Vocation Ltd (ASX: VET) shares entered a trading halt for the second time in as many months on Tuesday after the company decided it was necessary to "enable the Company to complete certain financial reviews which are currently in progress and, following completion of those reviews, make an announcement to the ASX updating the Company's FY15 guidance".
The trading halt comes a little over a month after the company announced that the Victorian Government was to pull $19.6 million of funding from two of Vocation's Registered Training Organisations (RTOs), BAWM and Aspin. The announcement has resulted in an 84% fall in the share price since shareholders were alerted to the review conducted by the Victorian Government.
Since then, Chairman and former federal Labor minister John Dawkins has resigned, shareholders have called for the sacking of Vocation's CEO Mark Hutchison, and litigation funder Bentham IMF Ltd (ASX: IMF) announced it would be funding a class action against the company.
Should you be worried?
If shareholders weren't already concerned about the future of the company, they have every right to be now. I made a guess previously about how the funding cut might hit the company's bottom line, however it appears that I may have seriously underestimated the impact.
The ruling, and subsequent media coverage, has damaged the brand's reputation as well as others in the industry according to Navitas Limited (ASX: NVT) CEO Rod Jones. In addition, the loss of Mr Dawkins will surely impact the group's previously strong relationship with regulators and funding bodies.
Vocation's FY15 profitability is at question now and the exodus of students following the ruling could be severe. CEO Mark Hutchinson predicted at the time of the decision that EBITDA would decrease by between 10-15% compared with the previous estimate of $64 million. This would imply a new range of $53m to $57m, however yesterday's trading halt implies that the guidance may be under threat.
A Better Option
