Pressure builds on ABC Learning chief Eddy Groves to step down
Thursday, 28 August 2008
James Thomson
It’s increasingly looking like childcare king Eddy Groves could be on the way out at ABC Learning, the company he founded and runs.
ABC remains in a trading halt this morning, pending the release of its 2007-08 results sometime in the next week.
But reports suggest ABC’s new auditors, Ernst & Young, may force the company to restate its accounts for the past two years and book a bigger-than-anticipated loss from the partial sale of its US business earlier this year.
The incident is just the latest in a series of problems for ABC Learning this year, starting with the release of a shock profit downgrade for the childcare company’s 2008 earnings on 22 April.
This sparked a dramatic fall in the company’s share price – it has dropped from $5.18 at the start of the year to 54c at present – which in turn caused a series of margin calls that forced Groves and his wife Le Neve to sell large stakes in the company.
The company is also facing a class action from litigation funder IMF, which claims ABC did not disclose developer contracts and fee arrangements between the release of its preliminary accounts on 27 August 2007 and the profit downgrade in April.
ABC previously said it would declare a pre-tax loss of $437 million for the 12 months to 30 June. Investors will be hoping the actual result does not turn out to be even worse than this.
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