IQE
11/02/2016 08:30
FORECAST
PRICE SENSITIVE
REL: 0830 HRS Intueri Education Group Limited
FORECAST: IQE: IQE: Intueri 2015 Earnings Update and 2016 Outlook
NZX/ASX RELEASE
11 February 2016
IQE - INTUERI CONFIRMS 2015 EARNINGS EXPECTATIONS AND PROVIDES 2016 OUTLOOK
Intueri Education Group (NZX/ASX: IQE) has today confirmed its 2015 expected
earnings and provided an update for 2016, taking into account the recent
regulatory changes in the Australian vocational sector and following
confirmation of 2016 Tertiary Education Commission (TEC) funding for
Intueri's New Zealand colleges.
In summary:
o Intueri confirms it expects to deliver approximately $21.5 million
underlying EBITA for the financial year ended 31 December 2015
o The TEC reviews of Quantum Education Group (Quantum) and the NZ School of
Outdoor Studies (Dive School) have commenced, and the Serious Fraud Office
(SFO) has requested information, pertaining to Quantum, to assist with an
enquiry
o The Intueri Board has agreed to suspend dividends until such time as the
TEC reviews are completed
o The TEC has confirmed 2016 funding for Intueri's New Zealand colleges that
is approximately 6% ahead of the level of funding consumed in 2015. However,
the TEC has restricted enrolments of unfunded students at Quantum, which will
impact Quantum annual revenues by approximately $8 to $9 million
o The interim regulatory measures introduced for the Australian VET FEE-HELP
(VFH) funding system while a review is underway, are likely to see 2016 OCA
Group earnings capped at 2015 levels
o While the Intueri Board is not in position to provide detailed guidance for
2016, it is expected that 2016 underlying EBITA will be slightly lower than
2015.
2015 Expected Earnings
Taking into account the previously announced forecast impact of the TEC
reviews, the Board confirms that it expects to report 2015 underlying EBITA
of approximately $21.5 million. This is within the forecast range of $20.5
million to $23.5 million as outlined below:
Previous EBITA Guidance as at 5 August 2015 $27 to $29 million
Forecast impact of TEC Reviews ($4 to $5 million) being:
- Reinstatement of Dive School provision, and
- Impact due to hold on funding portability discussions with the TEC and
associated costs
($1.1) million
($2.9 to $3.9) million
Delay in settlement of NZIS acquisition (delayed by 2 months) ($0.5) million
Acquisition costs ($0.6) million
Updated EBITA Guidance Range $20.9 to $23.9 million
Less Academy Deferred Consideration ($1.0) million
Add back Acquisition costs $0.6 million
Updated Underlying EBITA Guidance Range $20.5 to $23.5 million
The preliminary results for the financial year to 31 December 2015 will be
released on 24 February 2016.
TEC Review and SFO Enquiry
In New Zealand, the TEC has commenced its reviews of Quantum and the Dive
School. The Intueri Board has agreed to suspend dividends until such time as
the TEC reviews are completed, in order to meet TEC funding conditions.
On Friday 29 January 2016, the SFO in New Zealand requested information
pertaining to Quantum and dating back to 2012, to assist with an enquiry
under Part 1 of their legislation. Intueri is committed to cooperating fully
with the SFO, and will supply all of the requested information as
expeditiously as possible. Intueri is not aware of any financial liability
for the company at this time.
2016 TEC Funding
The TEC has confirmed 2016 funding for all of Intueri's New Zealand colleges,
which is approximately 6% ahead of the funding consumed in 2015. However, the
TEC has restricted enrolments of unfunded students at Quantum, which will
impact annual course fee revenues by approximately $8 to $9 million. To
compensate for the forecast reduction in revenue, the company has embarked on
a strategic review to align capacity with the reduced student numbers.
Quantum generated approximately 20% of Intueri's group revenues in 2015, and
this is expected to reduce to less than 10% in 2016. An impairment charge
against the carrying value of Quantum is anticipated in the 2015 full year
accounts. Intueri is awaiting the outcome of the TEC and SFO reviews, at
which time it will consider legal remedies and recourse against the original
vendors.
Australian Regulatory Environment
In December 2015, the Australian Government announced a review of the VFH
funding system. Interim measures have been put in place while a new funding
model is developed in consultation with the sector over the next 12 months,
including a cap on 2016 VFH funding at 2015 levels. Intueri are exploring
other options to drive growth however, the Board currently expects that 2016
EBITA for The OCA Group will be in line with 2015, at approximately AUD $10
million.
2016 Outlook
In 2016 Intueri is expecting continued growth from its International segment;
a profit in line with 2015 levels from the Australian Online segment; and
reduced earnings from the Domestic segment due to the reduction in student
numbers at Quantum. Recent acquisitions will provide a full year contribution
in 2016 and the company is focused on identifying and realising cost savings
from the strategic review of Quantum and across the group. The Board
therefore expects Intueri's 2016 underlying EBITA will be slightly lower than
2015.
Intueri's bankers remain supportive and the company has agreed indicative
terms for an $80 million, 3-year refinancing of its debt facilities. These
facilities are expected to be in place by the end of February.
Intueri CEO, Mr Rob Facer, said: "There have been significant changes in the
vocational education sector recently which are having a material impact on
our operations. Our priority is to evolve and adapt to meet these market
conditions and identify opportunities for continued growth.
"Vocational education remains an essential part of the tertiary education
sector and Intueri is committed to leading the way in quality and helping
students gain relevant qualifications. Since listing, we have made a number
of changes to legacy reporting and enrolment processes at schools we have
acquired, to bring them in line with our group-wide quality standards, and we
are working closely with regulators to ensure we deliver quality outcomes in
line with their expectations."
Intueri Chairman, Mr Chris Kelly, added: "The sector is facing increased
scrutiny from regulators in both New Zealand and Australia. We believe our
commitment to quality will help strengthen our position and benefit us over
the long term. The Intueri Board is committed to transparent and open
communications, and will keep shareholders updated as matters progress."
-Ends-
For more information, please contact:
Rob Facer
Chief Executive & Director
+64 (0) 27 675 3538
[email protected]
Rod Marvin
Chief Financial Officer
+64 (0) 27 499 7822
[email protected]
End CA:00277476 For:IQE Type:FORECAST Time:2016-02-11 08:30:08