Earlier post: Vocation chief Mark Hutchinson ‘should have been axed earlier’ after a damning audit review into the quality and practices of two of its businesses and the aggressive revenue recognition practices; How hedge funds predicted Vocation’s collapse
Vocation crashes to $273m loss, audit problems flagged
Date: March 02 2015
Embattled education company Vocation crashed to a $273 million loss for the first half of 2014-15 because of heavy write-downs and fewer enrolments due to its battered reputation over the quality of some of its courses. The company has made extra provisions for the outcomes of regulatory audits which are pending in another business, outside those which were in the spotlight late in 2014 and which have already caused serious damage to the company. Vocation announced on Monday it had suffered a $273 million bottom-line loss for the six months ended December 31, 2014, compared with a loss of $4 million for the same time last year.The previous year’s bottom-line result was restated on Monday by the company, which said it had done so because of “an arguable misinterpretation of facts at the time” in relation to a settlement connected with the Victorian Department of Education last year. That settlement and the lack of disclosure around it by the company was a key factor in the trashing of Vocation’s reputation.
The horrific bottom-line loss in the first half of 2014-15 was mainly caused by $241 million in impairment charges which were foreshadowed on February 23. But in a worrying sign for investors, other potential problems from regulatory audits were outlined for the first time by the company on Monday.
Vocation told the Australian Securities Exchange there remain a “number of regulatory audits either in progress, or with outcomes pending and likely to be concluded in the near term” for some of its businesses.
The company said it had “taken up further provisions for issues in Learning Verve (CSIA) and BAWM”. Vocation said it “considers it appropriate to provide for these potential exposures”.
Vocation chief financial officer Stewart Cummins said the extra provisions were part of the company starting afresh with “a clean sheet of paper”.
“We want to put the past behind us,” Mr Cummins said.
Learning Verve is part of the Customer Service Institute of Australia, while BAWM is a Victorian business which has already been in the spotlight over the quality of some courses and is being shut down by Vocation.
Vocation’s overall revenues for the first half of 2014-15 were up 9.3 per cent to $57.7 million.
When one-offs were stripped out, the underlying loss was $7 million.
Sales to pay bank debt
The company is in the process of selling off some of its businesses to pay down bank debt and hopes to finalise those sales by the end of April. It now forecasts it will make $10 million in the second half on an underlying earnings before interest, tax, depreciation and amortisation basis.
Vocation chief executive Mark Hutchinson, who has already signalled he will be stepping down shortly, said on Monday the core businesses in the company were trading satisfactorily.
This was despite “difficult trading conditions and substantial reputational damage” to parts of Vocation’s education businesses.
He said the Endeavour College natural health sciences business and the Australian School of Management operations had been performing in line with expectations. The sale process being handled by 333 Capital, the restructuring and advisory arm of insolvency firm KordaMentha, has received more than 30 expressions of interest for various businesses inside Vocation.
Endeavour, acquired by Vocation in mid-2014 for $84 million, is understood to be attracting the most interest, particularly by Laureate. Endeavour generated $2.27 million in profit before tax in the first half.
Vocation said on Monday the overall cash balance at the company was $17 million.
Vocation’s shares, trading as high as $3.40 in early September, 2014, are wallowing just below 9¢.