The long-term survival of Learndirect will hinge on the success of its sister companies, including Learndirect Apprenticeships, over the next 12 months, as newly released accounts show it saddled with debts of more than £50 million.
The nation’s biggest FE provider, which has had serious financial and performance issues ever since Ofsted damned it with a grade four in August, published its full accounts for the 18-month period up to January 31, 2017, this morning.
They show huge debts worth £48.5 million for its parent group, Pimco Holdings Ltd, plus a loan of £2.9 million from Lloyds Development Capital (LDC), both of which need to be paid back from November 2018.
There is a further loan from LDC of £48.8 million which will be repayable in May 2020.
Learndirect Apprenticeships (LDA), a firm set up by Learndirect as a separate entity to run its apprenticeships division in March 2016, also released its accounts this morning, which show similar financial problems.
Both companies were said in the accounts as to still be a “going concern”, and in order to survive Pimco has secured a “working capital facility” of up to £5 million from its bank lenders, which will be available until November 30, 2018.
There are however two “material uncertainties” which may cast “significant doubt” on Leanrdirect’s and LDA’s abilities to remain a going concerns: Pimco’s financial arrangements after November 2018 and the providers’ future performance.
The accounts state that while bank lenders and LDC “continue to be supportive”, Pimco’s ability to repay, refinance or extend these loans will depend on the performance of its subsidiaries – Leanrdirect Ltd, Learndirect Apprenticeships Ltd, and Learndirect Professional – over the next 12 months.
There are said to be “several factors” that make predicting income levels in the short-term more difficult than usual, according to the accounts.
These include the impact of Ofsted’s landmark report, changes to apprenticeship funding (particularly the levy), and the rate of growth in the European Social Fund.
Reduce the number of localised delivery centres and associated staff
Learndirect’s executive team is “continuing to manage day-to-day performance and is keeping cost levels under close review in order to be able to mitigate any shortfalls to expected operating income”, the accounts say.
Learndirect received around £45 million from the adult education budget to use until July 2018, despite its ‘inadequate’ rating and the fact it pulled out of a controversial procurement process. This represents 75 per cent of its previous £60 million contract.
Today’s accounts state that Learndirect, over the course of the coming year, will “continue to reduce the exposure that it has from costs related to delivery of ESFA-funded learning”.
This will be done by “reducing the number of localised delivery centres and associated staff”.
In the absence of an improved Ofsted grade, the ESFA has confirmed that funding for adult skills provision will not be available to Learndirect Ltd after July 2018.
The company’s accounts claim that it has “other sources” of funding, such as ESF contracts, which are “currently growing” with “scope for these contracts to be extended and for further contract wins in the future”.
“The directors consider that, if the business achieves its budgeted performance targets over the next 12 months, then there is a good prospect that the relevant facilities will be extended beyond 30 November 2018,” the report concludes.
Learndirect declined to comment.
The Learndirect saga has been closely followed by the FE sector ever since the Ofsted judgment in August, and subsequent decisions by the government have led the National Audit Office to launch an investigation into both Learndirect and the Department for Education following outcry from the Public Accounts Committee.
The outcome is expected to be released in “winter 2017-18”.