National Storage Mechanism | Additional information

RNS Number : 5603V

Malvern International PLC

06 April 2023

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

06 April 2023

Malvern International plc

("Malvern", the "Company" or the "Group")

Final results for the year ended 31 December 2022

Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces its final results for the year ended 31 December 2022.

Results

· Revenues increased 169% to £6.51m (2021: £2.42m)

· The operating loss for the year reduced to £0.78m (2021: loss £1.32m) reflecting continued strong cost control measures together with ongoing investment in our sales and marketing and central operations

· The loss for the year was £1.08m (2021 loss: £1.59m)

· Loss per share of 4.95 pence (2021 loss: 8.49 pence)

· Cash balances increased by £0.81m during the year to £1.18m (2021: £0.37m) reflecting cash inflow of £1.32m (2021: cash outflow of £1.19m). This increase was due to the late invoicing to us of accommodation costs

· Net debt was £4.38m (2021: £5.85m) including £3.08m (2021: £3.35m) of lease liabilities

Operational highlights

· Over three-fold an increase in University Pathways students for 2022/23 academic year with 500 University Pathway students now enrolled

· Revenues in English Language Training ("ELT") centres bounced back during summer months ahead of pre-pandemic levels

· Continued to strengthen and deepen relationship with the University of East London ("UEL") with five-year partnership aiming to increase rapidly the volume of Chinese student enrolments

· Strengthened senior management team with promotions and appointments of a Director of University Partnerships, Director of Student Recruitment, Commercial Director of ELT, Head of Operations and a Group HR Manager

· Appointed an experienced East Asia Director to manage and grow our agent network across China

· Junior programmes relaunched in summer of 2022 with 976 students enrolled after two years of no activity

Richard Mace, Chief Executive Officer, said: "Student numbers continued to rebuild throughout 2022 as limitations on international travel eased. English Language Training bounced back in 2022 with three centres posting revenues ahead of the pre-pandemic period during the busy summer months. Our University Pathways saw a three-fold increase in student numbers for the 2022/23 academic year start, contributing significantly to our overall University Pathways population of 500 students and giving a strong indication of the potential of this division. Juniors delivered programmes to 976 students, generating revenues of c.£1.35m after two years of no activity.

Our forward bookings and revenue visibility for the start of 2023, combine with the removal of all COVID-19 restrictions, gives us confidence in Malvern's near and longer term prospects. We expect to move towards profitable growth in all divisions in 2023."


For further information please contact:
Malvern International Plc	www.malverninternational.com
Mark Elliott - Chairman	Via our website
Richard Mace - Chief Executive Officer
WH Ireland (NOMAD & Broker)	www.whirelandcm.com
Mike Coe / Sarah Mather	0207 220 1666

Notes to Editors:

Malvern International is a learning and language skills development partner, offering 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.

University Pathways - on and off-campus university pathway programmes helping students progress to a range of universities, as well as in-sessional and pre-sessional courses.

Malvern House Schools - British Council accredited English Language Training at English UK registered schools in London, Brighton and Manchester.

Malvern Online Academy - British Council accredited online school, offering supported tuition to students from around the world in English language, higher education, and professional education.

Juniors and summer camps - fully-immersive summer residential English language camps and bespoke group programmes for 13 to 18 year olds.

For further investor information go to www.malverninternational.com.

CHAIRMAN'S STATEMENT

Introduction

Student numbers continued to rebuild throughout 2022 as the limitations on international travel eased. The second half of the year saw more significant growth and a return to pre-pandemic levels of student numbers in our adult ELT schools. The Juniors division which runs two-week courses mostly over the summer holidays saw a c.50% return of student numbers compared to 2019, which was in line with the wider market performance since the majority of these courses are booked many months in advance and at a time where uncertainty around travel remained. We welcomed our largest cohort of 500 students for University Pathways in the 2022/23 academic year.

Financial performance

Revenues increased 169% to £6.51m (2021: £2.42m). The operating loss for the year reduced to £0.78m (2021: loss £1.32m) reflecting continued strong cost control measures together with ongoing investment in our sales and marketing and central operations.

The loss for the year was £1.08m (2021 loss: £1.59m), resulting in a loss per share of 4.95 pence (2021 loss: 8.49 pence).

Cash balances increased by £0.81m during the year to £1.18m (2021: £0.37m) reflecting cash inflow of £1.32m (2021: cash outflow of £1.19m). This increase was due to the late invoicing to us of accommodation costs. Net debt was £4.38m (2021: £5.85m) including £3.08m (2021: £3.35m) of lease liabilities (see note 24 of the financial statements).

Financing and debt restructure

In March 2022, successful negotiations were finalised with BOOST&Co., (the Group's fund manager, acting on behalf of the Company's debtholder IL2 (2018) Sarl) to restructure the Group's £2.6m debt facility. Under the original agreement monthly payments were due to commence in April 2022 over a 24-month period. The new agreement provides for a 12-month payment and interest holiday with monthly payments commencing from March 2023, over a five-year period. To assist with the lumpy nature of our cash flow we have also agreed with them to vary the timing of these payments during 2023. At the same time BOOST&Co., provided a letter of comfort to provide ongoing financial support to the Group for any short-term working capital requirement should that become necessary.

Share option scheme

The Company continued to offer an EMI share option scheme to retain, incentivise and align the interests of employees with certain performance targets and strategic goals. The Company awarded 575,000 ordinary shares of 1 pence each in the capital of the Company, pursuant to the Company's EMI share option scheme (the "EMI Options") to Richard Mace, Daniel Fisher and certain employees of the Company in December 2022. The EMI Options granted, when added to the previously granted EMI Options of 2,002,500 represent 8.2% of the existing issued share capital of the Company.

Staff and staff appointments

Malvern continued to build and strengthen its sales and marketing team, appointing an experienced East Asia Director to manage the region's agent network primarily across China following our February 2023 expansion of operations there. As the business grows so does the need to continue to build our excellent senior management team and this we will continue to do to drive the business in 2023.

I would like to take this opportunity to thank all our colleagues for their continued dedication in delivering quality education to our students and in the significant contribution they have made in the post COVID-19 recovery of our business.

Outlook

The significant revenue growth seen in H2 2022, in combination with the visibility of University Pathways revenue in H1 2023, and no COVID-19 restrictions affecting students' ability to travel, gives us confidence in Malvern's near and longer term prospects. We expect to achieve growth in all divisions in 2023.

Student numbers in our language schools have returned to pre-pandemic levels and the pipeline for 2023 is encouraging. In our University Pathways division, student numbers are up 247% on the prior academic year (21/22 v 22/23), which reflects the significant investment in this division. Finally, pre-bookings for 2023 summer camps are very encouraging and revenue growth is expected as an outcome.

We have a great management team and the services we offer are in demand. We expect to grow and diversify our revenue by bringing on board new educational establishments and attracting students from more countries than ever before.

COVID-19 was a very difficult time for our industry but with the support of all our stakeholders we survived. We now see great opportunities for us to prosper in 2023 and beyond.

Mark Elliott

Chairman

OPERATING REVIEW

English Language Training ("ELT")

The ELT industry has bounced back after international borders reopened following two years of travel restrictions. This is evidenced through revenues across the Group's three ELT centres during the Group's busiest summer period, coming in slightly ahead of the pre-pandemic level in 2019.

Adult ELT revenue increased in 2022, mainly coming from the MENA and Latin America markets. This was helped by the Government's announcement in early May 2022 that Saudi Arabia nationals can apply to travel to the UK for tourism, business, study or medical treatment for up to six months with an electronic visa waiver from 1 June 2022.

The English language schools provided a mixture of in-class, online, and blended learning in 2022, although there is now a clear return to predominately in-class learning.

The focus for the Group continues to be increasing the volume of accommodation options for students, which is a challenge across the industry, and continuing to develop our student acquisition model. Recruiting students via our growing agency network and directly via our digital presence and processes is a key strategy for this division. With our investment in systems and appointment of a Commercial Director we are well placed to grow in 2023 and beyond.

University Partnerships

Underpinned by strong partnership structures with UEL, including regular joint senior management group meetings and excellent relationships with colleagues from across UEL, our International Study Centre welcomed a three-fold increase of students for the 2022/23 academic year, contributing significantly to our overall University Pathways population of 500 students. An increase of over 240% on the 2021-22 academic year compared which had 144 students across our International Study Centres.

This increase in student numbers is being driven by our expanded sales team and improved processes to manage and convert potential students from across the world. In parallel, staffing and operational arrangements have developed rapidly in our centre, driving our focus on learning and teaching excellence and maximising student attainment and progression to the University. These are built on a continued focus on optimising quality assurance within the centre, which has been recognised by our University partners during a range of formal and informal quality assurance processes.

We have formally launched a five-year strategic collaborative partnership with UEL, significantly extending our partnership with the University and aiming to increase rapidly the volume of Chinese students enrolled at UEL's three London campuses. Our centre is expected to expand further over the next five years.

Following the appointment of an experienced East Asia Director, we will manage an extensive education agent network across China via our in-country team and undertake extensive marketing, student recruitment and conversion activities on behalf of UEL in mainland China. Together with UEL colleagues, we will support partnership development with academic institutions in China. These partnerships will support the identification and development of articulation agreements (an articulation agreement is a formal partnership with another institution, which guarantees a UEL place on a particular programme, or programmes, on successful completion at another institution) and transnational education opportunities.

NCUK

Our NCUK centre at Malvern House London continues to grow, playing its part within our University Pathways division. We have attracted an increased number of students to both the September 2022 and January 2023 cohorts, aiming to progress to high quality universities via their International Foundation Year programme.

The building of our brand presence in key recruitment regions such as China, Nigeria and Sub-Saharan Africa, is expected to greatly increase the numbers of students on the NCUK programme during 2023/24. Delivery of further NCUK programmes, such as Science and Engineering routes, is currently being explored with our partners at NCUK, with both organisations looking to our NCUK centre to support their strong growth trajectories.

Malvern Juniors

As expected, the Italian funded INPS programmes went ahead in July and August 2022. The Company delivered programmes to 976 students, generating revenues of c.£1.35m after two years of no activity. The bulk of the students originate from Italy.

This performance was in line with the wider Junior market with 2022 programmes running at around 50% to 60% of pre-pandemic levels.

The team had a very successful British Council inspection in July 2022. The final result is excellent and puts Malvern in the top quartile of inspections in the industry. Our next full inspection of Junior programmes is due in 2026.

In China, the biggest international student market to the UK for Junior summer camps, we are expecting students to begin travelling again in 2023. The Group's strategic investment in this market is expected to contribute significant growth from 2024.

The Group is well placed for growth in this division. There remains a clear backlog of demand for 2023 based on pre-bookings, consequently we expect significant growth in student numbers and revenues in 2023.

Central services

We continue to make improvements to our shared central services which includes both back-office and sales and marketing. Our priority is to place quality at the heart of our business, standardising and optimising our education provision. This is backed by a decision to centralise quality assurance in order to support each division in managing student feedback processes, accreditations, reviews and compliance.

The creation of our China recruitment function and appointment of an experienced East Asia Director to manage the agent network across China continues to build on our sales and marketing capabilities. We continue to work with our agent network as well as supporting our direct student recruitment channels. For the latter, we are improving lead generation and conversion processes as well as expanding our marketing collateral.

With the international student market re-stabilising we are aware of the need to develop and engage our staff to promote a positive and high-performance team. Our HR team has been working to improve remuneration packages to attract the best talent, enhance training and CPD opportunities as well as identifying future leaders within the business.

We are looking at ways to extend our current social responsibility activities beyond offering scholarship places, establishing charity days at each of our centres and developing a company-wide giving back culture.

Richard Mace

Chief Executive Officer

FINANCIAL REVIEW

Revenue

Revenues increased 169% to £6.51m (2021: £2.42m). Revenues have increased across all areas of the business. Student numbers recovered following a long period of travel restrictions. Juniors ran for the first time in 2019, generating c£1.35m in revenue, the bulk of students coming from Italy. Freedom of travel and continued investment in our pathway partnerships, resulted in a 247% increase in student numbers from the prior academic year (21/22 vs. 22/23).

Operating costs

The reopening of international borders aside, continued investment in the Group's sales and marketing functions has also been critical to the growth of revenue in 2022. Spending on these functions totalled c£0.24m (excluding salaries) in 2022 (2021: c£0.08m). Much of this increased spend is the result of increased travel. Across all divisions, student number growth is built on relationships with the Group's agent network. The relaxation of travel restrictions allowed our people to travel to key recruitment markets for the first time in two years.

Group salaries and benefits also increased in 2022, £2.06m v £1.34m in 2021. This increase can be attributed to an increased number of student facing staff to deal with the large increase in student numbers during the year. As previously stated, the Group continues to invest in the sales function, including additional headcount, and as an extension of the sales function, the Group has also invested in the UEL admissions pipeline and student support structure. These UEL functions have been key to delivering growth in student numbers in this division. As the staffing structure continues to take shape, the Group is well positioned to scale effectively in 2023.

The loss for the year was £1.08m (2021 loss: £1.59m), resulting in a loss per share of 4.95 pence (2021 loss: 8.49 pence). The reduced loss position is the result of a strong H2 revenue performance. The total loss in 2022 was significantly impacted by supressed revenue in H1 2022, caused by the impact of COVID-19. An anticipated full year of normal operating conditions in 2023, in combination with the visibility of University Pathway revenue in H1 2023, gives the board confidence about Malvern's near and longer term prospects.

Consolidated Statement of Financial Position

The Group continues to make incremental improvements on the Consolidated Statement of Financial Position. The convertible loan note, first issued in 2017, was fully redeemed during the year following a placing (2021: £0.27m). The levels of historical creditor balances were also reduced in 2022. This included making the final payment of a long payment plan to clear a c£200k Junior's accommodation invoice from 2019.

The cash balance at the end of the financial year was £1.18m (2021: £0.37m). This increase was due to the late invoicing (c£0.75m) to us of accommodation costs. The Group has managed expenditure tightly. In addition, debtor days have reduced which is important for our working capital and growth requirements. The Group's £2.6m debt was restructured in 2022, providing a 12-month payment and interest holiday with monthly payments commencing from March 2023, over a five-year period. To assist with the uneven nature of our cashflow we have also agreed with BOOST&Co Limited to vary the timing of these payments during 2023.

Daniel Fisher

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


	Note	2022	2021
		£	£
Revenue
Sale of services	3	6,511,602	2,417,524
Total revenue		6,511,602	2,417,524

Cost of services sold		(3,558,448)	(1,071,679)
Gross profit		2,953,154	1,345,845
Other income		84,744	223,989

Salaries and employees' benefits		(2,063,363)	(1,346,486)
Share based payments		(3,745)	(3,128)
Depreciation of property, plant and equipment		(372,457)	(409,271)
Other operating expenses		(1,387,080)	(1,135,149)
Operating loss		(788,747)	(1,324,200)
Finance costs	4	(295,086)	(270,190)
Loss before tax		(1,083,833)	(1,594,390)
Income tax charge		-	-
Loss for the year from continuing operations		(1,083,833)	(1,594,390)
Profit from discontinued operation		-	448,741

Loss for the year being total comprehensive expense attributable to owners of the parent		(1,083,833)	(1,145,649)


	2022	2021
	£	£
Total comprehensive expense for the year	(1,083,833)	(1,145,649)
Continuing operations	(1,083,833)	(1,594,390)
Discontinued operations	-	448,741
Attributable to:
Equity holders of the parent	(1,083,833)	(1,145,649)


		2022	2021 restated*
Loss per share from continuing operations attributed to equity holders of the Company (in pence)
Basic		(4.95)	(8.49)
Diluted	6	(4.95)	(8.49)

*Total ordinary shares for 2021 have been restated to provide a meaningful comparison with 2022. A share consolidation was completed in 2022, increasing the nominal value of the Group's ordinary shares.

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION


	Group		Company
	2022	2021	2022	2021
	£	£	£	£
TOTAL ASSETS
Non-current assets
Property, plant, and equipment	30,662	50,427	-	-
Goodwill	1,419,350	1,419,350	-	-
Investment in subsidiaries	-	-	1,419,350	1,419,350
Right-of-use assets	2,215,076	2,553,726	-	-
Total non-current assets	3,665,088	4,023,503	1,419,350	1,419,350

Current assets
Trade receivables	405,051	705,271	-	-
Other receivables and prepayments	1,135,990	289,607	41,771	112,788
Amounts due from subsidiaries	-	-	-	501,409
Cash and cash equivalents	1,181,631	377,170	13,101	45,701
Total current assets	2,722,672	1,372,048	54,872	659,898
Total assets	6,387,760	5,395,551	1,474,222	2,079,248



				Group				Company
	Note			2022		2021		2022	2021
				£		£		£	£
EQUITY AND LIABILITIES
Non-current liabilities
Term loan	7			2,052,808		1,791,952		1,997,540	1,723,537
Warrants	7			189,762		72,801		189,762	72,801
Lease liabilities	7			2,624,792		3,075,517		-	-
Deferred tax liabilities				10,279		10,279		-	-
Total non-current liabilities				4,877,641		4,950,549		2,187,302	1,796,338
Current liabilities
Trade payables				416,944		413,297		788	31,896
Contract liabilities				2,199,570		899,137		-	-
Other payables and accruals				1,640,517		598,253		96,984	108,294
Amounts due to subsidiary				-		-		1,262,410	661,326
Convertible loan notes	8			-		275,885		-	275,885
Lease liabilities	7			450,726		278,961		-	-
Term loan	7			436,341		808,869		415,044	787,573
Total current liabilities				5,144,098		3,274,402		1,775,226	1,864,974
Total liabilities				10,021,739		8,224,951		3,962,528	3,661,312
Equity attributable to equity holders of the Company
Share capital		9	11,330,956		11,216,991		11,330,956			11,216,991
Share premium			6,797,950		6,603,839		6,797,950			6,603,839
Retained earnings			(21,762,885)		(20,679,052)		(20,617,212)			(19,431,716)
Convertible loan reserve			-		28,822		-			28,822
Total equity			(3,633,979)		(2,829,400)		(2,488,306)			(1,582,064)
Total equity and liabilities			6,387,760		5,395,551		1,474,222			2,079,248

The loss for the year as per the financial statements of the parent company at 31 December 2022 was £1,185,496 (2021: Loss £1,103,278).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


	Share capital	Share premium	Retained earnings	Translation reserve	Capital reserve	Convertible loan reserve	Total
	£	£	£	£	£	£	£
Balance at 1 January 2021	10,309,811	5,782,394	(19,703,963)	288,149	170,560	28,822	(3,124,227)
Direct costs relating to issue of shares	-	(89,503)	-	-	-	-	(89,503)
Total comprehensive expense for the year	-	-	(1,145,649)	-	-	-	(1,145,649)
Capital reserve transferred to retained earnings on disposal of Singapore	-	-	170,560	-	(170,560)	-	-
Translation reserve transferred to retained earnings on disposal of Singapore	-	-	-	(288,149)	-	-	(288,149)
New Share Issue	891,702	898,598	-	-	-	-	1,790,300
Share based payments (inc. EMI options)	15,478	12,350	-	-	-	-	27,828
Balance at 31 December 2021	11,216,991	6,603,839	(20,679,052)	-	-	28,822	(2,829,400)
Direct costs relating to issue of shares	-	(24,500)	-	-	-	-	(24,500)
Total comprehensive expense for the year	-	-	(1,083,833)	-	-	-	(1,083,833)
Convertible loan notes	85,211	14,789		-	-	-	100,000
Convertible loan note reserve transferred to share premium	-	28,822	-	-	-	(28,822)	-
New Share Issue	25,009	175,000	-	-	-	-	200,009
Share based payments (EMI options)	3,745	-	-	-	-	-	3,745
Balance at 31 December 2022	11,330,956	6,797,950	(21,762,885)	-	-	-	(3,633,979)

CONSOLIDATED STATEMENT OF CASH FLOWS


	2022	2021
		£
Cash flows from operating activities
Loss after income tax from
Continuing activities	(1,083,833)	(1,594,390)
Discontinued activities	-	448,741
Adjustments for:
Depreciation of tangible assets	372,457	409,271
Fair value movements	(40,019)	16,755
Share based payments	3,745	3,128
Profit/(loss) on disposal of tangible assets	503	2,400
Loss on disposal of discontinued operations	-	(503,040)
Impairment of trade receivables	113,583	311,102
Finance cost	295,086	270,190
Interest paid	(41,117)	(59,526)
Tax paid	-	-
	(379,595)	(695,369)
Changes in working capital:
(Increase)/decrease in receivables	(659,746)	(110,781)
Increase/(decrease) in payables	2,171,471	(348,043)
Decrease in amounts due to related parties	-	(40,000)
Net cash flows generated / (used) in operating activities	1,132,130	(1,194,193)

Cash Flows from Investing Activities
Purchases of property, plant, and equipment	(14,545)	(11,280)
Net cash used in investing activities	(14,545)	(11,280)

Cash Flows from Financing Activities
Repayment of lease liabilities	(473,359)	(161,475)
New equity issued	175,509	1,650,797
Term Loan	(15,275)	(10,288)
Net cash generated by financing activities	(313,125)	1,479,034
Net change in cash and cash equivalents	804,461	273,561
Cash and cash equivalents at the beginning of the year	377,170	103,609
Exchange losses on cash and cash equivalents	-	-
Cash and cash equivalent at the end of the year	1,181,631	377,170

Notes to the financial statements

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 3rd Floor 1 Ashley Road, Altrincham, Cheshire, United Kingdom, WA14 2DT. The registration number of the Company is 05174452.

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. There have been no significant changes in the nature of these activities during the year.

2. Significant accounting policies

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 United Kingdom, 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.

Going concern

The financial statements have been prepared on a going concern basis. The directors 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 March 2022, successful negotiations were finalised with BOOST&CO Limited (the Group's fund manager, acting on behalf of the Company's debtholder IL2 (2018) Sarl) to restructure the Group's £2.6m debt facility. Under the original agreement monthly payments were due to commence in April 2022 over a 24-month period. The new agreement provides for a 12-month payment and interest holiday with monthly payments commencing from March 2023, over a five-year period.

BOOST&CO Limited, acting on behalf of IL2 (2018) Sarl, have again provided a letter of comfort to provide ongoing financial support to the Group for any short-term working capital requirement should that become necessary. It is the present policy of BOOST&CO to ensure that the Group has adequate financial resources to meet their obligations and to enable it to continue as a going concern for a period of at least 12 months from the date of the signing of the financial statements. To assist with the uneven nature of our cash flow we have also agreed with BOOST&CO Limited to vary the timing of these payments during 2023.

The significant revenue growth seen in H2 2022, in combination with the visibility of University Pathway revenue in H1 2023, and no COVID-19 restrictions affecting students' ability to travel, gives the Board confidence about Malvern's short- and long-term prospects. The board expects to achieve growth in all divisions in 2023.

Student numbers in our language schools have returned to pre-pandemic levels and the pipeline for 2023 is encouraging. In our Pathway division, student numbers are up 247% on the prior academic year (21/22 vs. 22/23), which reflects the significant investment in this division. Finally, our summer camps successfully returned in 2022, delivering c£1.4m in revenue to the Group. Pre-bookings for 2023 summer camps are very encouraging and revenue growth is expected as an outcome.

Profit and cash flow projections for the Group indicate that the Group is moving towards profitable growth in its key operating entities. A large part of this assumed growth is driven by the more profitable pathways division of the Group.

Despite significant revenue growth in H2 and FY23 forecast, current UK and worldwide macroeconomic factors continue to create uncertainty in the profit and cash flow projections for the Group, in particular lecturers and staff wage inflation. The provision of the letter of comfort from the Group's lenders referred to above provides confidence to the Group with respect to future funding. However, there still remains a material uncertainty with respect to the going concern status of the Group..

3. Sale of services


	2022	2021
	£	£
Course fees	5,338,335	2,189,651
Accommodation fees	965,254	162,106
Application fees, registration and examination fees	143,148	50,264
Course materials and student activities	64,865	15,503
	6,511,602	2,417,524

Segments

The directors consider that the Group has a single business segment, being the sale of education services. The operations of the Group are managed centrally with group-wide functions covering sales and marketing, finance and administration. Geographically, operations are all UK based.

Other Income


	2022	2021
	£	£
Rental income	44,020	23,595
R&D credits	-	48,758
Government subsidies*	40,724	151,636
	84,744	223,989

*Government subsidies includes the amount received from the furlough job retention scheme in 2021 and council grants in 2022.

4. Finance costs


	2022	2021
	£	£
Interest on leases (IFRS 16)	194,399	162,935
Interest on term loan	68,368	80,845
Interest on convertible loan notes	24,555	21,503
Other finance costs	7,764	4, 907
	295,086	270,190

5. Operating expenses


	2022	2021
	£	£
Auditors' remuneration:
Fees payable to the Group's auditors for statutory audit	41,000	30,500
Fees payable to the Group's auditors and associates for statutory audit of subsidiary Companies	32,500	31,425
Non-audit fees for taxation compliance fees	8,570	9,200
Administrative and marketing expenses	1,123,930	736,167
Expected credit losses - trade receivables	221,099	311,102
Fair value movements	(40,019)	16,755
	1,387,080	1,135,149

6. Loss per share

The basic and diluted loss per share attributable to equity holders of the Company was based on the loss attributable to shareholders of £1,083,833 (2021: loss of £1,145,649) and the weighted average number of ordinary shares in issue during the year of 21,915,119 shares (2021 restated*: 18,788,985 shares). The loss per share (in pence) attributed to shareholders is 4.95 (2021 restated*: loss per share of 8.49).

Calculations for dilutive EPS have not been made in respect of the convertible loan notes (note 25 of the financial statements) on the basis the impact would be anti-dilutive.

7. Financial liabilities


	Group		Company
	2022	2021	2022	2021
	£	£	£	£
Non-current liabilities
Term Loan	2,052,808	1,791,952	1,997,540	1,723,537
Warrants	189,762	72,801	189,762	72,801
Lease liabilities	2,624,792	3,075,517	-	-
	4,867,362	4,940,270	2,187,302	1,796,338
Current liabilities
Convertible Loan Notes	-	275,885	-	275,885
Term Loan	436,341	808,869	415,044	675,251
Lease liabilities	450,726	278,961	-	-
Trade and other payables	2,057,461	1,011,550	97,772	140,191
	2,944,528	2,375,265	512,816	1,091,327
Total	7,811,890	7,315,535	2,700,120	2,887,665

Convertible loan notes

The convertible loan note was redeemed in 2022 (See Note 25 of the financial statements).

Term loan

In August 2019, Malvern received a term loan from BOOST&Co Limited for £2,600,000. This loan originally carried an interest rate as the higher of (a) 10% per annum, or (b) 8% per annum plus LIBOR. The loan was restructured in March 2022, the new terms include a 12-month payment and interest holiday with monthly payments commencing from March 2023 over a five-year period, with the interest being set at 7% for the first two years and 10% for the subsequent three years. There are no early repayment penalties on this facility.

During 2020, the Group took advantage of the Government-backed Bounce Back Loan Scheme (BBLS), benefitting from a total of £100,000 to 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. The balance outstanding at 31 December 2022 is £76,566 (2021: £89,872).

Warrants

As part of the term loan, Boost & Co was issued warrants over 1,725,113* 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 Group has fair valued these warrants at £189,762. The following estimates were used to calculate this fair value:

· Annualised volatility of 109% and 144% 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 £0.0015, being the 28-day average share price preceding the date (i.e. 27 Aug 2019) of drawdown.

*Restated for the share consolidation.

8. Convertible loan notes

In November 2022, the balance of the Convertible Loan Note was redeemed following a placing.



Issue Name	Convertible Unsecured Loan Notes 2020
Date of Issue	17 November 2017
Date of Redemption	31 December 2022
Interest Payable	1 Jan 2018-31 Dec 2018	3%
	1 Jan 2019-31 Dec 2019	4%
	1 Jan 2020-31 Dec 2020	5%
	1 Jan 2021-31 Dec 2022	6%
Total Issued	£1,200,000
Amount converted in 2017	(£100,000)
Balance at 31/12/2017	£1,100,000
Amount converted in 2018	(£771,898)
Fair value adjustment	(£28,822)
Balance at 31/12/2018	£299,280
Fair value adjustment	£17,307
Balance at 31/12/2019	£316,587
Unwinding Interest	£6,230
Balance at 31/12/2020	£322,817
Unwinding interest	£3,068
Share Conversion at 31/07/2021	(£50,000)
Balance at 31/12/2021	£275,885
Unwinding Interest	£2,217
Share Conversion	(£100,000)
Discount on payout and redemption	(£178,102)
Balance at 31/12/2022	-

9. Share capital


	Allotted, called up and fully paid
	No of Ordinary shares	Nominal Value of Ordinary shares	No of deferred shares	Nominal value of deferred shares	Nominal value of All shares
At 31 December 2021 - 0.1p ordinary shares and 0.1p, 1p & 5p deferred shares	2,109,018,964	2,109,019	2,828,138,750	9,104,659	11,213,678
Additions during the year - 18 February 2022 0.1p ordinary shares	35,211,724	35,212	-	-	35,212
Additions during the year - 20 August 2022 0.1p ordinary shares	50,000,000	50,000	-	-	50,000
Additions during the year - 3 November 2022 0.1p ordinary shares	9,312	9	-	-	9
At 3 November 2022 - pre-share consolidation	2,194,240,000	2,194,240	2,828,138,750	9,104,659	11,298,899

Share consolidation*


Share consolidation - ordinary shares 0.1p to 1p - 3 November	21,942,400*	219,424	2,828,138,750	9,104,659	9,324,083
Additions during the year - 3 November 2022 1p deferred shares	-	-	*197,481,600	1,974,816	1,974,816
At 3 November 2022 - post-share consolidation	21,942,400	219,424	3,025,620,350	11,079,475	11,298,899
Additions during the year - 14 November 2022 1p ordinary shares	2,500,000	25,000	-	-	25,000
At 31 December 2022 1p ordinary shares and 0.1p, 1p & 5p deferred shares	24,442,400	244,424	3,025,620,350	11,079,475	11,323,899*

*Excludes the accumulated share-based payment balance taken to equity, £7,057 (2021: £3,313).

On 18 February 2022, convertible loan notes of £50,000 were converted to shares at 0.142p, adding a further 35,211,724 0.1p ordinary shares.

On 20 August 2022, further convertible loan notes of £50,000 were converted to shares at 0.1p, adding a further 50,000,000 0.1p ordinary shares.

On 3 November 2022, 9,312 0.1p ordinary shares were issued as part of the preparation for the ordinary shares split. This was done to ensure that as part of the share reorganisation, an exact whole number of consolidated ordinary shares could be issued.

*All ordinary shares were then consolidated on the basis of one consolidated ordinary share for each 20,000 ordinary shares. Each consolidated ordinary share was then sub-divided into 200 new ordinary shares and 1,800 new deferred shares.

On 14 November 2022, the Group undertook a placing of 2,500,00 1p ordinary shares at 8p to raise £200,000 to redeem the balance of the convertible loan note.

The Company has Enterprise Management Incentive share option scheme for certain directors and employees. The cost related to it £3,745 (2021: £3,128) has been added to share capital in the financial statement.

10. 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. In addition, the mid-market share price of the Company on the AIM Market of the London Stock Exchange, must stay at or above the exercise price, for 40 consecutive business days.

The Group used the Black Scholes valuation framework for all share options awarded pre 2022. These options have also been valued using the Monte Carlo valuation method to validate the reasonableness of the results. The results from the Monte Carlo valuation were not considered materially different from the Black Scholes valuation.

The inputs into the Black Scholes model as at 31 December 2022 are as follows:


Grant date	EMI options*		Exercise price (pence)*	Strike price on grant date (pence)*	Vesting period (years)	Expected volatility	Risk free rate	Fair value	Deemed probability of achieving market condition
02/12/2020		336,250	50	15	3	12.30%	0.35%	0.34	5.02%
02/12/2020		336,250	90	15	3	12.30%	0.35%	0.74	0.37%
07/01/2021		50,000	50	15	3	11.98%	0.35%	0.35	5.30%
07/01/2021		50,000	90	15	3	11.98%	0.35%	0.75	0.37%
18/01/2021		60,000	50	15	3	11.98%	0.35%	0.35	5.30%
18/01/2021		60,000	90	15	3	11.98%	0.35%	0.75	0.37%
01/09/2021		283,750	60	22	3	10.45%	0.26%	0.38	1.10%
01/09/2021		283,750	110	22	3	10.45%	0.26%	0.87	0.00%

*Total EMI options have been restated due to the share consolidation that was completed in 2022. The share consolidation increased the nominal value of the Group's ordinary shares.

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 vesting probabilities presented 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

The Group has used the Monte Carlo valuation framework for all share options awarded in 2022.

The inputs into the Monte Carlo model as at 31 December 2022 are as follows:


Grant date	EMI options	Hurdles (pence)	Strike price on grant date (pence)	Expiry (years)	Volatility	Option price (pence)	Share price (pence)
30/11/2022	287,500	60	10	5	50%	2.93	12
30/11/2022	287,500	110	10	5	50%	1.34	12

For options with hurdles, early exercise is assumed to take place as soon as the 40-day hurdle requirement is triggered after the 3-year vesting period. The Monte Carlo simulation uses 50,000 iterations to enhance the accuracy of the predicted outcome.

Year ended 31 December 2022


	Number of options	Weighted average strike price
Outstanding at 1 January 2022*	1,460,000	17.00p

Granted during the year	575,000	10p
Forfeited during the year	70,000	-

Outstanding at 31 December 2022	1,965,000	15.54p
Exercisable	-	-

* Total EMI options and weighted price have been restated due to the share consolidation that was completed in 2022. The share consolidation increased the nominal value of the Group's ordinary shares.

Of the options outstanding at 31 December 2022, 892,500 (2021: 892,500) options have an exercise price of 15 pence, 567,500 (2021: 567,500) options have an exercise price of 22 pence, and 575,000 (2021: nil) options have an exercise price of 10 pence.

The aggregate charge for share options recognised in the Group financial statements in the year was, £3,745 (2021: £3,128).

The annual report and accounts together with the notice of AGM to be held in May 2023 (date to be announced), are expected to be uploaded to the Company's website and posted to shareholders in due course.

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FR UVOARONUSRUR

AI Terminal

MALVERN INTERNATIONAL PLC

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