Write-offs wreck Intueri result

Ructions from regulatory investigations have wrecked the full year results of NZX-listed tertiary education provider Intueri [NZX: IQE] as $59.9 million in write-offs drag its balance sheet into negative equity.

The company reported a bottom line loss for the year to December of $48.5m from revenue of $91.6m.

The big ticket item was a $53.1m write-off of its main domestic business Quantum Education Group, which is the subject of investigation by the Tertiary Education Commission and the Serious Fraud Office.

Intueri said restrictions on enrolments at Quantum, imposed by the TEC, “are expected to have a significant impact on the future financial performance of the school.”

The TEC has barred Quantum from enrolling students in excess of numbers provided for in TEC subsidies, a move that cuts its annual revenues by $8m-$9m.

Intueri said Quantum is expected to make a loss in 2016 but return to profit in 2017 “once the expected annualised benefits of a strategic review are realised, and when a partial reversal of the impairment may be considered.”

The company also took impairment charges of $3.9m on its Huntly Dive School and $2.9m on its Design & Art college in Christchurch.

“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,” Intueri said.

The company’s School of Commercial Diver Training, also under investigation by the TEC, is awaiting sentencing on a Health & Safety in Employment Act conviction after the death of a student in 2014. Intueri has provided for a cost of $175,000 from the case.

Intueri chief executive Rob Facer said the company had produced revenue growth and a result in line with its guidance, although below its prospectus forecasts.

“The last quarter of the year delivered a number of challenges, with a more focused regulatory environment and increased oversight in both Australia and New Zealand,” he said.

Funding freeze
In Australia, the system of government subsidies for tertiary education, known as Vet-Fee Help, is under review after a Senate inquiry found widespread abuse, and funding has been frozen at 2015 levels.

The freeze affects future revenue at Intueri’s OCA Group, which offers online courses in Australia.

In 2015 OCA was a strong performer, posting revenue of $27.7m, up from a pro forma level of $12.1m a year earlier. The segment’s net profit was $7.2m.

Intueri’s acquisition of the New Zealand Institute of Sport did not complete until November, so had little bearing on reported results.

That deal, as well as the purchase of the remaining 50% of OCA in January 2015, pushed Intueri’s debt to $53.4m at balance date, up from $19.2m a year earlier.

The company said it had supportive bankers and had recently agreed indicative terms for an $80m three-year refinancing of its debt facilities.

Intueri shares last traded at 28c, valuing its equity at $28m.

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