The Australian | 5 December 2014
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Following the resignation of John Dawkins as chair, Vocation chief executive Mark Hutchinson says he’ll stay on as CEO at the struggling education provider despite the company halving its financial-year earnings forecast and seeing a further plunge in its share price ( from a high of over $3 to around $0.50 following regulatory findings to just $0.19 currently), on the back of apparent failures in governance and poor operational policy and procedures. Meanwhile, estranged former director Brett Whitford, who has called for root and branch change, has substantially lifted his stake in the company from 9.11% to 15.4%, in what would seem likely be a pre-cursor to some sort of move on the board and management of the company.
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The company now expects earnings of between $25 million and $30m, against a previous guidance of $53m-$57m announced in late October. It originally forecast earnings for the financial year of $64m.
The discontinuation of the company’s relationship with third-party brokers and “significantly lower student enrolments from (the) referrer network” have affected revenues from the company’s training businesses, according to Hutchinson. He maintains that the level of impact on Vocation’s business following the Victorian Department of Education and Early Childhood Development settlement was “unexpected”.
Vocation’s troubles began after a DEECD review found the company’s BAWM and Aspin training subsidiaries had enrolled students in courses inappropriate for their needs and had provided low-quality education. The company had to return nearly $20m in government funding and will close both subsidiaries.
It will also stop the use of third-party contractors for training and enrolment. About 80% of BAWM’s business was conducted through these providers. But Vocation blames the damaging fallout from the review for a marked decrease in referrals from partners, across both the training business that took in BAWM and Aspin, but also in its fast growing VET FEE-HELP diplomas business.
The training business is now expected to earn the company $8.2m, from earlier forecasts of $25m, which were revised down from $45m in October. At that time, Vocation estimated a large proportion of lost revenue would be offset by a 140 per cent growth in earnings in its VET FEE-HELP business. It now estimates earnings of $4.5m, against an October forecast of $14m.
Hutchinson said the downturn in revenue from the Vocation-branded businesses had been “disappointing”, but the company was refocusing the Victorian operations and trying to strengthen its higher education business, which is expected to earn $14.8m this financial year.
Vocation has appointed former Goldman Sachs managing director Michael Everett to gauge shareholders’ perceptions of the board’s performance and repair relations with investors.
Mr Everett declined to comment. However, it is understood that reactions have been largely supportive of Mr Hutchinson, but critical of Mr Dawkins.
Vocation and several investors felt the company has been unfairly victimised by regulators, who had penalised the firm but has failed to stop unscrupulous industry-wide practices, an attitude which may go a long way towards explaining the depth of Vocation’s problems with regulators.
At least one company staffer expressed outrage about widespread enrolment practices, and said the system “incentivised” enrolling as many students as possible and “churning them through”.
Greater scrutiny by regulators on student broking services, which at times have claimed commissions of up to 40 per cent, has reduced the number of referrals.
Last month the Australian Skills Quality Authority began writing to training providers that had a partnership with Acquire Learning, the Andrew Demetriou-led employment and training services firm, requiring them to provide details about how they met guidelines for ethical and accurate marketing to prospective students. Several former students enrolled through Acquire have complained of unethical marketing practices and inappropriate enrolments.