At 7.5 cents per share the only way is up for professional education business Vocation Ltd (ASX: VET) and today's announcement that it plans to sell two of its operating divisions for $15 million will be welcome news for shareholders. The businesses to be sold are its Australian School of Management and Australian College of Applied Education.
After having announcing that a major funding contract had been pulled by Victorian education authorities in October last year the group's share price has headed down hill faster than an Austrian skier from above $3 to 7.5 cents a share.
The rocket-charged descent has been fuelled by multiple earnings downgrades, legal actions and pressure from circling creditors. The announced business sales are an attempt to reduce its debt load and create a sustainable business model, with a strategic review process due for completion by May/April 2015.
Vocation is also facing legal actions from investors who are likely fuming over alleged misleading conduct and disclosure failures in the run up to the October confession that two of its Registered Training Organisations (RTOs) had failed an audit by a Victorian government funding body.
As a result fee-hungry lawyers from IMF Bentham Ltd (ASX: IMF) are funding a proposed class action commenced by Slater & Gordon Limited (ASX: SGH) to seek redress for shareholders left nursing huge losses from their Vocation investments.
The class action will allege that Vocation failed to disclose to shareholders the compliance issues with the two audit-flunking RTOs between August and October 2014. Vocation intends to defend the claim and much of the case will rest on just how aware Vocation was of the likelihood of a failed audit in the period between late August and the October 27 confession.
Given that the shares are trading for 7.5 cents it appears as though Mr. Market has come to a guilty verdict, although Vocation's lawyers may have something to say about that yet.
Overall though Vocation's track record suggests it's one to avoid for now, as there are plenty of other far better dividend-paying, capital growth producing businesses with strong futures to snap up.
