Half-year Results

Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces its interim results for the six months ended 30 June 2024 ("H1 2024" or the "Period").

H1 2024 results

• Underlying revenues1, excluding agent commission, increased 22% to £5.10m (H1 2023: £4.18m).
• Underlying operating profit was £0.39m (H1 2023: underlying operating profit £0.50m).
• Statutory profit after tax for H1 2024 was £0.14m (H1 2023: profit £0.22m).
• Statutory earnings per share was 0.57p (H1 2023: statutory profit 0.91p).
• Cash at 30 June 2024 was £1.31m (FY 2023: £2.20 and H1 2023: £2.12m).
• The Group continues to reduce its debt with BOOST&CO with £2.02m remaining at the period end (FY 2023: £2.24m, H1 2023: £2.60m).

Operating highlights

• University Pathways student numbers increased by 59% in H1 2024 to 794 students (H1 2023: 500 students) studying in our centres, delivering revenue and profit growth.
• Significant growth in Juniors ELT, with student numbers increasing by 37% in 2024 to 3,405 students (2023: 2,478 students) during the peak summer season. Approximately 95% of revenues will be recognised in H2 2024.
• Compared to a 66% rebound in H1 2023, adult ELT centre revenue growth for H1 2024 was flat, delivering a loss for the division due to the fixed cost base of our year round centres.
• Appointed senior sales staff in H1 2024 to support Junior and adult English Language Teaching (ELT) student numbers and revenue growth.
• Total underlying revenues and operating profit are detailed in note 4.

Commenting on the results and prospects, Richard Mace, Chief Executive Officer, said:

"Our performance in H1 2024 reflects the investment made across the business over the past three years. This investment is ongoing, and we are currently in a transition phase where top-line revenue growth is fueling further investment in our sales and marketing, teaching, and back-office functions, setting the stage for accelerated growth in 2025. Whilst Pathways and Juniors are thriving due to strong demand, our adult ELT centres are not experiencing equal growth. We are taking measures to address this, including launching low-season and academic group programmes to improve staff and centre utilisation throughout the year at our permanent schools.

Looking ahead, our forward bookings and revenue visibility for H2 2024 and early 2025 provide confidence in Malvern's short- and long-term prospects, with growth anticipated across all divisions in 2025."

Chief Executive's review

Malvern has seen a significant improvement in revenues, student numbers and mix, and business pipeline in H1 2024, and we are pleased to have posted a small profit for the Period.

Financial review

Underlying revenues, excluding agent commission, increased to £5.10m (H1 2023: £4.18m). Revenue growth was driven by higher student numbers in University Pathways and, to a lesser extent, by Junior summer centres, where revenue is predominately recognised in July and August (H2 2024).

Underlying operating profit was £0.39m (H1 2023: £0.50m) due to increased strategic investment in people, travel and marketing activities.

Staff costs increased by £0.56m in H1 2024 compared to H1 2023. This rise included £0.09m for additional summer centres staffing to accommodate the higher numbers of Junior students, £0.14m for new sales staff, £0.07m in additional bonus accruals, £0.03m in staff settlement costs, £0.07m in additional recruitment costs and the remainder in salary increases and new operational staff. Travel expenses also increased by £0.12m in H1 2024 as a result of intensified business development and sales and marketing efforts to accelerate revenue and profit growth across all divisions.

Statutory operating profit was £0.35m (H1 2023: £0.40m).

We remain profitable before tax, achieving an underlying profit of £0.18m (H1 2023: £0.34m). The statutory profit per share from operating activities was 0.57p (H1 2023: 0.91p).

We continue to maintain tight cost controls whilst making strategic investments to increase the depth of our teams, systems and processes to support our growth plans.

Cash balances at 30 June 2024 were £1.31m (31 December 2023: £2.20m and 30 June 2023: £2.12m). This reduction was due to the delay in Junior summer centre receivables, which fell into H2 2024. As at the date of this interim announcement, the majority of the Junior's receivables has now been collected.

We continue to pay down the BOOST&CO debt, which stood at £2.02m at the period end, down from £2.24m as of 31 December 2023. No payments were made to reduce the BOOST&CO debt in H1 2023.

Operating review

University Pathways

The number of students studying in our University Pathways programmes in H1 2024 (794 students) was significantly higher than H1 2023 (500 students). Of these, 783 students were enrolled at the University of East London (UEL) International Study Centre.

The performance in student recruitment is driven by our expanded international sales team and our expertise in managing and converting the student pipeline from across the world. We continue to invest in staffing and operational arrangements, focusing on learning, teaching and pastoral excellence to maximise student attainment and progression. This investment will increase once we have successfully concluded negotiations with UEL for a contract longer than the current one year.

Junior ELT

Junior Summer Centres continued to produce significant revenue growth combined with high-quality delivery. Approximately 5% of revenues from our Junior ELT centres is recognised in H1 2024, with the remainder falling in the six months to 31 December 2024.

We successfully delivered eight centres (2023: five centres) over the summer season to 3,405 students (2023: 2,478 students), with feedback noting the high-quality delivery. This result produced significant revenue growth with a more diversified nationality mix, with growth from China, Taiwan, and MENA.

Adult ELT

Revenues from ELT teaching delivered to adults at our year round centres in Manchester and London King's Cross were flat compared to the same period in 2023. This is a mature market compared to Junior ELT with greater overseas competition, and the sector has yet to recover fully to pre-pandemic levels and is now at approximately 80% of the 2019 peak. Our school's fixed-cost base means that the division is currently running at an operating loss . Without a sudden and unexpected increase in adult student numbers short-term change is unlikely.

The Group is taking measures to address this situation, and we hope to see significant improvements in 2025. Following our investment in our ELT sales and marketing team, we are improving the quality of our engagement with our agent network. We are also focusing on increasing year-round staff and premises utilisation with the development of low-season group programmes.

Investment in sales and marketing

During the Period, we were pleased to appoint Maya Frost as our new Marketing Director and Matthew Hird as Global Sales Director for ELT programmes. Both Maya and Matt have considerable experience in international student recruitment. In addition, we have appointed several new senior sales staff in key recruitment and under-represented markets.

These investments are crucial to growing the business and maintaining our market position since both Pathways and the ELT market face increased competition from UK and non-UK destinations. We welcome the Labour Government's decision to maintain the Graduate Visa Route in its current form, ensuring the UK continues to be an attractive destination for international students. With universities increasingly reliant on international students to cover their costs and enable them to sustain publicly funded teaching and research activities, we are pleased that the uncertainty has been lifted.

Summary and outlook

We are pleased with our performance in H1 2024, having taken advantage of improved market conditions following our investment in the business over the last three years. Pathways and Junior ELT continue to be the strongest performing divisions in terms of revenue and profit growth, and we are addressing the issues we face in our adult ELT division.

Approximately 490 students will start courses in September 2024 at the Group's University of East London ("UEL") International Student Centre, compared to 450 students in 2023. This solidifies the Group's partnership with UEL as one of the UK's largest and most successful University Pathway centres.

The investment in business development has resulted in discussions with several potential university partnerships in the UK and the US, some of which are at an advanced stage. The opportunities offer different models, including providing a comprehensive Pathway programme and exclusive direct recruitment contracts. Additionally, discussions regarding a renewed contract remain ongoing with UEL, and the Board anticipates an update on this before the end of the year.

Junior revenues for the full year are expected to increase by 62% to £6.05m (2023: £3.72m), with £5.73m to be recognised in H2 2024, underpinning the Group's full-year revenues. The Junior ELT market is expected to grow, and our investment in our ELT sales and marketing teams will enable us to harness the available opportunities. For 2025 we are developing new academic and low-season programmes to target a broad range of international markets and their respective national holiday seasons to improve our income profile during the year.

Whilst the adult ELT industry has yet to fully recover from the pandemic, there is an opportunity for us to take a greater share of this market. We have recruited new sales staff to cover Europe, Spanish Latin America, and the Far East. Given the long ELT recruitment cycle, we don't expect to see a material upturn until 2025.

Student numbers and revenues are growing steadily, and we have the skills in house to drive our growth strategy and expand the business significantly. With this solid foundation, we are increasingly confident in growing all areas of the business.

Richard Mace

Chief Executive Officer

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2024

* See note 4 for a reconciliation of underlying.

UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 30 June 2024

NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 June 2024

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 3rd Floor, 1 Ashley Road, Altrincham, Cheshire WA14 2DT and its principal place of business is in the UK. 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 Company 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 period.

Significant accounting policies

Basis of preparation

The Group's unaudited interim results for the six months ended 30 June 2024 ("Interim Results") are prepared in accordance with the Group's accounting policies which are based on the recognition and measurement principles of the UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006. As permitted, the Interim Results have been prepared in accordance with the AIM rules and not in accordance with IAS 34 "Interim financial reporting" and therefore the interim information is not in full compliance with International Accounting Standards.

The interim condensed consolidated financial statements are prepared under the historical cost convention as modified to include the revaluation of certain financial instruments. The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2023 (https://www.malverninternational.com/annual-report-2023/). The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2023 annual report and financial statements. The Principal Risks and Uncertainties of the Group are also set out in the Group's 2023 annual report and financial statements and are unchanged in the period.

The financial information for the six months ended 30 June 2024 and 30 June 2023 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.

The Group's 2023 financial statements for the year ended 31 December 2023 were prepared under UK-adopted International Accounting Standards. The auditor's report on these financial statements was unqualified and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 and they have been filed with the Registrar of Companies. However, the auditor's report did draw attention to a material uncertainty in relation to going concern.

Profit/(Loss) per share

The basic profit/(loss) per share is calculated by dividing the profit/(loss) before tax attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period. The weighted average number of shares in issue during the period was 24,442,400 (H1 2023: 24,442,400).

• Reconciliation of Statutory information to underlying information

Underlying information is provided because the Directors consider that it provides assistance in understanding the Group's underlying performance.

Malvern House Brighton

During 2023 the Directors of the Company announced its decision to close Malvern House Brighton. The decision was made following a review of the viability of the school, informed by current operations, overhead costs, projected student numbers, financial performance and the further investment required for the school to achieve profitability which it had yet to do.

Staff restructuring costs

The management of the Group are completing a staff review to ensure that we are using our resources as efficiently as possible.

Malaysia liquidation & loan write-back

Minor liquidator costs to close out the remaining issues from the Group's former Malaysian entity.

Share-based payments

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. The warrants are revalued at fair value annually, any movement is expensed in the Consolidated Statement of Comprehensive Income.