Malvern International plc (AIM: MLVN), the global learning and skills development partner, announces that the Company is carrying out an equity fundraising to raise gross proceeds of approximately £1.21 million. The fundraising will consist of a firm and conditional placing to raise up to £0.75 million through the issue of 604,822,470 new Ordinary Shares (the “Placing”) and a firm and conditional subscription to raise approximately £0.46 million through the issue of 230,000,000 new Ordinary Shares (the “Subscription”), in each case at a price of 0.2 pence per share (the “Issue Price”) (the “Fundraising”).
The Issue Price represents a discount of approximately 13 per cent. to the closing mid-market price of 0.23 pence per Existing Ordinary Share on 30 March 2021, being the latest practicable date prior to the announcement of the Fundraising.
The Subscription is being made by Boost & Co., the principal debt provider to the Company, and certain other investors.
The Directors have concluded that proceeding with the Fundraising is the most suitable option available to the Company for raising additional funds through the issue of new Ordinary Shares and that issuing the new Ordinary Shares at a discount is fair and reasonable so far as all existing Shareholders are concerned.
The Placing is to be conducted by way of an accelerated bookbuild process which will commence immediately following this Announcement and will be subject to the terms and conditions set out in Appendix III to this Announcement and will close later today.
Fundraising Highlights
· Fundraising by way of the Placing and the Subscription to raise in aggregate up to approximately £1.21 million (before expenses) through the issue of an aggregate of approximately 604,822,470 new Ordinary Shares at the Issue Price.
· Placing to be conducted via an accelerated bookbuild process of new Ordinary Shares at the Issue Price.
· The Company has conditionally raised £0.46 million (before expenses) through the Subscription of 230,000,000 Ordinary Shares at the Issue Price.
· The Issue Price represents a discount of approximately 13 per cent. to the closing mid-market price of 0.23 pence per Ordinary Share on 30 March 2021, being the latest practicable date prior to the announcement of the Fundraising.
· The Fundraising Shares, assuming full take-up, will represent approximately 33.4 per cent. of the Enlarged Issued Share Capital.
· The majority of the net proceeds of the Fundraising will be used to supplement the Company’s working capital resources and strengthen the Company’s balance sheet with a view to providing sufficient liquidity and flexibility to allow the Company to manage through the remainder of 2021 which is expected to be a loss making period due to COVID-19.
Highlights – Trading Update
· The audit of the results for the year ended 31 December 2020 has not yet been completed. Unaudited management accounts for the year show revenue for the year of £2.3 million (2019: audited £4.7 million) and a loss before tax of £1.5 million (2019: audited £4.3 million). The results for the year were significantly impacted by losses and write offs arising from the closure of the Singapore operations and by the impact of COVID-19 which resulted in the Company’s schools being physically closed for approximately five months of the year.
· The Company’s audited results for the year ended 31 December 2020 are expected to be completed following completion of the Fundraising and announced in June 2021.
· Further details on the Company’s current trading and prospects are set out in paragraph 4 of the section headed Additional Information of this announcement
The Fundraising
The Fundraising comprises a proposed placing and subscription of new Ordinary Shares to be effected in two tranches. The first tranche of up to 240,933,450 new Ordinary Shares (the “Firm Fundraising Shares”) will utilise the Company’s existing shareholder authorities to issue the Firm Fundraising Shares on a non-pre-emptive basis for cash (the “Firm Fundraising”) and will consist of 72,500,000 Firm Subscription Shares and 168,433,450 Firm Placing Shares. The second conditional tranche of 363,889,020 new Ordinary Shares (the “Conditional Fundraising Shares”) will be conditional (amongst other things) on the passing of Resolution 1 being proposed at the General Meeting of the Company to be held on 20 April 2021 (or any adjournment thereof) which will renew the Company’s authority to disapply statutory pre-emption rights and issue shares on a non-pre-emptive basis for cash.
WH Ireland Limited (“WH Ireland”) are acting as broker in connection with the Placing. The Placing Shares are being offered by way of an accelerated bookbuild (the “Bookbuild”), which will be launched immediately following this Announcement, in accordance with the terms and conditions set out in Appendix III to this Announcement and is expected to close later today.
The timing of the closing of the Bookbuild and the allocation of Placing Shares to be issued at the Issue Price are to be determined at the discretion of the Company and WH Ireland.
A further announcement will be made following the close of the Bookbuild, confirming final details of the Placing.
The Placing is not being underwritten.
The expected timetable of principal events is set out in Appendix I to this Announcement.
WH Ireland are playing no role in connection with the Subscription.
The Placing is conditional upon (amongst other things) the Placing Agreement not having been terminated prior to First Admission and Second Admission as appropriate. The Fundraising is not conditional on a minimum amount being raised.
For further enquiries:
| Malvern International plcRichard Mace (Chief Executive Officer) Mark Elliott (Chairman) | www.malverninternational.com Via Communications Portfolio |
| WH Ireland – Nominated Adviser and BrokerMike Coe / Chris Savidge (Corporate Finance)Jasper Berry (Corporate Broking) | +44 (0) 207 220 1666www.whirelandcb.com |
| Communications portfolio – Public RelationsAriane Comstive | +44 (0) 203 727 1000ariane.comstive@communications-portfolio.co.uk |
Additional Information
1. Background to, and reasons for, the Fundraising
In its June 2020 Fundraise the Company indicated that it expected its trading would be interrupted for some time by COVID-19 and was working on the assumption that levels of business would not return to normal levels until early 2021. It is has turned out this was not the case. Malvern’s business is still being impacted by the on-going effects of COVID-19 and the Directors consider this will continue for the remainder of this year.
The purpose of the Fundraising announced today is to ensure Malvern has the cash resources to trade through the continued difficulties and to build on the very significant progress that it has made in many areas of its business since the June 2020 Fundraise and take advantage of the opportunities for the business that are emerging.
There is no certainty as to how long COVID-19 will persist but as the vaccine roll-out gathers pace across the world the Directors are increasingly confident for the prospects for Malvern in 2022 when they consider the Company should return to profitability.
Progress since the June 2020 Fundraise
Since the June 2020 Fundraise the Company has seen a number of developments and made significant changes to the business that the Board considers are benefitting, and will continue to benefit, Malvern’s business. These include:
· a restructuring and streamlining of the Board;
· the recruitment of a new CEO, Richard Mace, who despite Covid-19 has already had a significant impact on the business and whose confidence in the business has been demonstrated by his participation of £100,000 in the June 2020 Fundraise, the purchase of £10,560 of shares in January 2021, and a participation of £100,000 in this Fundraising (including loan conversion of £30,000)
· a significant strengthening of the management team. Appointments include a Head of University Pathways, a Head of Operations, a Head of Global Sales and Marketing and a new Group Head of Finance;
· the Group’s structure has been simplified. Following the closure of loss making operations in Malaysia in 2019 and Singapore in 2020, the Group’s operations are now all UK based;
· the relationship with UEL has been strengthened with a new account manager having been put in place. New courses with UEL have been approved and the Board is confident that further significant growth in student numbers with UEL can be achieved;
· agreement with NCUK. NCUK is a consortium of leading UK universities, such as the University of Manchester, University of Leeds and The University of Sheffield dedicated to giving international students guaranteed access to universities worldwide. The first students will be enrolled in September 2021 and the Directors believe there is scope for a significant growth in student numbers from January 2022;
· the changing dynamics of the marketplace and demand from UK universities means opportunities for Malvern in the Chinese market are growing and the Company is currently seeking to recruit a China based sales manager and, subject to progress, potentially opening a sales office in China.
Further details regarding current trading and prospects are set out in paragraph 4 below
2. Details of the Fundraising
Subject to the satisfaction of (1) the conditions under the Firm Placing and (2) the conditions under the Conditional Fundraise including, inter alia, the passing of Resolution 1, the Company will place pursuant to the Fundraising a total of 604,822,470 New Ordinary Shares at the Issue Price raising in aggregate approximately £1.21 million, before expenses.
The Firm Fundraise comprises the placing and subscription of 240,933,450 New Ordinary Shares at the Issue Price. A total of £0.48 million (before expenses) has been raised by way of the Firm Fundraise utilising the existing share authorities granted at the 2020 AGM.
The Conditional Fundraise comprises the placing and subscription of 363,889,020 New Ordinary Shares at the Issue Price. A total of £0.73 million (before expenses) is being raised by way of the Conditional Fundraise.
The Issue Price represents a discount of approximately 13 per cent. against the mid-market price of 0.23 pence per share at which the Ordinary Shares were quoted on AIM as at close of trading on 30 March 2021, the latest practicable date prior to announcement of the Fundraising.
Details of the Placing
Subject to the satisfaction of the conditions to the Placing becoming wholly unconditional, the Company will place a total of 374,822,470 New Ordinary Shares pursuant to the Placing raising in aggregate approximately £0.75 million (before expenses). The Placing has been conditionally placed by WH Ireland, as agent for the Company with institutional and other investors.
The Placing comprises the Firm Placing and the Conditional Placing.
The Firm Placing comprises the placing of 168,433,450 New Ordinary Shares at the Issue Price. A total of £0.34 million (before expenses) has been raised by way of the Firm Placing. The Firm Placing is conditional only upon compliance by the Company in all material respects with its obligations under the Placing Agreement and the occurrence of First Admission.
The Conditional Placing comprises the placing of 206,389,020 New Ordinary Shares at the Issue Price. The Conditional Placing will raise approximately £0.41 million before expenses. The Conditional Placing is conditional, inter alia, upon Shareholders approving Resolution 1 at the General Meeting, compliance by the Company in all material respects with its obligations under the Placing Agreement and the occurrence of Second Admission.
The Directors are all participating in the Placing with Richard Mace, Mark Elliott and Alan Carroll subscribing for Ordinary Shares valued at the Issue Price at £70,000, £14,900 and £10,400 respectively.
Pursuant to the terms of the Placing Agreement, WH Ireland, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price. The Placing is not underwritten.
The Placing Agreement contains warranties from the Company in favour of WH Ireland in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify WH Ireland in relation to certain liabilities it may incur in respect of the Placing. WH Ireland has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties given to WH Ireland in the Placing Agreement, the failure of the Company to comply in any material respect with its obligations under the Placing Agreement, the occurrence of a force majeure event or a material adverse change affecting the condition, or the earnings or business affairs or prospects of the Group as a whole, whether or not arising in the ordinary course of business.
Details of the Subscription
Subject to the satisfaction of the conditions to the Subscription becoming wholly unconditional, the Company will issue a total of 230,000,000 New Ordinary Shares pursuant to the Subscription raising in aggregate approximately £0.46 million (before expenses). 175,000,000 Subscription Shares have been subscribed for by Boost & Co., the principal debt provider to the Company, and 55,000,000 Subscription Shares by certain other investors.
The Subscription comprises the Firm Subscription and the Conditional Subscription.
The Firm Subscription comprises the subscription of 72,500,000 New Ordinary Shares at the Issue Price. A total of approximately £0.15 million before expenses has been raised by way of the Firm Subscription utilising the existing share authorities granted at the 2020 AGM. The Firm Subscription is conditional only upon compliance by the Company in all material respects with its obligations under the Placing Agreement and the occurrence of First Admission.
The Conditional Subscription comprises the subscription of 157,500,000 New Ordinary Shares at the Issue Price. The Conditional Subscription will raise approximately £0.31 million before expenses. The Conditional Subscription is conditional, inter alia, upon Shareholders approving Resolution 1 at the General Meeting, compliance by the Company in all material respects with its obligations under the Placing Agreement and the occurrence of Second Admission.
Effect of the Fundraising
Upon Admission, the Enlarged Issued Ordinary Share Capital is expected to be 1,842,139,710 New Ordinary Shares. On this basis, the Fundraising Shares will represent approximately 33.4 per cent. of the Company’s Enlarged Issued Ordinary Share Capital.
Settlement and dealings
The Fundraising Shares and the Creditor Conversion Shares will rank, pari passu, in all respects with the New Ordinary Shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.
Applications have been or will be made to the London Stock Exchange for admission of the Fundraising Shares and Creditor Conversion Shares to trading on AIM as follows:
i. it is expected that First Admission of the Firm Fundraising Shares will take place on or before 8.00 a.m. on 8 April 2021 and that dealings in the Firm Fundraising Shares on AIM will commence at the same time; and
ii. it is expected that Second Admission of the Conditional Fundraising Shares and Creditor Conversion Shares will take place on or before 8.00 a.m. on 21 April 2021 and that dealings in the Conditional Fundraising Shares and Creditor Conversion Shares on AIM will commence at the same time.
It is expected that CREST accounts will be credited with entitlements to the Fundraising Shares and the Creditor Conversion Shares as soon as practicable after 8.00 a.m. on the day of Admission and that share certificates (where applicable) will be despatched as soon as practicable after Admission.
3. Use of proceeds
The net cash proceeds of the Fundraising are expected to be approximately £1.1 million.
The majority of the proceeds will be used to supplement the Company’s working capital resources and strengthen the Company’s balance sheet with a view to providing sufficient liquidity and flexibility to allow the Company to manage through the remainder of 2021 which is expected to be a loss making period due to COVID-19.
In addition, the Company anticipates allocating funds, when considered appropriate to do so, for the following purposes:
· approximately £0.21 million to new staff and marketing to support and drive anticipated growth in UEL and NCUK student numbers;
· approximately £0.1 million to finance software upgrades and support the Malvern online offering; and
· up to £0.1 million to support entry into the market for Chinese students.
4. Current trading and prospects
Results for the year ended 31 December 2020
The audit of the results for the year ended 31 December 2020 has not yet been completed. Unaudited management accounts for the year show revenue of £2.3 million (2019: audited £4.7 million) and a loss before tax of £1.5 million (2019: audited loss £4.3 million). The results for the year were significantly impacted by losses and write offs arising from the closure of the Singapore operations and by the impact of COVID-19 which resulted in the Company’s schools being physically closed for approximately five months of the year.
The Company’s audited results for the year ended 31 December 2020 are expected to be completed following completion of the Fundraising and announced in June 2021.
March 2021 Trading Update
On 8 March 2021 the Company issued the following update on trading.
University Pathway
University Pathway programmes will continue to be delivered online while universities follow a tiered approach to returning to on-campus teaching. Further clarity is expected on this return following updated government guidance currently scheduled for mid-April.
University Pathway student numbers for the January UEL International Study Centre (ISC) intake resulted in 43 students. This takes the total number of foundation students in UEL ISC to 167 for the 2020-21 academic year, representing growth of 90% from the previous year’s academic calendar. It is a significant achievement to grow the centre in such challenging conditions.
Following demand from the international student market and at the request from the UEL International Office, the Malvern team has designed two extra courses which have been validated by UEL:
-International Year One in Computer Science
-International Year One in Hospitality.
These courses will be delivered in UEL ISC from the September 2021 intake and form a sound foundation for further growth.
Language schools
In line with the Government guidance, our language schools will open for face-to-face teaching from 8 March.
Language student bookings had been rebuilding in H2 of 2020. Following the latest government COVID restrictions, 80% of the existing language students who were already in the UK transitioned to online study via Malvern Online Academy. The remaining 20% decided to wait until our language schools reopened for face-to-face teaching.
Until international travel opens we will be focused on targeting the students within the UK.
NCUK
Further to our successful application to become a NCUK accredited delivery centre in London, there has been a marketing launch on 17 March to officially open our NCUK London centre in Kings Cross. From September 2021, Malvern will accept international and EU students on a nine-month NCUK International Foundation Year.
NCUK is a consortium owned by leading UK universities dedicated to giving international students guaranteed access to universities worldwide.
The programme is designed to prepare international students for undergraduate study, usually at a UK university. On completion of the course, students have guaranteed progression options to over 20 leading partner universities in the UK, as well as established universities in USA, Canada, Australia and New Zealand.
The NCUK partnership will add to additional revenue streams that are likely to grow in 2022 and beyond as student numbers increase. The programmes will help attract a wider diversity of students from key recruitment markets. As part of the group strategy, we see these academic foundation programmes as an area of growth.
Management recruitment
During Q1 we are delighted to have recruited three senior executives to develop and grow the company. These comprise a Centre Director for the UEL International Study Centre who will also assist in developing Malvern’s foundation programme provision across the Group, a Head of Operations for Malvern International and a Financial Director.
As part of our recruitment strategy, we have identified the need for a regional Head of Sales in China and plan to build a sales team in that market. China is the biggest international student market to the UK for Higher Education provision and junior summer camps.
Outlook
There remains strong demand for our education products. We expect further growth in the University Pathway division in September 2021. With the accelerated vaccine rollout, we are hopeful that there will be a plan to safely open international travel before the summer and expect the language business division to build up to normal levels by the end of the year.
For these reasons and with a significantly stronger and experienced management team now in place, we remain positive about the outlook for the Company.
Latest update
Since the last update, the Directors consider that Company has continued to make encouraging progress In the university market, the Company now anticipates a September 2021 intake from NCUK of at least 20 students and the Directors believe this number should grow significantly for the January 2022 intake. The Company has also received enquiries from other universities seeking to establish pathway programmes similar to that Malvern has with UEL. Finally, given the success of the vaccination programme and the falling rate of infection from COVID-19 there is increasing optimism that some junior camps may be able to take place in late summer 2021.
Should the effects of COVID-19 dissipate by the end of 2021 such that business and travel return to more normal levels, the Directors believe the Company will be well-placed to recover quickly. The Directors currently believe the Company will be operationally cash flow positive in early 2022 and that it will trade profitably in 2022.
In addition, the competitive landscape of the Company’s markets is being severely impacted by COVID-19. The directors believe around 60 language schools have closed since the beginning of the pandemic and that will create opportunities for the Company.
5. Creditor Conversion
Certain creditors, including certain Directors and advisers have agreed to convert outstanding salaries and fees into new Ordinary Shares at the Issue Price. In aggregate debts of £64,700 are expected to be converted into 3,225,000 New Ordinary Shares. Of these shares, 7,550,000 and 4,800,000 will be issued to Mark Elliott (Non-Executive Chairman) and Alan Carroll (Non-Executive Director) respectively in respect of unpaid salaries and fees. A further 15,000,000 Creditor Conversion Shares will be issued to Richard Mace in satisfaction of a loan from him to the Company amounting to £30,000.
6. General Meeting
The General Meeting will be held at the offices of Malvern International plc at 200 Pentonville Rd, London N1 9JP on 20 April 2021 at 11.00 a.m., at which the following resolutions will be proposed as ordinary or special resolutions as indicated below:
· Resolution 1 – a special resolution to issue and allot the Conditional Fundraising Shares and Creditor Conversion Shares.
· Resolution 2 – an ordinary resolution seeking general authority for the Directors to issue and allot up to a further £602,659 in nominal amount of Ordinary Shares from time to time, being an amount equal to approximately 33 per cent. of the Enlarged Issued Share Capital.
· Resolution 3 – a special resolution to disapply statutory pre-emption rights over up to a further £180,978 in nominal amount of Ordinary Shares, being an amount equal to approximately 10 per cent. of the Enlarged Issued Share Capital.
In light of public health advice in response to the COVID-19 outbreak, including to limit travel, and public gatherings, the Company strongly encourages all shareholders to submit their Form of Proxy appointing the Chairman of the meeting as proxy rather than attend the meeting in person. Only the formal business of the Resolutions will be carried out at the meeting. As a result of this Government advice, Shareholders who seek to attend the General Meeting will not be admitted.