Australian Careers Network Ltd sinks into administration

Australian Careers Network Ltd (ASX:ACO) appoints administrators after government withholds funding

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australian Careers Network Ltd (ASX: ACO) has ended its short stint as a listed company on the ASX, after appointing administrators today.

The vocational education company listed on the ASX in December 2014, but shares were suspended in October last year after it received non-compliance notices from regulators, including the Department of Education.

Australian Careers Network had 14 different education companies under its wing, but fell afoul of regulators in July 2015, after the Victorian Higher Education and Skills Group (HESG) suspended funding to subsidiary Consider This Training (CTT) and terminated the contract. HESG also suspended payments related to a diabetes certificate course offered by another of Australian Careers' subsidiaries, the Australian Management Academy (AMA).

Then in October, The company received further notice from the HESG that all payments outstanding for three other subsidiary training organisations were suspended pending a regulatory review. Following a court case, the payments were reinstated, but then another of Australian Careers Network's training organisations – Phoenix – fell afoul of the regulators and in November was asked why it should not cancel its registration as a Registered Training Organisation (RTO).

The ACCC, NSW Fair Trading and the Department of Education and Training then commenced legal proceedings against Phoenix and CTI – yet another of the company's subsidiaries, for making false or misleading representations and engaged in unconscionable conduct. You can read the ACCC's allegations here.

Earlier this month Phoenix lost its case against the government, and the $40 million in funding the government would have paid to it under the VET FEE-HELP scheme. That essentially meant Australian Careers Network could not continue as going concern, and the board had no option but to place the company into voluntary administration.

It also raises serious questions about the potential impact of the rolling reforms introduced earlier last year to stop rogue training providers on the vocation training sector. Vocation Ltd (ASX: VET) had already appointed administrators in November 2015.

Other providers in the sector include Site Group International Ltd (ASX: SIT), Navitas Limited (ASX: NVT) and Intueri Education Group Ltd (ASX: IQE)  — all of which could see changes to the government funding they receive. In 2014, an estimated 75% of the $1.3 billion paid out under the VET FEE-HELP scheme went to the private sector.

Foolish takeaway

Existing shareholders of Australian Careers Network are unlikely to receive any return on their shares, with virtually no tangible assets left in the company once liabilities have been taken into account.

The failure of Australian Career Network is another warning to investors considering buying shares in companies highly dependent on government-sourced revenues.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »