Local industry bears burden of GEOS fall

LOCAL administrators of English language schools have been working overtime to accommodate almost 500 foreign students left stranded by the collapse of Japanese-owned Australian chain GEOS a fortnight ago.

The impact of the collapse has been dramatic in a financial sense, with about $10 million in unsecured creditors around the nation and other colleges forced to take on students for free under the industry’s Tuition Assurance Scheme.

Even listed property player Finbar has been drawn into the drama, due to its ownership of the Highgate campus GEOS operated as St Marks International College, which paid about $750,000 a year in rent.

Insolvency experts from Ernst & Young were appointed to the business on January 29 after concerns raised by two months of investigation by state and then federal authorities prompted the Australian directors to seek voluntary administration.

Western Australian education authorities launched a thorough investigation of St Marks after analysis of its annual accounts for the year ending June 30.

It is understood that WA’s Department of Education Services was concerned by the school’s financial situation, including evidence of what appeared to be a high level of subsidisation out of Perth to other colleges in the group. It then turned to Commonwealth authorities, which conducted a national review in December.

Perth Education City executive director Mike Ryan said that while any closure of a college was bad for students, the local industry – led by English Australia and WA Private Education and Training Industry Association – had responded well to the problem.

“What we have been keen to do is assure people that Perth is still open for business and that there are many, many good viable colleges here,” Mr Ryan said.

Under the industry’s protection scheme about 12 colleges in WA have agreed to take on the education commitments of St Marks, which extends to students who have paid for tuition and are expected to arrive as late as May.

Some in the industry have raised concerns about having to provide free tuition, as well as the administrative burden of helping students reapply for visas, for a rival.

Market speculation has focused on GEOS’s fee and commission structure, claiming it discounted student education and paid agents handsomely.

However, former GEOS regional marketing coordinator Gary Maserow dismissed this view, stating that prices were based on the market and that the group enjoyed economies of scale.

Mr Maserow – who quit GEOS in October and is seeking to start a new school, Q English, with former colleague Peter Millington – claimed the blame for the collapse lay with the Japanese parent, which left the Australian business cash strapped.