Intueri chairman Chris Kelly says 74% share price slump 'a bit of an overreaction'
Intueri Education Group chairman Chris Kelly says the market has had "a bit of an overreaction" to today's news that an Australian government audit of its subsidiaries across the Tasman could threaten the viability of the company, and the company is confident in its future.
Audits by the Australian Skills Quality Authority (ASQA) found that Online Courses Australia (OCA) and Conwal & Associates weren't compliant with its standards.
Intueri has until October 21 to respond before the ASQA makes a decision, with possible outcomes ranging from a directive to correct areas of non-compliance through to the full cancellation of OCA and Conwal's registrations as registered training organisations (RTOs).
Cancellation of the registration for Conwal, which generates some 95% of OCA's revenue, "would place serious doubt on OCA Group's ability to continue to operate, and also significantly impact Intueri's ability to remain a going concern as it would be unlikely to meet its future banking covenants," Intueri said today in a statement.
OCA accounted for 35% of Intueri's $50.1 million of revenue in the six months ended June 30.
"We're quite confident we can rebuff many aspects of it but until that due process has happened we have to warn the market accordingly, and they've taken rather a pessimistic view of the situation, in my view," Mr Kelly told BusinessDesk. "I think there's been a bit of an overreaction but investors don't like uncertainty, and right now the environment is uncertain."
"We're confident we can rebuff much of what's been written in the audit – we have an opportunity to reply to it, they will then re-assess it, we can then appeal – so there are a number of processes to go through, and we're not by any means the first company to be audited and not be given a clean bill of health."
The shares had been halted for the announcement at 30c, having fallen 58% this year, and tumbled by as much as 87% to just 4 cents when they resumed trading today, valuing Intueri at $4 million. They recently traded at 7.7c, down 74% on the day.
Kelly said the board has every confidence in current management.
"If the investors wish me to stand down, I will do that in a shot. I'm terribly disappointed with what's happened, and like many things, it's not one thing in particular, but if shareholders have a desire to replace me I will step down."
Grant Williamson, director at Christchurch-based Hamilton Hindin Green, said it would be "a long road back" for the company.
"They're certainly on the critical list, it's all down to the outcome of when these Australian authorities look at their papers," Williamson said. "I can certainly understand why some investors are getting out."
A large percentage of students in Intueri's Australian online courses are funded through VET Fee-Help, a scheme which helps either pay some or all of a student's fees. The Australian government has imposed a cap on the scheme this year, holding all providers to their 2015 revenue levels.
When Intueri reported its first-half earnings last month, it posted a 43% decline in first-half profit to $3.5 million and gave full-year earnings before interest, taxation, depreciation and amortisation guidance of about $15 million, dependent on a $6 million lift in its government funding cap. Mr Kelly said today that he was confident Intueri would get that $6 million lift, based on information from other organisations who had applied for their funding caps to be lifted.
"All our information thus far suggests we will get that payment but we haven't got it yet," Kelly said.
Mr Kelly also said initiatives mentioned in the first-half earnings, set to deliver benefits in the second half and next year, are "tracking really well."
Intueri's shares listed at $2.35 in May 2014 and peaked at $3.35 in September 2014. Since then the company has missed prospectus forecasts and has been investigated by the Serious Fraud Office. Its Quantum Education Group and Dive School units have been reviewed by the Tertiary Education Commission, with dividends suspended in February pending the outcome of that review. It has shed 70 staff and in May directors agreed to cut their fees as the company sought to slash costs.
In March this year it was ordered to pay about $150,000 in reparations to the family of a foreign diving student who died during training after pleading guilty to one charge under the Health and Safety in Employment Act, in addition to a $54,000 fine.
In June, TEC said Intueri must refund $1.47 million plus tax after an investigation into its dive school showed some student enrolments between 2009-2014 could not be validated and some courses under-delivered against their funding agreement.
Shares in ASX-listed Arowana International, which floated Intueri and retains 24.88% of the business fell 9% to 70Ac.