MALVERN INTERNATIONAL PLC

Annual / Quarterly Financial Statement • Jun 6, 2017

National Storage Mechanism | Additional information

You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.

RNS Number : 2553H

Malvern International PLC

06 June 2017

6 June 2017

Malvern International PLC

("MLVN" or the "Company" and together with its subsidiaries, the" Group")

Final results for the year ended 31 December 2016

Malvern International plc (AIM: MLVN), the provider of educational services in the UK, Europe and Asia, announces its results for the year ended

Key Points

·    Revenues GBP4.0m (2015:GBP4.8m)

·    Operating loss of GBP1.45m (2015: loss of GBP1.61m)

·    Loss before tax of GBP 1.34m (2015: loss of GBP 1.65m)

·    Loss per share of 1.84p (2015: loss 2.84p)

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Enquiries:

Malvern International PLC		www.malverninternational.com
Haider Sithawalla Dr Sam Malafeh		+65 641 20733 +65 838 60155
WH Ireland Limited (Nomad and Broker)		www.whirelandcb.com
Mike Coe Ed Allsopp		+44 (0)117 945 3470

CHAIRMAN'S STATEMENT

Overview

2016 was both challenging and exciting. The company responded to the challenges which included severe competition, uncertainties created by Brexit in Britain and changing policies in other markets in three ways. First the two largest shareholders, namely KSP and CG Group made available substantial funding, without interest for the present to strengthen the balance sheet. Second, we recruited a dynamic young educationist from New Zealand Dr. Sam Malafeh, as the Deputy CEO of the Group in charge of operations. He has also invested GBP 450,000 to indicate his commitment to the company. Third, with new funding and new management we revamped our offerings and now stand poised to launch IT related subjects including courses related to cyber security and analytics in partnership with specialists in these areas. 

As part of the new strategy, the name of the Company was changed from AEC Education Plc to Malvern International Plc on 13th September 2016. This was to link the parent company to its subsidiaries which have been operating under Malvern name. The Mission of the group is to be a Global Learning and Skills Development Partner to those who come to us to improve their employable opportunities.

The new management team has also set up fresh guidelines on quality assurance to take Malvern International Plc to a higher international level that not only complies with the relevant territory's regulatory requirements but also exceeds consumer and market expectation. The quality improvement plan started in late 2016 and continues into 2017 with series of internal audits taking place to assure the improvement.

Malvern International has also as mentioned earlier set up a new learning technology division to offer technology based products to other education providers looking for new ways of teaching/learning methods and products. This is being done in collaboration with Playware Studios in Singapore, which has patented digital learning technology that has won several awards globally. At the same time, we are also developing a number of other new programmes and these will be announced as and when they are finalised for introduction to the market in 2017 and 2018. The new products are expected to bring additional returns to Malvern in 2017 and the years ahead.

The implementation of the new strategy takes time and requires investment towards improvement of the quality of the service provided in different countries; this would involve a change in management and operations, developing new programmes and new technology products, and establishing a larger and stronger international marketing team. Hence the performance of the Group for the year 2016 was not much different from that in 2015. However, the Board is confident that going forward we are on the right track and the performance of the Group in 2017 onwards should show significant improvement.

In July 2016, the Group disposed of its Dublin subsidiary in which it had 55% interest for €660,000 (equivalent to £554,909) to enable the Group to focus on its 100% owned UK operation. The activities for Dublin have been classified as a discontinued activity for the year ended 31 December 2016 and the comparatives have been restated accordingly.  The 50/50 partnership contract with Cyprus ended in August 2016 and this was not renewed.

Financial results and business review

Group

In 2016 the total revenue for the continuing operations of the Group was £3,992,581. This was 17% less than the Group revenue from continuing operations in 2015 of £4,794,168. The fall was mainly due to the fall of revenue in UK of £1.1m which was partially offset by the increase in revenue from Asia of £0.3m. As mentioned in previous reports, UK continued to be impacted by restrictions of working hours allowed under student visas, the terror threat and the uncertainty of the possible effects of Brexit.   

As a result of the decrease in revenue for the 2016 financial year, the Group incurred a loss after tax of £1,373,410 on the continuing business as compared to the loss of £1,669,763 in 2015 which included impairment charges of £900,000 made against goodwill and intangible assets. In FY 2016, the impairment was at £150,000

However, after taking the gain on the sale of shares in Dublin operations and the six-month operating profit for Dublin totalling £573,800, the Group comprehensive loss after tax in 2016 was £820,681 (2015 - £1,718,798). 

Hence net loss per share for the year on a continuing basis for 2016 was 1.84p compared to 2.84p for 2015 and the net cash at the end of the year stood at £0.12m  ( 2015 - £0.42m).

During 2016, the Board has undertaken an impairment review of the carrying value of its goodwill and intangible assets within the consolidated financial statements of the investments held within the Group in accordance to the process set out in 2015, which takes into consideration our business plan and growth strategies for the Group going forward. Based on this review, an impairment provision of £150,000 was made for the year 2016.

Subsidiaries

With the sale of shares in Dublin and the discontinued business arrangement in Cyprus, the European Sector now comprises only the UK operations. The Southeast East Asia/Middle East sector comprises Singapore and Malaysia. Brief summary of these two sectors is set out below:

United Kingdom (Malvern House)

The revenue of the United Kingdom operations in 2016 was down by 45% to £1.3m compared to the revenue of £2.4m in 2015. Despite this sharp drop in sales, UK was able to contain its operating losses before tax to £433k which was only worse than the operating losses in 2015 of £384k by £49k .  This was achieved through cost cutting measures that were undertaken during the past couple of years.

Despite the poor performance of the UK operations in 2016 and in the past years, the Board is still very positive about its potential going forward. It recognises that UK and especially London will continue to be a popular destination for education. Although the student numbers coming to UK have been falling because of the reasons already mentioned earlier in this and past statements, they can be increased again if the courses offered are widened to include skills development programmes This will attract not only overseas students but also UK residents. Hence the main thrust of the Strategic Plan mentioned earlier is to widen the scope of the programmes offered and strengthen the marketing network with strong management control and supervision.

Southeast Asia comprises Singapore and Malaysian operations.

The total revenue for Southeast Asian operations in 2016 was £2.7m compared to £2.3m in 2015. This was an increase of 14%. However, despite this increase in revenue the sector incurred an operating loss of £311K as compared to the operating loss for the 2015 financial year of £80k due to higher operating costs in Malaysia and further provisions for bad debts. The Malaysian operations made a marginal operating profit of £20K and the rest of the losses came from Singapore operations.

The Group has invested heavily in Singapore to prepare for the re-application of Edu Trust Certification which enables the operation not only to enrol overseas students but also to offer overseas diploma and degree programmes. The application for this certification has now been made and the inspection is expected to take place soon. Once this certification is obtained Singapore will be able to drive up its revenue by offering a wide range of programmes that have been developed or are in the process of being developed both to attract students in Singapore and from other countries.

The Malaysian operation is progressing well and is expected to continue to be profitable going forward. The Malaysia operation has also been through some changes to create a more sustainable business aligned with the new strategy of the group. The Board is also looking at the possibility of further expansion of the operations to the different states in Malaysia.

Dividend

The Board does not propose the payment of a final dividend for the year ended 31 December 2016 (2015: nil).

Prospects

The past few years have been difficult years for the Group. However, the Board is confident that with the reorganised management and marketing teams and proper and gradual implementation of the New Strategic Plan (which covers development and marketing of new and wider range of programmes), the impact on the performance of the Group will be positive going forward and bring the Group to profitability within a year or two.

Acknowledgements

On behalf of the Board I would like to thank all staff members for their continued dedication, commitment, and cooperation during what has been a very difficult period. We look forward to their continuing support going forward in implementing the new plans to bring back the Group to profitability in the years ahead.

We also would like to extend our appreciation and thanks to all our business partners, students, associates and valued shareholders for their support throughout the year and look forward to the same in the years ahead.

Finally, I would like to personally thank all members of the Board for their time and guidance at the Board level and the various committee levels in which they serve.

Gopinath Pillai

Chairman

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2016

	2016	2015 restated
	£	£
Revenue
Sale of services	3,992,581	4,794,168
Other income	52,104	261,467
	4,044,685	5,055,635
Cost of services sold	2,210,611	2,418,647
Salaries and employees' benefits	1,158,797	1,292,034
Amortisation of brand, licences and trademarks	158,333	165,165
Depreciation of plant and equipment	77,579	101,244
Other operating expenses	1,744,219	1,788,167
Impairment of goodwill	-	404,352
Impairment of intangible assets	150,000	495,648
Operating loss	(1,454,854)	(1,609,622)
Share of results of associated companies and joint ventures	49,898	965
Finance costs	61,919	(36,960)
Loss before income tax	(1,343,037)	(1,645,617)
Income tax charge	(30,373)	(24,146)
Loss for the year from continuing activities	(1,373,410)	(1,669,763)
Profit for the year from discontinued activities	573,800	262,431
Loss for the year	(799,610)	(1,407,332)
Attributable to:
Equity holders of the Company	(799,610)	(1,525,426)
Non-controlling interest	-	118,094
	(799,610)	(1,407,332)

	2016	2015 restated
Loss per share on continuing activities (in pence)
Basic	(1.84)	(2.84)
Diluted	(1.84)	(2.84)
Profit /(loss) per share on discontinued activities (in pence)
Basic	0.77	0.42
Diluted	0.77	0.42

Loss per share attributable to equity holders of the Company (in pence)
Basic	(1.07)	(2.42)
Diluted	(1.07)	(2.42)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016

				2016		2015
				£		£
Loss for the year				(799,610)		(1,407,332)
Foreign currency translation movements				(21,071)		(311,466)
Total comprehensive income for the year				(820,681)		(1,718,798)
Attributable to:
Equity holders of the parent				(820,681)		(1,857,769)
Non-controlling interest				-		138,971
Total comprehensive income for the year				(820,681)		(1,718,798)

STATEMENTS OF FINANCIAL POSITION

	Group
	2016		2015
	£		£
TOTAL ASSETS
Non-Current Assets
Property, plant and equipment	188,835		348,251
Investment in subsidiary companies	-		-
Investment in joint ventures	-		89,675
Intangible assets	2,144,264		2,445,611
Development Expenditure	1,505		-
Goodwill	1,312		1,312
Deferred tax asset	-		17,120
	2,335,916		2,901,969
Current Assets
Inventories	3,129		9,142
Trade receivables	460,939		575,952
Other receivables and       prepayments	619,993		804,003
Tax recoverable	32,539		13,020
Amounts due from subsidiary companies	-		-
Amounts due from joint ventures	27,841		32,428
Amounts due from related parties	-		-
Cash and cash equivalents	116,541		416,268
	1,260,982		1,850,813
Total Assets	3,596,898		4,752,782
EQUITY AND LIABILITIES
Non-Current Liabilities
Financial liabilities	24,447		7,492
Deferred taxation liability	-		3,323
	24,447		10,815
Current Liabilities
Trade payables	170,675		535,940
Deferred income	243,297		756,282
Other payables and accruals	809,824		1,487,997
Amounts due to a subsidiary	-		-
Amounts due to related parties	1,223,256		1,589,052
Financial liabilities	4,823		31,383
Provision for income tax	9,626		18,949
	2,461,501		4,419,603
Total liabilities	2,485,948		4,430,418
Share capital	6,823,838		5,362,491
Share premium	896,111		896,111
Retained earnings	(7,785,081)		(6,964,400)
Translation reserve	1,005,522		965,602
Capital reserve	170,560		170,560
	1,110,950		430,364
Non-controlling interests	-		(108,000)
Total equity	1,110,950		322,364
Total Equity and Liabilities	3,596,898		4,752,782

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2016

Share

Capital

Share

Premium

Share-Based

Payment

Reserve

Retained

Earnings

Translation

Reserve

Capital

Reserve

Attributable

To Equity

Holders of the Company

Non- controlling

Interests

Total

£

£

£

£

£

£

£

£

£

Balance at 1 January 2015

5,362,491

896,111

-

(5,444,476)

1,297,945

170,560

2,282,631

(246,971)

2,035,660

Loss for the year

-

-

-

(1,525,426)

-

-

(1,525,426)

118,094

(1,407,332)

Total other comprehensive income

-

-

-

-

(332,343)

-

(332,343)

20,877

(311,466)

Total comprehensive income for the year

-

-

-

(1,525,426)

(332,343)

-

(1,857,769)

138,971

(1,718,798)

Unclaimed dividends

-

-

-

5,502

-

-

5,502

-

5,502

Balance at 31 December 2015/ 1 January 2016

5,362,491

896,111

-

(6,964,400)

965,602

170,560

430,364

(108,000)

322,364

Loss for the year

-

-

-

(820,681)

-

-

(820,681)

108,000

(712,681)

Total other comprehensive income

-

-

-

-

39,920

-

39,920

-

39,920

Total comprehensive income for the year

-

-

-

(820,681)

39,920

-

(780,761)

108,000

(672,761)

New Share Issues	-	-	-	5,502	-	-	5,502	-	5,502

1,461,347

-

-

-

-

-

1,461,347

-

1,461,347

Balance at 31 December 2016

6,823,838

896,111

-

(7,785,081)

1,005,522

170,560

1,110,950

-

1,110,950

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2016

					2016					2015 restated
					£					£
Cash Flows from Operating Activities
Loss before income tax from continuing activities				(1,343,037)					(1,645,617)
Profit/(loss) before income tax from discontinued   activities				573,800					262,431
Adjustments for:
Amortisation of intangible assets				158,333					165,165
Depreciation of property, plant and equipment				77,579					150,016
Impairment of goodwill				-					404,352
Impairment of intangible assets				150,000					495,648
Loss on disposal of plant and equipment				43,533					9,920
Non-cash elements of profit on discontinued activities				(308,082)					-
Interest expense				61,919					43,747
Others				-					965
				(585,955)					(113,373)
Changes in working capital:
Receivables				120,356					(137,221)
Payables				(817,411)					(63,954)
Inventories				3,424					(2,424)
Related parties and associated companies				683,662					632,497
				(595,924)					315,525
Taxation				7,797					(24,867)
Net cash used from operating activities				(588,127)						290,658
Cash Flows from Investing Activities
Interest received					-					-
Dividends received     Purchases of property, plant and equipment					- (45,899)					- (90,649)
Purchase of trademarks and licences					-					-
Net cash used in investing activities					(45,899)					(90,649)
Cash Flows from Financing Activities

Interest paid		(61,919)		(43,747)
Repayment of term loan		-		(37,204)
Finance leases       Unclaimed dividends returned       New Share Issues		(9,605) - 428,992		(38,964) 5,502 -
Net cash generated by/(used in) financing activities		357,468		(114,413)
Effect of foreign exchange rate changes on     consolidation		(23,169)		(30,074)
Net decrease in cash and cash equivalents		(299,727)		55,522
Cash and cash equivalents at the beginning of the   Year		416,268		360,746
Cash and cash equivalents at the end of the year		116,541		416,268

NOTES

1.   General Information

Malvern International plc (the "Company") is a public limited liability company incorporated in England and Wales on 8 July 2004. The Company was admitted to AIM on 10 December 2004. Its registered office is Witan Gate House, 500-600 Witan Gate West, Milton Keynes MK9 1SH and its principal place of business is in Singapore. The registration number of the Company is 05174452.

The principal activities of the Company are that of investment holding and provision of educational consultancy services.  The principal activity of the group is to provide an educational offering that is broad and geared principally towards preparing students to meet the demands of business and management.   The specific principal activities of the subsidiary companies are set out in note 12 to the financial statements. There have been no significant changes in the nature of these activities during the year.

2.   Segmental Information

All revenue and profit before taxation arises from operations in the education sector. Reportable segments are based on the geographical area where operations are based comprising Europe (UK and Cyprus) and South East Asia/Middle East (Malaysia and Singapore).  These segments represent the respective sub-groups of Malvern House Group Limited (Europe) and Malvern Singapore (South East Asia/Middle East).

The segmental analysis is as follows:

	Europe	Asia	Total
2016	£	£	£
Revenue from external customers	1,314,904	2,677,677	3,992,581
Depreciation, write offs and amortisation	(92,852)	(293,060)	(385,912)
Loss before taxation	(528,355)	(814,682)	(1,343,037)
Taxation charge	-	(30,373)	(30,373)
Profit on discontinued activities	573,800	-	573,800
Loss for the year	45,445	(845,055)	(799,610)
Segmental assets	1,018,926	2,577,972	3,596,898
Segmental liabilities	(1,022,332)	(1,463,617)	(2,485,948)
Additions to non-current assets	3,653	42,246	45,899
2015-restated
Revenue from external customers	2,446,734	2,347,434	4,794,168
Depreciation, write offs and amortisation	(1,044,024)	(122,384)	(1,166,408)
Loss before taxation	(1,548,300)	(97,317)	(1,645,617)
Taxation charge	(1,100)	(23,046)	(24,146)
Profit on discontinued activities	262,431	-	262,431
Loss for the year	(1,286,969)	(120,363)	(1,407,332)
Segmental assets	1,988,438	2,764,344	4,752,782
Segmental liabilities	(3,178,018)	(1,252,400)	(4,430,418)
Additions to non-current assets	17,120	-	17,120

Note that the Segmental liabilities figure for South East Asia and the Middle East is shown as a net asset due to the treatment of the amount due from Europe to South East Asia for funding being shown as a liability in the former and an asset in the latter.

3.   Earnings/(Loss) Per Share

The basic and diluted earnings/(loss) per share on continuing activities was based on the loss attributable to shareholders of £1,373,410 (2015-restated: loss of £1,787,857) and the weighted average number of ordinary shares in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).

The basic and diluted earnings/(loss) per share on discontinued activities was based on the profit attributable to shareholders of £573,800 (2015-restated: £262,431) and the weighted average number of ordinary shares in issue during the year of 74,592,510 shares (2015: 63,051,043 shares).

There were no outstanding options in 2016.

4.   Annual Report

The Annual Report will be sent to shareholders by close of business on or around 6 June 2017. Additional copies will be available to the public, free of charge, from the Company's website www.malverninternational.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UNAWRBSANRRR