,394 (19,703,963)
288,149
170,560
28,822
(3,124,227)
(3,124,227)
1
The total of share-based payments taken to equity during the year excludes the director's bonus accrual
(£24,700) which was recognised as a liability in 2020. The accrual was moved to equity in 2021 when the
bonus was paid in shares (see note 30 for more information).
Malvern International Plc Annual Report and Accounts 2020 53
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Consolidated statement
of cash flows
for the year ended 31 December 2020
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
Share based payments
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
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 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 issued
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
54 Malvern International Plc Annual Report and Accounts 2020
2020
£
2019
£
(1,659,473)
(5,885,513)
(480,092)
(2,482,788)
–
414,349
324,261
848,070
–
2,876,257
(61,939)
(197,640)
–
175,278
(115,587)
–
–
123,690
302,066
–
(51,583)
–
17,307
–
21,180
1,133,034
517,344
189,990
422,005
190,000
(404,715)
(81,946)
(1,353,291)
(2,513,154)
6,153
94,657
71
(411,801)
218,561
1,127,843
(6,646)
(508,048)
(1,040,566)
(2,305,089)
–
–
–
–
(245,112)
(72,040)
–
(317,152)
(194,801)
(502,584)
1,155,712
100,000
1,060,911
20,345
83,264
–
103,609
566,100
2,537,706
2,601,222
(21,019)
105,380
(1,097)
83,264
Company statement
of changes in equity
for the year ended 31 December 2020
Share
Capital
£
Share
Premium
£
Retained
Earnings
£
Convertible
loan
reserve
£
Total
£
Balance at 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)
Direct costs relating to issue of shares
Total comprehensive income for the year
New Share Issues
Share based payments (inc EMI options)
–
–
(122,250)
–
–
(896,815)
833,333
416,667
113,242
56,528
–
–
–
–
–
–
(122,250)
(896,815)
1,250,000
169,770
Balance at 31 December 2020
10,309,811
5,782,394 (18,328,438)
28,822
(2,207,411)
1
The total of share-based payments taken to equity during the year excludes the director's bonus accrual
(£24,700) which was recognised as a liability in 2020. The accrual was moved to equity in 2021 when the
bonus was paid in shares (see note 30 for more information).
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its own income
statement.
Malvern International Plc Annual Report and Accounts 2020 55
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS 2020
£
2019
£
(896,815)
(12,660,341)
–
7,161,369
175,278
(61,939)
–
114,891
(51,583)
–
(197,640)
17,307
120,642
(103,352)
(449,605)
2,897,488
(1,169,773)
(2,764,527)
32,164
(17,328)
7,309
(1,674)
162,832
(564,001)
(1,147,628)
(3,167,370)
1,155,712
–
1,155,712
566,100
2,600,000
3,166,100
–
–
8,084
864
8,948
–
–
(1,270)
2,134
864
Company statement
of cash flows
for the year ended 31 December 2020
Cash Outflows from Operating Activities
Loss before income tax
Adjustments for:
Adjustment made in prior year retained earnings
Impairment on investments
Share based payments
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)/decrease in receivables
Increase/(decrease) in payables
Increase in amounts due to related parties
Net cash used in operating activities
Cash Flows from Financing Activities
New equity issued
Term Loan
Net cash used in financing activities
Cash Flows from Investing Activities
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
56 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements
for the year ended 31 December 2020
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 the AIM on 10 December 2004. Its registered office is 100 Avebury
Boulevard, Milton Keynes, MK9 1FH. The registration number of the Company is 05174452.
The principal activities of the Company are that of investment holding and the 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. 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 2020. 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
The Group applied IFRS 16 to its annual financial statements for the first time as of 31 December 2019. 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 interpretations have been issued but are not yet effective and, in some cases, have not yet
been adopted by the EU. The amendments to standards IAS 1 & IAS 8 for definition of materiality and IFRS 3 for definition of
business has been adopted effectively which did not have material impact on the financial statements.
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 has been very disruptive to the Company's operations,
including the closure of its schools for a large part of 2020, the business was able to adapt its service offering through
on-line learning. 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:
Malvern International Plc Annual Report and Accounts 2020 57
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
Profitability
•
In August 2020, 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 Singapore, 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.
Following the closure of the UK schools for large parts of 2020, operations reopened in March 2021. As a result of
the success of the UK's vaccination program, the government is gradually opening up internationally travel.
A number of embassy sponsored students from the Middle East are currently attending face-to-face classes in
each of the Group's centres. The advanced vaccine rollout in some areas of the Middle East is expected to result
in more students being able to travel in the short to medium term.
Profit and cash flow projections for the Group assume profitable growth in its key operating entities once
operations return to normal. A large part of this assumed growth is driven by the more profitable pathways division
of the Group, which now includes the newly acquired partnership with NCUK.
•
The Group is working on the assumption that student numbers will increase throughout the second half of 2021,
before returning to normal business in 2022.
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 and Subscription in June 2020, raising £1.15m (net). The proceeds of this
Fundraising were used to supplement the Company's working capital resources and strengthen the Company's
balance sheet. The Group undertook a further Placing and Subscription in March 2021, raising £1.58m (net). The
proceeds of this fundraise will provide sufficient liquidity and flexibility to allow the Company to manage through
the period of expected disruption caused by Covid-19, and to contribute to planned growth initiatives.
•
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.
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.
58 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
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 and UK Pound 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:
Pound Sterling to Singapore Dollar
Closing rate
Average rate
2020
2019
1.805
1.769
1.770
1.742
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:
•
•
•
Fixtures, fittings and equipment are depreciated over 3 to 10 years according to the estimated life of the asset;
Leasehold improvements are depreciated over the period of the lease up to a maximum of 25 years;
Leasehold premises with lease terms of 50 years of less are depreciated over the remaining period of the lease.
Malvern International Plc Annual Report and Accounts 2020 59
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
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.
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 the expected credit losses for all debt instruments (other than those categorised at fair value
through profit or loss) on a forward-looking basis.
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.
60 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
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.
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.
Malvern International Plc Annual Report and Accounts 2020 61
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
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.
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.
62 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
xxvii. Share-based payments and share options
The company has issued share options under an Enterprise Management Incentive Scheme used for granting share
options in respect of ordinary shares, to directors and employees. See note 30 for additional information on this
scheme.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate
or the probability of equity instruments eventually vesting, with a corresponding increase in equity. Fair value is
measured using a Black-Scholes pricing model. The resulting charge to the statement of comprehensive income
requires assumptions to be made regarding future events and market conditions.
The number of options expected to vest is adjusted only for expectations of leavers prior to vesting. The impact of
the revision of the original estimates, if any, is recognised in the statement of comprehensive income such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value
of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are
measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or
the counterparty renders the service.
xxviii. 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.
Judgements
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 .
Malvern International Plc Annual Report and Accounts 2020 63
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS 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.
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.
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. The specific estimates used in calculating fair value are detailed in note 23.
Share-based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The resulting charge to the statement of comprehensive
income requires assumptions to be made regarding future events and market conditions. Judgement is required in
determining the most appropriate valuation model and the most appropriate inputs into the model including the
level of volatility of the Group's share price, market conditions and the expected life of the option.
3. Lessee Accounting
From January 2019, the Company implemented IFRS 16 Leases, recognising right-of-use assets and the corresponding
lease liabilities by recording them on the balance sheet.
The Group’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.
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.
64 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
Amounts recognised in the income statement
Interest expense and similar charges
Interest expense
Interest expense on disposed right-of-use assets
Operating and administrative expenses
Depreciation of right-of-use assets
Depreciation of disposed right-of-use assets
Total expensed to income statement
Amounts recognised on the balance sheet
Right-of-use assets
Balance as at the beginning of the year
Net disposals
Depreciation of right-of-use assets
Depreciation of disposed right-of-use assets
FX movement
Balance as at the end of the year
Lease liabilities
Current liability
Non-current liability
Total liability
Lease payments
Total lease rent amount (Excl. VAT)
Amount paid during the year (Excl. VAT)
Rent free amount (Excl. VAT)
Balance amount at end of the year
2020
£
184,897
103,302
374,149
283,353
945,701
2019
£
301,363
–
716,583
–
1,017,946
At
31 December
2020
At
31 December
2019
4,912,511
5,623,656
(1,605,429)
(374,149)
(283,353)
(36,966)
–
–
716,583
(5,438)
2,612,614
4,912,511
At
31 December
2020
£
At
31 December
2019
£
350,829
2,491,486
2,842,315
604,863
4,580,165
5,185,028
At
31 December
2020
£
At
31 December
2019
£
519,501
(194,801)
(84,598)
240,102
479,223
(328,140)
(151,083)
–
In October 2020, the Company disposed of the lease relating to the office of the Singapore operations.
Malvern International Plc Annual Report and Accounts 2020 65
STRATEGIC REPORTOVERVIEWCORPORATE 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 with both educational and language courses offered.
2020
Revenue from external customers
Depreciation and amortisation
Loss before taxation
Taxation charge
Loss for the year
Segmental assets
Segmental liabilities
2019
Revenue from external customers
Depreciation and amortisation
Impairment of Intangibles
Loss before taxation
Taxation charge
Loss for the year
Segmental assets
Segmental liabilities
Additions to non-current assets
UK
£
Discontinued
Operations1
£
Total
£
1,901,307
648,167
2,549,474
(414,349)
(349,164)
(763,513)
(1,659,473)
(480,092)
(2,139,565)
–
–
–
(1,659,473)
(480,092)
(2,139,565)
5,411,552
8,320,888
1,846
216,737
5,413,398
8,537,625
£
£
4,703,864
2,311,223
656,964
515,367
2,211,471
2,116,097
£
7,015,087
1,172,331
4,327,568
(4,144,495)
(4,033,806)
(8,178,301)
(190,000)
–
(190,000)
(4,334,495)
(4,033,806)
(8,368,301)
4,007,083
2,779,211
6,786,294
7,094,348
3,409,055
10,503,403
2,541,092
1,736,851
4,277,943
1
Following the closure of Singapore operations, 2020 figures have been presented as discontinued operations.
The 2019 figures for Singapore are now restated to discontinued operations with Malaysia in Table 4(a).
Revenue of 2019 for UK & Singapore were £4.70m and £1.81m (in total £6.51). The Operating loss of 2019
for UK & Singapore were £3.86m and £1.41m (in total £5.27m). The reported loss for the year 2019 for
UK & Singapore were £4.33m and £1.55m (in total £5.89m).
66 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
(b) Discontinued Operations
On 4 August 2020, the group announced closure of Singapore operations 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 2020 and
31 December 2019
Revenue
Other Income
Expenses
Loss before tax
2020
£
2019
£
Singapore
Singapore
2019
£
Singapore &
Malaysia
648,167
118,279
1,802,451
2,311,223
91,920
125,145
(1,246,538)
(3,445,389)
(4,638,194)
(480,092)
(1,551,018)
(2,201,826)
Income tax expenses
–
–
(5,399)
Loss after income tax of discontinued operation
(480,092)
(1,551,018)
(2,207,225)
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 disposal of the subsidiaries
Consideration received or receivable:
Fair value of consideration
Carrying amount of net liabilities disposed of
Profit 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
–
–
–
(375,270)
(1,551,018)
(2,582,495)
–
(1,451,311)
(480,092)
(1,551,018)
(4,033,806)
15,575
15,575
(24,299)
–
–
272,574
272,574
(72,981)
(13,023)
85,594
589,290
589,290
(462,317)
(13,023)
85,594
(24,299)
(410)
(389,746)
2020
£
–
–
–
–
–
2019
£
–
10,330
10,330
(385,660)
(375,270)
Malvern International Plc Annual Report and Accounts 2020 67
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
iii) The details of disposal of the subsidiaries
The carrying amounts of assets and liabilities as at the year end (31 December 2020)
Property, plant and equipment
Cash & cash equivalents
Total assets
Trade creditors
Total liabilities
Net assets
2020
£
–
–
–
–
–
–
2019
£
54,901
225,864
280,765
(291,095)
(291,095)
(10,330)
iv) Assets and Liabilities of disposal entities classified for disposal
The following assets and liabilities were reclassified as held for disposal in relation to the discontinued operation as at
31 December 2020
2020
£
546
1,300
1,846
(161,254)
(55,483)
(216,737)
2020
£
1,659,601
192,643
28,470
20,593
2019
£
–
–
–
–
–
–
2019
Restated
£
3,266,301
1,207,926
39,746
189,891
1,901,307
4,703,864
Assets classified for disposal
Other Receivable
Cash and cash equivalent
Total assets of entities for disposal
Liabilities directly associated with assets classified for disposal
Trade Creditors
Other payables
Total liabilities of entities for disposal
5. Sale of Services
Course fees
Accommodation fees
Application fees, registration and examination fees
Training fees, course materials and others
68 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
6. Other Income
Contribution from ACCA towards marketing activities
Rental and related income
R&D credits
Government subsidies1
1 Government subsidies includes the amount received for furlough job retention scheme.
7. Salaries and Employees’ Benefits
Staff salaries and related costs1
Directors’ remuneration (executive directors)
Directors’ fees (non–executive directors)
Payment made to director on loss of office
Staff training and welfare
Pension
Share–based remuneration – staffs
Share–based remuneration – directors
Highest paid director
Remuneration and benefits
2020
£
–
23,346
15,185
379,832
418,363
2020
£
767,154
164,845
61,842
66,666
17,321
17,184
2019
Restated
£
13,525
71,979
–
–
85,504
2019
Restated
£
842,127
200,000
24,000
–
14,834
37,017
1,095,012
1,117,978
75,167
37,741
112,908
19,192
–
19,192
192,972
200,000
Average number of employees
Number
Number
Lecturers
Marketing staff
Operational and administration staff
53
14
48
115
79
23
72
174
1 Salaries and related costs are not inclusive of lecturers
The average number of employees is calculated based on the number of full or part time employees on the payroll
each month.
Malvern International Plc Annual Report and Accounts 2020 69
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
8. Finance Costs
Interest on leases (IFRS 16)
Interest on term loan1
Interest on convertible loan notes
Other finance costs
2020
£
184,897
90,125
24,766
2,278
2019
Restated
£
159,361
107,518
13,124
–
302,066
280,003
1 An interest free period was negotiated with the lender part–way through 2020. All interest disclosed above relates
to interest pre–dating this agreement, alongside the unwinding of interest accrued during the period of cash flow
deferral.
9. Operating Expenses
Auditors’ remuneration:
– Fees payable to the Company’s auditors for statutory audit1
– Fees payable to the Company’s auditors and associates for statutory audit of
subsidiary Companies1
Administrative and marketing expenses
Expected credit losses – trade receivables
Fair value movement on warrants
Fair value movement on convertible loan notes
2020
£
27,500
40,000
821,494
123,690
2019
Restated
£
35,000
35,000
1,168,634
94,796
(61,939)
(197,640)
–
17,307
950,745
1,153,097
1 Fees payable to company’s auditors for 2019 and 2020 are to Crowe UK and Cooper Parry respectively.
10. Income Tax
Tax expense attributable to the results is made up of:
Current year tax
Prior period1
Deferred taxation Charge
2020
£
–
(31,300)
–
(31,300)
2019
£
–
–
(190,000)
(190,000)
1 Provision for corporate tax charges created for period ending 30 June 2019 for the communicate school as group
relief was not applicable.
70 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
The reconciliation of the current year tax expense and the product of accounting profit multiplied by the statutory
tax rate is as follows:
2020
£
%
2019
£
%
Accounting loss before tax from continuing
operations
Loss before tax from discontinued operations
Loss for the year 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 attributable to continuing
operations
Income tax attributable to discontinued operations
Income tax charge in the consolidated statement of
comprehensive income
(1,659,473)
(480,092)
(2,139,565)
(406,517)
–
406,517
–
–
–
–
(5,885,513)
(2,482,788)
(8,368,301)
19.0
(1,589,977)
19.0
–
1,589,977
(190,000)
(190,000)
–
(190,000)
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
2020
£
2019
£
–
–
–
–
–
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
2020
£
552,474
4,725,788
5,278,262
2019
£
552,474
3,278,131
3,830,605
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.
Malvern International Plc Annual Report and Accounts 2020 71
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
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 £2,139,565 (2019: loss of £8,368,301) and the weighted average number
of ordinary shares in issue during the year of 735,661,044 shares (2019: 256,453,628 shares).
Calculations for dilutive EPS have not been made in respect of the convertible loan notes (note 29) on the
basis the impact would be anti–dilutive.
12. Property, Plant, and Equipment
Leasehold
property and
improvements
Classroom
and office
equipment
Motor
Vehicle
£
£
£
Cost
Opening balance, 01 Jan 2019
782,198
2,425,777
40,958
Right of Use Assets
Total
Equipment
Property
£
–
£
–
£
3,248,933
Additions
Disposals
–
72,040
–
92,037
5,531,619
5,695,696
(170,604)
(1,550,087)
(40,958)
Exchange differences
(9,820)
11,144
Closing balance, 31 Dec 2019
601,774
958,874
Additions
Disposals
Exchange differences
(591,794)
(545,628)
(9,980)
(11,177)
Closing balance, 31 Dec 2020
–
402,069
–
–
–
–
–
–
–
–
–
(1,761,649)
1,324
92,037
5,531,619
7,184,304
–
–
(2,222,096)
(3,359,518)
(43,489)
(64,646)
92,037
3,266,034
3,760,140
Accumulated depreciation
Opening balance, 01 Jan 2019
487,734
2,193,858
22,453
–
–
2,704,045
61,081
70,406
12,883
703,700
848,070
Closing balance, 31 Dec 2019
401,968
790,681
(149,540)
(1,480,814)
(22,453)
2,693
7,231
–
–
–
(1,652,807)
(5,438)
4,486
12,883
698,262
1,903,794
26,861
347,288
414,349
–
–
–
283,353
349,164
(616,667)
(1,579,570)
(6,523)
(20,992)
–
–
–
–
–
–
–
40,200
48,643
17,168
(444,466)
(518,437)
(6,145)
(8,324)
–
–
321,288
–
39,744
705,713
1,066,745
80,781
199,806
168,193
–
–
52,293
2,560,321
2,693,395
79,154
4,833,357
5,280,510
Charge for the year
Disposals
Exchange differences
Charge for the year –
Continuing operations
Charge for the year –
Discontinued operations
Disposals
Exchange differences
Closing balance, 31 Dec 2020
Net book value
At 31 Dec 2020
At 31 Dec 2019
72 Malvern International Plc Annual Report and Accounts 2020
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
Additions1
Disposals
As at the end of the year
Provision against the cost of investment in subsidiaries
As at the beginning of the year
Disposal
Impairment2
As at the end of the year
Net book value at the end of the year
2020
£
2019
£
11,205,720
10,725,495
–
–
480,225
–
11,205,720
11,205,720
9,786,370
2,625,000
–
–
9,786,370
–
7,161,370
9,786,370
1,419,350
1,419,350
1 During 2019, the loan to SAAGE Singapore was capitalised for £480,225
2 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 investments in SAA Global Education Center Pte Ltd and Malvern
International Academy Pte Ltd were fully impaired during 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)
• Malvern House International Limited (UK) is 100% owned by Malvern House Group Limited.
Malvern International Plc Annual Report and Accounts 2020 73
STRATEGIC REPORTOVERVIEWCORPORATE 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, 1 Jan 2019
868,006
4,327,386
362,860
12,242
261,736
£
£
£
£
£
£
–
Total
£
5,832,230
Additions
–
–
(868,006)
(1,687,500)
–
–
–
–
172,809
508,000
680,809
–
–
(2,555,506)
Opening balance, 1 Jan 2019
136,695
2,532,017
207,739
22,554
36,286
612
1,224
Disposal – discontinued
operations
Closing balance, 31 Dec 2019
Additions
Closing Balance, 31 Dec 2020
Accumulated amortisation
Charge for the year
Impairment in respect of
continuing operations
Disposal - discontinued
operations
Closing balance, 31 Dec 2019
Charge for the year
Closing balance, 31 Dec 2020
Net book value, 31 Dec 2020
Net book value, 31 Dec 2019
–
–
–
–
–
2,639,886
362,860
12,242
434,545
508,000
3,957,533
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,691,878
15,000
64,012
324,261
867,630
304,020
10,406
419,545
443,988
2,045,589
(136,695)
(967,500)
–
–
–
–
(1,104,195)
–
–
–
–
–
2,639,886
362,860
12,242
434,545
508,000
3,957,533
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 December 2019 as a result there are no intangible assets
recorded in financial statements as of 31 December 2020. The impairment is in relation to Singapore and UK
operations.
15. Goodwill
Cost
Balance as at the beginning of the year
Additions
Impairment
Balance as at the end of the year
2020
£
2019
£
1,419,350
2,250,018
–
–
–
(830,668)
1,419,350
1,419,350
Goodwill arose on the acquisition of Communicate English School Ltd in 2018. 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.
74 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
The recoverable amount of this CGU is in excess of the carrying value of £1,419,350, therefore no impairment charge
has been made in 2020. 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 WACC of the group.
•
Dynamic growth rate applied, ranging from 6% in 2022, reflecting additional growth of the anticipated
bounce-back from lockdown impacted trade, to 3% annual growth at the end of the 5-year time horizon,
consistent with industry data.
•
Sensitivities around the model: a 0.1% increase in the discount rate has an impact of approximately £24k in
impairment.
16. Trade Receivables
Trade Receivables
2020
£
2019
£
1,033,105
751,333
At 31 December 2020, 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
2020
£
–
1,033,105
1,033,105
2020
£
2019
£
203,978
547,355
751,333
2019
£
Not yet due and not impaired
947,103
174,688
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
32,516
1,825
51,661
1,033,105
158,571
385,031
34,163
157,451
751,333
133,547
(158,571)
(133,547)
1,033,105
751,333
Malvern International Plc Annual Report and Accounts 2020 75
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
The following table provides information about the exposure to credit risk and expected credit losses for trade
receivables as at 31 December 2020:
Not yet due and not 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%
947,103
0%
0%
32,516
1,825
–
–
–
Net
carrying
amount
947,103
32,516
1,825
75%
210,232
(158,571)
51,661
1,191,676
(158,571)
1,033,105
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
2020
£
133,547
–
–
123,690
(98,666)
158,571
2019
£
141,027
(11,686)
(90,590)
189,990
(95,194)
133,547
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 180 days past due.
These are no contract assets within trade and other receivables.
17. Other Receivables and Prepayments
Group
Company
Rent deposits
Prepayments
Other debtors
2020
£
45,015
99,634
17,444
162,093
2019
£
268,207
332,333
64,495
665,035
Other receivables and cash equivalents of entity classified as held for disposal
Other receivables
Cash and cash equivalents
2020
£
–
35,770
17,444
53,214
2020
£
546
1,300
1,846
2019
£
–
17,800
67,578
85,378
2019
£
–
–
–
76 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
18. 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
19. Trade Payables
Trade payables are denominated in the following
currencies:
Singapore Dollar
Pound Sterling
2020
£
103,609
–
103,609
–
103,609
103,609
Group
2020
£
–
603,631
603,631
2019
£
83,264
–
83,264
21,751
61,513
83,264
2019
£
293,320
691,736
985,056
Trade and other payables related to entity classified as held for disposal.
Trade payables
Other payables
2020
£
8,948
–
8,948
–
8,948
8,948
Company
2020
£
–
182,274
182,274
2020
£
161,254
55,483
216,737
2019
£
864
–
864
–
864
864
2019
£
–
–
–
2019
£
–
–
–
20. Contract liabilities
Contract liabilities are deferred revenue representing amounts billed on account of revenues where performance
obligations have not been met for recognition of revenue. Contract liabilities relate 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 recognised in contract liabilities at the beginning of the period has been recognised as
revenue for the period ended 31 December 2020.
Contract liabilities denominated in the following currencies:
Singapore Dollar
Pound Sterling
Opening balance
Deferred income recognised during the year
Course fees received in respect of subsequent financial year
Closing balance
2020
£
–
676,287
676,287
2019
£
327,197
429,228
756,425
2020
£
756,425
(756,425)
676,287
676,287
Malvern International Plc Annual Report and Accounts 2020 77
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
21. Other Payables and Accruals
Other payables
Accrued expenses
22. 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
Dr Sam Malafeh
Group
Company
2020
£
396,969
832,774
1,229,743
2019
£
258,694
430,475
689,169
2020
£
–
140,219
140,219
2019
£
192,793
100,022
292,815
Group
2020
£
2019
£
Company
2020
£
2019
£
40,000
46,646
40,000
32,691
–
40,000
40,000
Group
2020
£
40,000
40,000
3,955
42,691
46,646
2019
£
46,646
46,646
–
40,000
40,000
Company
2020
£
40,000
40,000
–
32,691
32,691
2019
£
32,691
32,691
All amounts due to related parties are unsecured, interest-free, and due within the next twelve months.
23. Financial Liabilities
Non-current liabilities
Convertible Loan Notes
Term Loan
Warrants
Lease liabilities
Current liabilities
Convertible Loan Notes
Lease liabilities
Trade and other payables
Related parties
Total
Group
2020
£
272,817
2,532,115
63,701
2,491,486
5,360,119
50,000
350,829
1,833,374
40,000
2,274,203
7,634,322
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
Company
2020
£
272,817
2,432,115
63,701
–
2019
£
–
2,438,573
75,640
–
2,768,633
2,514,213
50,000
–
322,493
40,000
412,493
3,181,126
316,587
–
292,815
32,691
642,093
3,156,306
78 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
Convertible Loan Notes
At 31 December 2020, the Group has an obligation for £322,817 (See Note 29).
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 £80,009.
During 2020, the Group took advantage of the Government-backed Bounce Back Loan Scheme (BBLS), benefitting
from a total of £100,000. This will be repaid over a six year period with a 2.5% fixed rate of interest. The first 12 months of
this lending facility are free of any obligation to pay capital or interest.
Warrants
As part of the term loan, Boost & Co. was issued warrants over 45,500,464 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 £63,701. 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.
24. Share Capital
At 31 December 2019 - 1p ordinary
shares and 5p deferred shares
Additions during the year - June
2020 0.1p ordinary shares
Sub-division of shares -1p deferred
shares
At 7 June 2020 – 1p & 0.1p ordinary
shares and 1p & 5p deferred shares
Sub-division of stock – 0.1p ordinary
shares
Sub-division of stock – 0.1p deferred
shares
At 31 December 2020 – 0.1p ordinary
shares and 0.1p, 1p & 5p deferred
shares
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
258,576,293
7,153,297
44,198,781
2,209,939
9,363,236
946,390,947
946,391
–
–
946,391
–
(4,567,533)
456,753,332
4,567,533
–
1,204,967,240
3,532,155
500,952,113
6,777,472
10,309,627
–
–
(2,327,187)
–
–
–
2,327,186,637
2,327,187
–
–
1,204,967,240
1,204,968
2,828,138,750
9,104,659
10,309,627
Malvern International Plc Annual Report and Accounts 2020 79
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS Notes to the financial statements continued
During June 2020, 833,333,334 0.1p ordinary shares were issued as a fund raising at 0.15p each and an amount of
£169,586 due to creditors was converted into 113,057,613 new ordinary shares, giving a total of 946,390,947 shares
admitted to trading.
On 8 June 2020, a stock split was conducted, with each ordinary share of 1p in the company being sub-divided into
1 ordinary share of 0.1p and 9 deferred shares of 0.1p, thereby creating an additional 2,327,186,637 deferred shares.
Deferred shares have no rights attached to them.
The company has Enterprise Management Incentive share option scheme for certain directors and employee. The
cost related to it £184 has been added to share capital in financial statement further details on Note (30).
25. 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
2020
£
5,431,449
473,195
(122,250)
5,782,394
2019
£
5,016,849
454,500
(39,900)
5,431,449
The share premium reserve arises where shares have been issued at a price more than the nominal value of 0.1p
(formerly 5p/1p until division of the shares in June 2018 and June 2020 respectively) less any costs of the issue.
(ii) Retained earnings
At the beginning of the year
Loss for the year
At the end of the year
Group
2020
£
2019
£
Company
2020
£
2019
£
(17,564,398)
(2,139,565)
(9,196,097)
(8,368,301)
(17,431,623)
(896,815)
(4,771,282)
(12,660,341)
(19,703,963)
(17,564,398)
(18,328,438)
(17,431,623)
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
2020
£
272,574
15,575
–
288,149
2019
£
589,290
(385,600)
68,884
272,574
Company
2020
£
–
–
–
–
2019
£
–
–
–
–
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.
(iv) Convertible loan reserve
At the beginning of the year
Changes in the present value
At the end of the year
Group
Company
2020
£
28,822
–
28,822
2019
£
28,822
–
28,822
2020
£
28,822
–
28,822
2019
£
28,822
–
28,822
The convertible loan reserve arose on the issue of convertible loan notes in November 2017 (note 29).
(v) Capital reserve
The capital reserve arose on the merger of the Company, then AEC Plc, and AEC Edu Group Pte Limited in 2004.
80 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
26. Related Party Transactions
There were no transactions of income/(expenses) with related parties, except the ones mentioned in note 22.
Details of key management personnel and Directors’ fees and emoluments were as follows:
Key management personnel
Directors’ remuneration:
- Salaries and bonuses
- Loss of office
- Directors’ fees
- Share-based payments
Analysis of Directors’ fees and emoluments:
2020
Sam Malafeh
Mark Elliott
Alan Carroll
Richard Mace
2019 RESTATED
Sam Malafeh
Mark Elliott
Alan Carroll
Richard Mace
Salary & Fees
£
Share Based
Payments
£
126,304
39,942
21,900
38,542
226,688
200,000
–
–
–
–
23,847
13,894
–
37,741
–
–
–
19,192
Fees
£
–
–
–
–
–
–
18,250
5,750
–
2020
£
2019
RESTATED
£
164,846
66,666
61,842
37,741
331,095
Other1
£
66,666
–
–
–
66,666
–
–
–
–
200,000
–
24,000
19,192
243,192
Total
£
192,970
63,789
35,794
38,542
331,095
200,000
18,250
5,750
19,192
1 Includes compensation for loss of office
27. Subsequent events
The Directors are reporting the following subsequent events to the Statement of Financial Position which are
significant to these Financial Statements.
In January 2021, the Company arranged a bridging loan facility with financing partner Boost & Co. to ensure the
availability of working capital pending the payment of a significant trade debtor. This facility was drawn in full with
interest charged at 11.25% per annum. The bridging loan facility was repaid with interest in March 2021, following
receipt of the trade debtor.
In addition, the Group's Chief Executive Officer agreed to lend the Company £30,000 by way of an unsecured
loan. This loan was repayable on or before 30 April 2021, attracting interest at 5.0% per annum. The unsecured loan
was repaid to the Chief Executive Officer in March 2021 via an equity settled transaction. The full value of the loan
(£30,000) was converted into shares, at the issue price of 0.20p, equating to 15,000,000 shares.
With the Company experiencing the prolonged impacts of Covid-19, a decision was made in March 2021 to
undertake a fundraise. The proceeds of this fundraise would provide sufficient liquidity and flexibility to allow the
Company to manage through the period of expected disruption caused by Covid-19, and to contribute to planned
growth initiatives.
The Fundraising raised gross proceeds of £1.70 million through the placing of 620,150,000 New Ordinary Shares and a
subscription to the Company of 230,000,000 New Ordinary Shares all at a price of 0.2 pence per share. In aggregate
850,150,000 New Ordinary Shares were issued pursuant to the Placing and Subscription.
Following the announcement made in the 2019 accounts that the Group’s Singapore operations would be closed,
the main operating entity in Singapore officially entered liquidation in April 2021.
Malvern International Plc Annual Report and Accounts 2020 81
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
28. 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:
2020
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 notes
Financial liabilities at FVPL
Warrants
Total financial liabilities
Net position
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
Total
(Pound Sterling)
18
16
17
19, 21
22
23
23
23
23
103,609
1,033,105
62,459
1,199,173
1,833,374
40,000
2,532,115
2,842,315
322,817
63,701
7,634,322
(6,435,149)
–
–
–
–
–
–
–
–
–
–
–
–
103,609
1,033,105
62,459
1,199,173
1,833,374
40,000
2,532,115
2,842,315
322,817
63,701
7,634,322
(6,435,149)
Notes
Pound Sterling
Singapore
Dollar
Total
Pound Sterling
18
16
17
19, 21
22
23
23
23
23
61,513
547,355
64,495
673,363
1,220,033
42,691
2,438,573
3,175,719
316,587
21,751
203,978
–
225,729
454,192
3,955
–
2,009,309
–
83,264
751,333
64,495
899,092
1,674,225
46,646
2,438,573
5,185,028
316,587
75,640
7,269,243
(6,595,880)
–
2,467,456
(2,241,727)
75,640
9,736,699
(8,837,607)
82 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
(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 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. At the end of the year 13% (2019:
65%) of the Group’s account receivables were made up of individual students, 84% (2019: 12%) relates to large funding
organisations such as universities and the balance of 3% (2019: 23%) to other organisations. All trading activities are
concentrated in 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 Company can be required to pay.
2020
Trade payables
Other payables and Accruals
Due to related parties
Term Loan
Lease Liabilities
Convertible Loan Notes
Warrants
2019
Trade payables
Other payables and Accruals
Due to related parties
Term Loan
Lease Liabilities
Convertible Loan Notes
Warrants
On demand or
within one year
£
Within
2 to 10 years
£
603,631
1,229,743
40,000
–
350,829
50,000
–
2,274,203
–
–
–
2,532,115
2,491,486
272,817
63,701
5,360,119
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
Malvern International Plc Annual Report and Accounts 2020 83
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
(iii) Foreign currency risk
The Group’s investments in overseas subsidiaries and associated companies which have been closed/discontinued
after announcement in August 2020 and therefore group exposure is no longer a material 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 December 2020
Singapore Dollar
At 31 December 2019
Singapore Dollar
10% weakening of GBP
10% strengthening of GBP
Impact on
Equity
£
Impact on
income/
reserves
£
Impact on
Equity
£
Impact on
income/
reserves
£
49,387
278,870
(49,387)
(278,870)
126,039
88,346
(126,039)
(88,346)
(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 2020, there was
none to report.
The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets and liabilities at
carrying amounts, categorised by the earlier of contractual repricing or maturity dates.
At 31 December 2020
Assets
Trade and other receivables
Cash and bank balances
Total assets
At 31 December 2020
Liabilities
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
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,532,115
2,842,315
–
322,817
5,697,247
1,095,564
103,609
1,199,173
1,095,564
103,609
1,199,173
1,833,374
40,000
–
–
63,701
–
1,937,075
1,833,374
40,000
2,532,115
2,842,315
63,701
322,817
7,634,322
84 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
At 31 December 2019
Assets
Trade and other receivables
Cash and bank balances
Non-financial assets
Total assets
At 31 December 2019
Liabilities
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
£
–
–
–
–
–
–
–
–
75,640
–
75,640
–
–
–
–
–
–
2,438,573
5,185,028
–
316,587
7,940,188
1,416,368
83,264
1,787,349
3,286,981
1,674,225
46,646
–
–
–
–
Total
£
1,416,368
83,264
1,787,349
3,286,981
1,674,225
46,646
2,438,573
5,185,028
75,640
316,587
1,720,871
9,736,699
(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 2020
Disposal
Net financing
cash flows
Interest paid
Fair value
movement
Reclassified
Unwinding of
Interest
31 December
2020
CASH
NON-CASH
100,000
(46,583)
–
(50,000)
90,125
2,532,115
Term loan
Warrants
2,438,573
75,640
Convertible loans
notes
316,587
–
–
–
–
–
IFRS 16 - Lease
Liability
5,185,028
(2,009,309)
(194,801)
–
–
–
(11,939)
–
–
–
–
–
63,701
6,230
322,817
(323,500)
184,897
2,842,315
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
299,280
IFRS 16 -Lease
Liability1
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
1 £63,957 has been included within the opening of IFRS 16 lease liability which was disclosed as finance lease in prior
year financial statement.
Malvern International Plc Annual Report and Accounts 2020 85
STRATEGIC REPORTOVERVIEWCORPORATE 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.
2020
£
Group
2019
£
2020
£
Company
2019
£
Total debt
5,697,247
2,514,213
2,754,932
2,514,213
Less: Cash and cash equivalents
(103,609)
(83,264)
(8,948)
(864)
Net debt
Total equity
Debt to equity
5,593,638
2,430,949
2,745,984
2,513,349
(3,124,227)
(2,297,757)
(2,207,411)
(2,608,116)
–
–
–
–
Financial assets are disclosed in notes 16 to 18. The Group's principal financial assets are bank balances, trade and
other receivables.
Loan covenants
The Group’s does not have any specific financial covenants to comply with its major debt provider.
29. Convertible Loan Notes
In 2017 the Company issued loans notes, as described in the table below.
In November 2020, Convertible Loan Note holders agreed a variation of the redemption date from 16 November
2020 to 31 December 2022.
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
Unwinding Interest
Balance at 31/12/2020
3%
4%
5%
6%
Convertible Unsecured Loan
Notes 2020
17 November 2017
31 December 2022
1 Jan 2018-31 Dec 2018
1 Jan 2019-31 Dec 2019
1 Jan 2020-31 Dec 2020
1 Jan 2021-31 Dec 2022
£1,200,000
(£100,000)
£1,100,000
(£771,898)
(£28,822)
£299,280
£17,307
£316,587
£6,230
£322,817
86 Malvern International Plc Annual Report and Accounts 2020
Notes to the financial statements continued
30. Share-based payments and share options
The Company has an Enterprise Management Incentive share option scheme for certain directors and employees.
Under the scheme, participants have been awarded options to acquire up to a prescribed level of shares following
a 3-year vesting period if the Company’s share price has met the pre-determined target conditions. There are two
market-based conditions, each accounting for 50% of the share options awarded to the employee, these are:
•
•
Mid-market share price of the Company on the AIM Market of the London Stock Exchange stays at 0.5p or more
for 40 consecutive business days.
Mid-market share price of the Company on the AIM Market of the London Stock Exchange stays at 0.9p or more
for 40 consecutive business days.
The cost recognised for 2020 in respect of these options is, £184. The following methodology was used to calculate
the amount chargeable in respect of these options:
•
Fair values of 0.3448p and 0.7406p. These have been derived using the following criteria within the Black Scholes
valuation framework:
• Grant Date – 2nd December 2020
• Stock price of 0.15p, as at the grant date, with exercise prices of 0.5p and 0.9p respectively.
• Risk free rate of 0.35%, being the yield on UK 10-year Government bonds at the grant date.
• Volatility of 12.3% representing the standard deviation of inter-day returns over the prior 365-day period.
As with options containing performance-based market targets, the probability of achieving the set condition is
factored into the determination of the value. These will not be re-measured at subsequent reporting dates.
The Company has deemed the vesting probabilities at 5.02% and 0.37%. These are products of lognormal distribution
modelling over a 3-year period to determine the likelihood of the vesting condition being reached, based off the
scaled mean and standard deviation from a prior 365-day period.
1. Condition - 0.5p or more for 40 consecutive business days
Share Options in circulation
Exercise Price (p)
Fair Value (p)
Deemed probability of achieving market condition
Expensed over scheme duration
2. Condition - 0.9p or more for 40 consecutive business days
Share Options in circulation
Exercise Price (p)
Fair Value (p)
Deemed probability of achieving market condition
Expensed over scheme duration
Year ended 31 December 2020
Outstanding at 1 January 2020
Granted during the year
Exercised during the year
Outstanding at 31 December 2020
Exercisable
34,750,000
0.5
0.3448
5.02%
£6,015
34,750,000
0.9
0.7406
0.37%
£952
Number of
options
–
34,750,000
–
Weighted
average
exercise price
–
0.15p
–
34,750,000
0.15p
–
–
Malvern International Plc Annual Report and Accounts 2020 87
STRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
During the year, the Company also made an equity settled share-based payment in lieu of fees to certain
employees, directors and a creditor. A total of 100,262,947 ordinary shares were issued at 0.15p per share. No vesting
conditions were attached to this share issue. The fair value at the grant date has been calculated as the total of the
fees owing for services provided. The cost recognised for 2020 in respect of these share-based payments is, £144,394
for continuing operations, and £6,000 for discontinued operations.
In addition, a bonus was also awarded to certain directors as compensation for an additional and significant time
commitment during a change in Chief Executive Officer during the year. The bonus was not paid until 2021, therefore
an accrual was recognised through liabilities in 2020. The cost recognised for 2020 in respect of these share-based
payments is, £24,700 (restated 2019: £19,192). The bonus was paid in 2021 when a total of 12,350,000 ordinary shares
were issued at 0.20p per share (2019: 12,794,667 ordinary shares at 0.15p per share). No vesting conditions were
attached to this share issue. The fair value at the grant date has been calculated as the total cash value of the
bonus awarded.
The prior year bonus of £19,192, awarded in 2019, was originally accrued to liabilities. In 2020 when then bonus was
paid in shares, the accrual was transferred to equity.
88 Malvern International Plc Annual Report and Accounts 2020
Shareholder information
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 July 2021
Advisers and Registrars
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
Cooper Parry Ltd.
Sky View
Argosy Road
East Midlands Airport
Castle Donington
Derby
DE74 2SA
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
Malvern International Plc Annual Report and Accounts 2020 89
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