Post by myles on Aug 15, 2017 14:15:21 GMT
There is a story on the front page and page 3 involving Darryl Eales and LDC. I'm not a corporate financing expert, but I'm sure others can explain what's happened here.
Page 3:
Learndirect faces collapse after Ofsted blasts training record;
• Adult education provider fails inspector's tests
• Private equity owner extracted millions
Kadhim Shubber
The future of the UK's largest adult training and apprenticeships provider is in doubt after a damning report by Ofsted and questions about cash extracted from the private equity-owned company since its privatisation.
Learndirect, owned by an arm of Lloyds Bank, was given the education regulator's lowest grade possible after an inspection in March. The inspector claims Learndirect tried to obstruct its report, winning a court injunction that was finally lifted yesterday.
Ofsted said it found no evidence in a sample of the 20,000 apprentices trained annually of a learning plan or monitoring of progress.
It said a third of apprentices had not received off-the-job training as required and 70 per cent of Learndirect's apprenticeship services were below the success threshold set by the government.
An investigation by the Financial Times and FE Week further found that in the four years after Learndirect was privatised in 2011, its parent spent 84 per cent of its largely taxpayerprovided cash flows on payments to managers and financiers, loaded itself with £90m of debt and extracted £20m in dividends from its operating company as profits dwindled.
In 2012, it spent £500,000 sponsoring the Marussia Formula One team, which was also backed by its private-equity owners LDC but which subsequently went bust.
Details of the Ofsted report and the steps Learndirect took to keep it secret can only now be revealed following the lifting of the injunction obtained by the company after it warned it could lose government contracts and be forced into administration if the report was published. The company's request for a judicial review of Ofsted's report was rejected this month.
Angela Rayner, Labour's shadow -minister for education, criticised Learndirect for attempting to suppress the report and said it and Lloyds had "big questions to answer".
"That Learndirect spent millions of pounds of public money on shareholder dividends and backing [Marussia F1] while the quality of training and learning deteriorated is unacceptable," she said. She called on the government to "urgently investigate these events to ensure they never happen in future".
Learndirect was launched in 2000 by the then Labour government to boost adult education through online learning. It was privatised in 2011 in a £36m management buyout led by LDC, the private arm of Lloyds bank, then 40 per cent owned by the government.
The company remains reliant on government contracts, though it has been criticised for taking a 40 per cent slice of the funding it passes on to contractors - other operators in the sector take 15 to 20 per cent.
The government has given Learn-direct contracts worth £158m for the year ending July 2017. There are currently 73,000 people on training courses with Learndirect, which has 1,650 staff.
The training provider's service quality has fallen in recent years and in March the Education and Skills Funding Agency (ESFA), part of the Department for Education, issued a "notice of serious breach" in relation to standards in Learndirect's apprenticeships business.
Learndirect said it challenged Ofsted's report because the inspector's process did not give a "true reflection" of the business.
It said the report did not affect parts of Learndirect's business that are not reliant on contracts with the ESFA. "Learndirect Limited will continue to be well-supported by our stakeholders," a spokesperson said.
LDC said "We remain a supportive shareholder."
• Adult education provider fails inspector's tests
• Private equity owner extracted millions
Kadhim Shubber
The future of the UK's largest adult training and apprenticeships provider is in doubt after a damning report by Ofsted and questions about cash extracted from the private equity-owned company since its privatisation.
Learndirect, owned by an arm of Lloyds Bank, was given the education regulator's lowest grade possible after an inspection in March. The inspector claims Learndirect tried to obstruct its report, winning a court injunction that was finally lifted yesterday.
Ofsted said it found no evidence in a sample of the 20,000 apprentices trained annually of a learning plan or monitoring of progress.
It said a third of apprentices had not received off-the-job training as required and 70 per cent of Learndirect's apprenticeship services were below the success threshold set by the government.
An investigation by the Financial Times and FE Week further found that in the four years after Learndirect was privatised in 2011, its parent spent 84 per cent of its largely taxpayerprovided cash flows on payments to managers and financiers, loaded itself with £90m of debt and extracted £20m in dividends from its operating company as profits dwindled.
In 2012, it spent £500,000 sponsoring the Marussia Formula One team, which was also backed by its private-equity owners LDC but which subsequently went bust.
Details of the Ofsted report and the steps Learndirect took to keep it secret can only now be revealed following the lifting of the injunction obtained by the company after it warned it could lose government contracts and be forced into administration if the report was published. The company's request for a judicial review of Ofsted's report was rejected this month.
Angela Rayner, Labour's shadow -minister for education, criticised Learndirect for attempting to suppress the report and said it and Lloyds had "big questions to answer".
"That Learndirect spent millions of pounds of public money on shareholder dividends and backing [Marussia F1] while the quality of training and learning deteriorated is unacceptable," she said. She called on the government to "urgently investigate these events to ensure they never happen in future".
Learndirect was launched in 2000 by the then Labour government to boost adult education through online learning. It was privatised in 2011 in a £36m management buyout led by LDC, the private arm of Lloyds bank, then 40 per cent owned by the government.
The company remains reliant on government contracts, though it has been criticised for taking a 40 per cent slice of the funding it passes on to contractors - other operators in the sector take 15 to 20 per cent.
The government has given Learn-direct contracts worth £158m for the year ending July 2017. There are currently 73,000 people on training courses with Learndirect, which has 1,650 staff.
The training provider's service quality has fallen in recent years and in March the Education and Skills Funding Agency (ESFA), part of the Department for Education, issued a "notice of serious breach" in relation to standards in Learndirect's apprenticeships business.
Learndirect said it challenged Ofsted's report because the inspector's process did not give a "true reflection" of the business.
It said the report did not affect parts of Learndirect's business that are not reliant on contracts with the ESFA. "Learndirect Limited will continue to be well-supported by our stakeholders," a spokesperson said.
LDC said "We remain a supportive shareholder."
Page 3:
Online training provider receives poor marks for achievements after privatisation;
Learndirect, launched in 2000 by Labour and taken over in a 2011 management buyout, obtained a court order to gag Ofsted
Kadhim Shubber
In November 2012 representatives from the UK's largest provider of adult training headed to São Paulo for the Brazilian Grand Prix.
What benefits Learndirect obtained through its £504,000 sponsorship of the Marussia F1 team that year are unclear, beyond a small logo on the tail fin of the racing cars. The company said at the time the partnership allowed it "to reach our core customer group in a new and exciting way".
The sponsorship must have made sense to Darryl Eales. The 57-year-old was the Marussia chairman. He was also head of Lloyds Bank's private equity arm, LDC, which had a minority stake in the F1 team. And he was a director of Learndirect's parent company, which is controlled by LDC.
In 2014 Marussia collapsed. Learn-direct is at risk of a similar fate.
The company, which is training 73,000 people and has 1,650 employees, has warned it faces possible insolvency after a damning report by Ofsted, the education regulator.
Details of the report, the lengths to which Learndirect has gone to keep it secret, and the tens of millions of pounds extracted from the operating business since privatisation in 2011 can be revealed following an investigation by the Financial Times and FE Week.
• Ofsted found that a 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 progress monitoring.
• Ofsted alleged that its inspection had been obstructed by Learndirect, which it said 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 privatisation, payments to mana-gers and financiers accounted for 84 per cent of cash generated by the business.
Learndirect was launched in 2000 by the last Labour government, to boost adult education via online learning. The business was run by a charitable trust controlled by the Department for Education. It was privatised in 2011 in a management buyout led by Lloyds TSB Development Capital (LDC), the private equity arm of Lloyds Bank, during the early years of the coalition government's austerity programme. LDC purchased Learndirect for £36m in cash. The acquisition was funded through a loan from LDC to Pimco 2909, the entity that was used to acquire Learndirect - a debt-financed deal that is typical of private equity transactions. The following year LDC paid itself £62m for Learndirect in a transaction that merged the company with JHP Group, another training provider that it owned, which had a large apprenticeships business. The strength of Learndirect's balance sheet severely weakened in the years following its sale and it was hit by widespread cuts in government funding.
Learndirect was free of 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 earnings before interest, tax, depreciation and amortisation that year.
The group had a net liability position of £18m, on a balance sheet that recorded £71m of intangible "goodwill" assets.
"The training provider business is a pretty challenging one . . . you're quite vulnerable to events," said Julian Gravatt, deputy chief executive at the Association of Colleges. "The main assets you have are the skills of the people and the government contracts."
Between 2012 and 2015, Learndirect's post-tax profit declined from £10.2m to just £1.6m, even though revenue rose because of its merger with JHP. Over 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.
In February Learndirect hired John Dewhirst, a restructuring specialist, as chief financial officer, according to Companies House filings. Four months later he resigned from the board, saying he was "no longer involved with the business".
Accounts for Learndirect's holding companies - Pimco 2909 and Pimco (Holdings) - show they paid interest payments, dividends, management and debt-related fees that accounted for 84 per cent of the £38m of cash generated by the operating business between 2012 and 2015.
In July 2015 Pimco (Holdings) had bank loans of £54m secured by a debenture in favour of Lloyds Bank. Other loans worth £44m were secured by a debenture in favour of LDC.
As the financial health of Learndirect has declined, so has the quality of its services. From 2013 to 2016 the overall achievement rate on its education and training programme fell from 90.7 per cent to 80.5 per cent.
The achievement rate in its apprent-iceships scheme fell from 67.5 per cent to 57.8 per cent in the same period, bringing it below the government req-u-ired minimum of 62 per cent.
In March the Education and Skills Funding Agency, part of the DfE, issued a "notice of serious breach" related to the standards in Learndirect's apprenticeship operations. Later that month, Ofsted conducted its first inspection of Learndirect since 2013, when it had received a grade 2. This time it was given the worst possible mark, a grade 4, or "inadequate".
Publication of the embarrassing score was delayed by campaigning for the general election in June. As the election drew to a close, Learndirect obtained a gagging order and applied to challenge Ofsted's finding in a judicial review.
In its application for the order, Learndirect said the government might terminate its contracts as a result of the grade. In June Judge Jane Moulder gagged Ofsted. Andy Palmer , Learndirect chief executive, had warned that publication of the report could have "catastrophic" consequences for the business, involving eventual insolvency, she said in her order. The reporting restriction was lifted yesterday.
During judicial review hearings in July, it was alleged that Learndirect had obstructed Ofsted's inspection.
However, the company said Ofsted had relied on too small a sample of apprentices in its report, and that the lead inspector had prejudged the issues. It rejected allegations that it had tried to obstruct the inspection.
This month Learndirect's application for a judicial review was rejected.
Learndirect said "normal dividends" were paid at a time when the company was growing rapidly, generating significant profits, and the outlook was good.
"In addition, there were significant intra-group dividends paid as part of a group reorganisation; none of these resulted in cash leaving the group. No further dividends have been paid since."
Learndirect said LDC had reinvested more than £37m over the past three years as government funding cuts had reduced revenue by £100m.
LDC said it remained a "supportive shareholder".
Learndirect, launched in 2000 by Labour and taken over in a 2011 management buyout, obtained a court order to gag Ofsted
Kadhim Shubber
In November 2012 representatives from the UK's largest provider of adult training headed to São Paulo for the Brazilian Grand Prix.
What benefits Learndirect obtained through its £504,000 sponsorship of the Marussia F1 team that year are unclear, beyond a small logo on the tail fin of the racing cars. The company said at the time the partnership allowed it "to reach our core customer group in a new and exciting way".
The sponsorship must have made sense to Darryl Eales. The 57-year-old was the Marussia chairman. He was also head of Lloyds Bank's private equity arm, LDC, which had a minority stake in the F1 team. And he was a director of Learndirect's parent company, which is controlled by LDC.
In 2014 Marussia collapsed. Learn-direct is at risk of a similar fate.
The company, which is training 73,000 people and has 1,650 employees, has warned it faces possible insolvency after a damning report by Ofsted, the education regulator.
Details of the report, the lengths to which Learndirect has gone to keep it secret, and the tens of millions of pounds extracted from the operating business since privatisation in 2011 can be revealed following an investigation by the Financial Times and FE Week.
• Ofsted found that a 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 progress monitoring.
• Ofsted alleged that its inspection had been obstructed by Learndirect, which it said 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 privatisation, payments to mana-gers and financiers accounted for 84 per cent of cash generated by the business.
Learndirect was launched in 2000 by the last Labour government, to boost adult education via online learning. The business was run by a charitable trust controlled by the Department for Education. It was privatised in 2011 in a management buyout led by Lloyds TSB Development Capital (LDC), the private equity arm of Lloyds Bank, during the early years of the coalition government's austerity programme. LDC purchased Learndirect for £36m in cash. The acquisition was funded through a loan from LDC to Pimco 2909, the entity that was used to acquire Learndirect - a debt-financed deal that is typical of private equity transactions. The following year LDC paid itself £62m for Learndirect in a transaction that merged the company with JHP Group, another training provider that it owned, which had a large apprenticeships business. The strength of Learndirect's balance sheet severely weakened in the years following its sale and it was hit by widespread cuts in government funding.
Learndirect was free of 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 earnings before interest, tax, depreciation and amortisation that year.
The group had a net liability position of £18m, on a balance sheet that recorded £71m of intangible "goodwill" assets.
"The training provider business is a pretty challenging one . . . you're quite vulnerable to events," said Julian Gravatt, deputy chief executive at the Association of Colleges. "The main assets you have are the skills of the people and the government contracts."
Between 2012 and 2015, Learndirect's post-tax profit declined from £10.2m to just £1.6m, even though revenue rose because of its merger with JHP. Over 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.
In February Learndirect hired John Dewhirst, a restructuring specialist, as chief financial officer, according to Companies House filings. Four months later he resigned from the board, saying he was "no longer involved with the business".
Accounts for Learndirect's holding companies - Pimco 2909 and Pimco (Holdings) - show they paid interest payments, dividends, management and debt-related fees that accounted for 84 per cent of the £38m of cash generated by the operating business between 2012 and 2015.
In July 2015 Pimco (Holdings) had bank loans of £54m secured by a debenture in favour of Lloyds Bank. Other loans worth £44m were secured by a debenture in favour of LDC.
As the financial health of Learndirect has declined, so has the quality of its services. From 2013 to 2016 the overall achievement rate on its education and training programme fell from 90.7 per cent to 80.5 per cent.
The achievement rate in its apprent-iceships scheme fell from 67.5 per cent to 57.8 per cent in the same period, bringing it below the government req-u-ired minimum of 62 per cent.
In March the Education and Skills Funding Agency, part of the DfE, issued a "notice of serious breach" related to the standards in Learndirect's apprenticeship operations. Later that month, Ofsted conducted its first inspection of Learndirect since 2013, when it had received a grade 2. This time it was given the worst possible mark, a grade 4, or "inadequate".
Publication of the embarrassing score was delayed by campaigning for the general election in June. As the election drew to a close, Learndirect obtained a gagging order and applied to challenge Ofsted's finding in a judicial review.
In its application for the order, Learndirect said the government might terminate its contracts as a result of the grade. In June Judge Jane Moulder gagged Ofsted. Andy Palmer , Learndirect chief executive, had warned that publication of the report could have "catastrophic" consequences for the business, involving eventual insolvency, she said in her order. The reporting restriction was lifted yesterday.
During judicial review hearings in July, it was alleged that Learndirect had obstructed Ofsted's inspection.
However, the company said Ofsted had relied on too small a sample of apprentices in its report, and that the lead inspector had prejudged the issues. It rejected allegations that it had tried to obstruct the inspection.
This month Learndirect's application for a judicial review was rejected.
Learndirect said "normal dividends" were paid at a time when the company was growing rapidly, generating significant profits, and the outlook was good.
"In addition, there were significant intra-group dividends paid as part of a group reorganisation; none of these resulted in cash leaving the group. No further dividends have been paid since."
Learndirect said LDC had reinvested more than £37m over the past three years as government funding cuts had reduced revenue by £100m.
LDC said it remained a "supportive shareholder".