Intueri crashes to $48.5M annual loss after writing down value of schools

Wednesday 24th February 2016

Intueri Education Group, which is under investigation by the Serious Fraud Office, wrote down the value of its schools, resulting in a $48.5 million annual loss.

New Zealand's largest private training college said the loss for the year ended Dec. 31 compares with forecast profit of $13.8 million in its prospectus ahead of its listing on the New Zealand stock exchange in May 2014. It also missed its prospectus forecast in its 2014 financial year, when it posted a profit of $4 million compared with a projection of $7.9 million.

Intueri wrote down the value of its Quantum Education Group by $53.1 million, including wiping $27 million off the value of its the school's brand and goodwill to take it down to zero, reflecting stricter enrolment criteria imposed by the Tertiary Education Commission which saw student numbers drop 34 percent to 2,093 last year. The Quantum school is also the subject of an SFO investigation, with the white-collar crime investigator seeking information dating back to 2012.

"Enrolment restrictions have been put in place at Quantum which are expected to have a significant impact on the future financial performance of the school," Intueri said. "Therefore the board has taken a full impairment on Quantum Group."

The company said TEC has confirmed its total funding for 2016 will be 6 percent ahead of the level of funding consumed last year, but with a restriction on the number of unfunded students who can be enrolled at Quantum, which is expected to dent the company's annual course fee revenue by $8 million to $9 million.

Intueri said it's undertaking a strategic review to match capacity at Quantum with the reduced student numbers and to identify and realise costs savings across the wider group.

Quantum is expected to post a loss in 2016 before returning to profitability in 2017 once any benefits of the strategic review are realised and when a partial reversal of the impairment may be considered, the company said.

The company's shares gained 8.9 percent to 30.5 cents. Prior to today, the stock has shed 90 percent the past year, making it the worst performer on the S&P/NZX All Capital Index.

The stock is rated a 'buy' according to two analyst recommendations compiled by Reuters.

Intueri also wrote down the value of its Dive School by $3.9 million and its Design and Arts College by $2.9 million.

"Performance at both schools has been weaker than anticipated with legacy issues continuing to impact on the Dive School, and a slower than expected rebound in enrolments at the Design and Art School in Christchurch following the 2011 earthquake," the company said. "All other domestic colleges delivered a satisfactory performance, whilst the strong online and international profit performances partially offset the profit shortfalls of the domestic sector."

The company has suspended its dividends until the TEC reviews into its Quantum and Dive Schools announced in November are completed, which it expects by the middle of the year.

In Australia, the government said in December it would cap funding to companies offering vocational education courses via its VFH scheme while it undertakes a review.

Intueri's annual revenue increased 40 percent to $91.6 million, which is 6 percent ahead of its prospectus forecast, due to growth in its online segment and the benefit of acquisitions. Its debt rose to $52.7 million from $11.4 million, primarily due to acquisitions.

"We have seen good growth in our online and international segments, where we have high performing and well regarded schools," said chairman Chris Kelly. "We have also seen good performances from a number of our domestic colleges and realised additional earnings from strategic acquisitions. However these have been offset by the disappointing performance of Quantum as we implemented our quality strategy and introduced stricter enrolment criteria. This has meant that our growth, while positive, has been lower than expected at the time of listing."

BusinessDesk.co.nz

Comments from our readers

No comments yet