By Thursday the immediate future of the listed education company, Vocation (VET), will be known, and it’s very likely that it’s already reduced profit estimates for 2014-15 will be lowered.
The company’s shares were placed in trading halt yesterday as the education and training group carries out a review of its finances.
The company said the results of that review will be used to reassess the earlier forecasts.
In late October, Vocation said it expected full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $53 million and $57 million for 2014-15, which was 10% to 15% under the then market consensus earnings forecasts, which have been further cut by worried analysts.
Vocation shares last traded at a record low of 50c, but they had been worth $3.35 as recently as September.
They were issued at $1.89 a year ago in the float. That float raised $253 million, and the company raised a further $74 million in a placement a couple of months ago.
All up $327 million has been raised by this company and one question now is how much remains?
VET YTD – Vocation shares placed in trading halt
Vocation said it would update the market on its guidance for fiscal 2015 once the reviews were complete, by Thursday at the latest. The trading halt request came less than a week after former Labor education minister John Dawkins quit as Vocation’s chairman.
A Victorian government review in October concluded that some students were enrolled in inappropriate and low quality courses. Vocation is also embroiled in an audit review by the federal skills regulator.
Mr Dawkins, who had chaired the group since its listing on the ASX in December a year ago, will continue to advise the group as a consultant.
In late October, we reported:
In Monday night’s statement, it admitted it has been stripped of almost $20 million in funding by the Victorian government.
As a result, the company has also been forced into an embarrassing back-down on a previous hardline stance that a review into one of its main profit centres would end up being immaterial. That was comprehensively undone by the move by the Victorian government.
Vocation, which raised $74 million in a placement to institutions at $3.05 a share in early September, said it would be forced to forfeit $19.6 million of funds after a commercial settlement with the Victorian government.
The settlement came after a lengthy review by the Victorian Department of Education into two of Vocation’s registered training organisations in Victoria, BAWM and Aspin.
Vocation over the past few weeks has maintained in statements to the ASX that neither the review nor the anticipated outcomes were expected to be material.
Vocation managing director Mark Hutchinson revealed that while it would be allowed to keep $9 million of government funding, the overall impact would be a $5 million hit to earnings in 2014-15.
Vocation will now undertake a heavy restructuring of its Victorian operations, scrapping the use of third-party training and assessment providers, and restructuring management.
