Intueri directors halve their fees as SFO and TEC investigations icontinue

Directors of Intueri Education Group [NZX: IQE] have cut their base director fee in half as the listed training provider seeks to cut costs, has laid off 70 staff, put dividends on hold, and seen its share price tank after continuing reviews by the Tertiary Education Commission and Serious Fraud Office.

The savings from the director fee cut will only amount to around $200,000 a year but chairman Chris Kelly told shareholders at the annual meeting in Auckland it was a case of "all shoulders to the wheel at a particularly difficult time."

Intueri's share price has dropped from $2.35 at the time of its initial public offering two years ago to 37c  today. It reported a net loss of $48.5 million for the year to December 2015, mainly due to a full writeoff in the value of its Quantum Education Group and impairments at its Dive School and Design & Arts College.

The directors advised shareholders today that underlying earnings, before, interest, tax, depreciation and amortisation for the 2016 financial year will be slightly less than the $21.5 million achieved in 2015.

Directors and management faced a barrage of questions from shareholders including when dividends, which amounted to $13.7 million in the past two years, would be reinstated.

Mr Kelly said the board would consider paying dividends again once the outcome of the TEC reviews into Quantum and the Dive School and the SFO investigation into Quantum were completed, though debt reduction also needed to be a focus for the company.

Its auditors tagged the company's financial statements over its ability to continue as a going concern. It has confirmed an extension of its banking facilities to March 2018 and lifted its total facility to $80 million and delayed until 2017 paying $A5 million owed for the acquisition cost of an Australian business.

Experienced director Alison Paterson, who was elected to the board in June, said she wouldn't have taken the job if she didn't have confidence in the chairman, chief executive, and chief financial officer but there "was a job to do" to restore shareholder wealth and dividends.

Deloitte was appointed by the TEC to review the Dive School and Intueri has provided feedback on a draft report which chief executive Rob Facer said didn't find any issues for concern in 2015 when the school was under its management. However, it did confirm issues Intueri had raised in its own review relating to the period 2010 to 2014 when the school was under the management of the previous owners. Intueri said it would be seeking recourse from the sellers. A final report is expected in the next two to three months.

TEC and SFO reviews of Quantum, where concerns have been raised about the performance and reporting of high student completion rates that didn't match the real number of student enrolments, are still going. How long it will take to resolve the issues is uncertain. Mr Kelly said the former owners of Quantum have also been put on notice Intueri may also take action against them.

He said problems with the subsidiary also occurred before Intueri took over management of the school. Due to Quantum's 2016 student enrolments halving to around 500 equivalent full-time students, 70 staff have been laid off and 12 campuses have been closed, with students taking courses on the remaining campuses and sharing those of other colleges.

Mr Facer said overall cost-cutting initiatives are expected to save $3 million this year and $5 million on an annualised basis from 2017 and beyond.

Intueri is also hampered in meeting a growing demand for online learning as a large percentage of students in its Australian-based online courses are funded through VET Fee-Help. The Australian government has imposed a cap on the scheme this year, holding all providers to their 2015 revenue levels. The Australian Federal Department of Education and Training is conducting a review of the scheme after a Senate inquiry found rampant abuse of the system and soaring costs, and legislation is expected to be introduced early next year.

The current long-term executive share scheme has been scrapped by the board because it was not "meeting its desired objectives" and also doesn't meet likely tax and regulation changes. Options for a new one are being explored. The long-term incentive scheme provided an interest-free loan to Facer and CFO Rod Marvin if they reached financial targets but Facer said the drop in share price meant the executives were now effectively out of the money if they took up the loan. He received a $204,653 loan under the share scheme in the 2015 year which he said related to the company's performance the previous year.

He's also entitled to a short-term bonus equivalent to up to 60 percent of his $320,000 base salary if share price and profit targets are met, though Kelly said he "obviously" didn't receive that this year.

(BusinessDesk)