Embattled education provider Vocation Ltd (ASX: VET) will repay roughly $8 million to the Victorian Department of Education & Training (the Department), while it will also tear up 1,100 student qualifications in its latest step to move on from its long-running regulatory predicament.
Vocation is desperately trying to move on from the controversy that has plagued it for the last half-year, after a major funding contract was pulled by the Victorian education authorities in response to an audit into two of its Registered Training Organisations (RTOs), BAWM and Aspin.
The shares plummeted from a high of $3.40 before the audit to a low of just 6.8 cents as investors grew frustrated at the numerous profit downgrades and lack of transparency from management.
Back on Track
Although the pain is far from over, Vocation does appear to be progressing in resetting its business under the newly inserted CEO Stewart Cummins.
Cummins has sold off numerous business lines to strengthen its balance sheet and appease its banking syndicate, comprising National Australia Bank Ltd. (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), while Vocation is also working in full cooperation with the Victorian education authorities to get back on track.
In an announcement made to the market yesterday, Vocation said that it will pay the Department $8 million as part of the closure of its BAWM training subsidiary, stating that the amount sits "comfortably" within the amount provisioned in its first-half 2015 earnings results.
Meanwhile, it will also tear up roughly 1,100 student qualifications in areas including Aged Care, Children's Services, Business Administration and Competitive Systems and Practices. Those who undertook First Aid and Assist Clients with Medication in 2014 will also be impacted.
Vocation said that it has "undertaken a comprehensive process to identify and address compliance issues and fully adhere with regulatory directives. Vocation has established a Quality & Compliance team under the guidance of the independent Quality Advisory Committee. The company remains committed to the highest levels of compliance across its business going forward."
Should you buy Vocation?
Since bottoming out at 6.8 cents, Vocation's shares have managed to regain some composure to trade at 14.5 cents at yesterday's close. While some investors could view this as a turnaround opportunity (indeed, the reward could be enormous if Vocation does get itself back on track under Cummins' leadership), it also remains a risky bet.
To begin with, it is difficult to determine how the company will perform in its narrowed-down structure while the stock would be punished heavily should there be any more earnings upsets. As such, Vocation isn't a good fit for the more risk-averse investors – at least until conditions begin to stabilise.
