Another privatisation failure

[wutang]

Learndirect faces collapse after failing to suppress Ofsted report

Private equity owners extracted millions from UK’s largest adult training provider

https://www.ft.com/content/3a85ac1c-7dd ... da0bcbc928

The UK’s largest adult training and apprenticeships provider is at risk of collapse following a damning report by Ofsted, the education regulator, that the company tried to suppress.

Learndirect, which currently has 73,000 people on training courses and apprenticeships, was given Ofsted’s lowest grade possible after an inspection in March.

The company, which was privatised and sold to the private equity arm of Lloyds Bank in 2011, obtained an injunction, warning that it might lose government contracts and be forced into administration if the Ofsted report was published.

Learndirect is almost entirely reliant on government funding, and had received contracts worth £158m in the year to July 2017, according to latest Department for Education figures.

Details of the Ofsted report, the lengths Learndirect has gone to keep it secret, and the tens of millions of pounds extracted from the operating business since the company’s privatisation can now be revealed following an investigation by the Financial Times and FE Week.

Learndirect had no borrowings when it was privatised but, by the end of July 2015, its parent company had net debt of £90m, 10.6 times its operating cash flow and 7.3 times its earnings before interest, tax, depreciation and amortisation that year. The group had net liabilities of £18m, on a balance sheet that recorded £71m of intangible “goodwill” assets.

Between 2012 and 2015 Learndirect’s post-tax profit declined from £10.2m to £1.6m, even though revenue rose because of its merger with JHP. During the same period the operating business paid £20m in dividends to its immediate holding company. The business also paid £6m in interest over the four years, as its cash holdings dwindled from £34m to £5m.

Accounts for Learndirect’s two holding companies — Pimco 2909 and Pimco (Holdings) — show that they paid interest, dividends, management and debt-related fees that amounted to 84 per cent of the £38m of cash generated by the operating business between 2012 and 2015.

[wutang]

Details of the Ofsted report, the lengths Learndirect has gone to keep it secret, and the tens of millions of pounds extracted from the operating business since the company’s privatisation can now be revealed following an investigation by the Financial Times and FE Week.

Ofsted found one-third of apprentices in programmes arranged by Learndirect had not received off-the-job training as required

The regulator discovered, in a random sample of apprentices, no evidence of learning plans or monitoring of progress

Ofsted claimed its inspection had been obstructed by Learndirect and alleged it had “a strategy . . . to limit our evidence base”

A Manchester court was told last month that 70 per cent of Learndirect’s apprenticeship services were below the success threshold required by the government

In the four years following Learndirect’s privatisation, payments to managers and financiers accounted for 84 per cent of the cash generated by the business

In 2012, its parent company spent more than £500,000 sponsoring a Formula One team backed by Learndirect’s private equity owners

In 2012, Pimco 2909 spent three times more in bankers’ and lawyers’ fees than Learndirect generated in cash from its training and apprenticeships operations. It even spent £504,000 on sponsoring the Marussia Formula One team, which was part-owned by LDC. Darryl Eales, the former chief executive of LDC and then a Pimco 2909 board member, was also chairman of the team.