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Refreshed Malvern taps into online education boom

Malvern has the marketing and sales network is in place
Learn from anywhere online

Malvern International PLC (LON:MLVN) is well-known in English language and the vocational degree providers circle.

The group, though, has flown under the radar of investors since it joined AIM in 2004.

A new management team aims to change that.

Two acquisitions have already been chalked up since Sam Malafeh joined as chief executive in October 2016.

The latest was the Communicate English School in Manchester at a cost of £2.34mln.

The school generates £1mln a year in revenues and £413,000 annually in underlying profit.

More deals like this look likely as Malafeh wants a larger presence in areas where it currently operates.

Network in place

After that, a move on to larger purchases further afield to expand the footprint and utilise the Malvern brand and reputation is the plan.

An education specialist, Malafeh says the marketing and sales network is in place, more just needs to be sent over it.

Malvern has a large sales team to help market its courses to international students in different regions.

The business currently has operations in the UK – London and Manchester - Singapore and Malaysia.

There is also a network of agents in Russia, South America, India and Asia-Pacific and elsewhere.

In the UK, courses are primarily to learn English – an England experience – and university foundation while Singapore and Malaysia offer vocational courses and degrees.

Acquisitions are one way to grow but another is partnerships with other education organisations.

In April, an agreement was signed with the University of East London (UEL) for a foundation course for students wanting to come to the UK to study.

Under new visa restrictions a minimum standard of English is required to study here, but many international students applying to UEL failed this test for a direct entry to the degree.

Foundation year

A foundation course or ‘year zero’ qualification enables them to meet the requirements and is cheaper and much more cost-effective than the university doing it itself.

This is potentially a big market for Malvern.

Another company, Navitas, doing similar courses for universities in Australia is valued at A$1.5bn.

Navitas also operates in the UK, but Malafeh believes Malvern’s recent overhaul has left it more adaptable and able to offer bespoke or tailored products, especially with online opportunities now opening.

Like many other sectors, education is being transformed by the onset of new technologies.

Online tutoring has made learning English (or any course for that matter) relatively straightforward from anywhere in the world without the necessity of costly infrastructure.

Accountancy courses run in Singapore can now be accessed through London and Manchester, for example.

Malvern has also started to use virtual learning (live classes) to give a student the impression they are in a classroom even if they are in a different country.

Broker upbeat

Actions taken so far should start to show through in the current financial year, 2018, says house broker WH Ireland.

WHI forecasts sales will double to £8.5mln while the bottom line should see a swing to a profit of £300,000 from an £800,000 loss.

In 2019, WH Ireland expects a further jump in revenues to £11.7mln and underlying profits of £1.2mln.

On a share price of 6.4p, that is a multiple of earnings of about six.

That allows nothing for further acquisitions. Malvern took the opportunity to strengthen its balance sheet through a £4mln fund raise in May when it bought Communicate, part of which went to pay for the acquisition, but that left £2mln for additional deals and working capital.

The funding also loosened the share structure with the two previously dominant shareholders, KSP and CG Corp each diluted down from just under 30% to 17% and new institutions coming on board.

WH Ireland has a target price of 17.5p, which looks punchy but Malafeh is confident.

“The brand has been there a long-time and this is just the start of the journey."


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