The University delivered a very strong performance recording an operating surplus for the year of £15.555m.
Total income rose by £15.4m to £260.3m as a result of:
- a further £11.3m (20%) reduction in funding council grants
- £23.3m (26%) increase in academic fees as a further cohort of students entered the new £9k fee regime and the University reversed the under-recruitment experienced in the prior year when the new fee regime was introduced.
Movements in other income sources were less material but are set out in the financial statements. Other income benefitted from the receipt of an unrestricted legacy donation and the conclusion of historic tax recovery claims.
Total expenditure rose by £7.9m to £244,7m. This was commensurate with the rise in overall activity and income for the University and its subsidiary companies. The more material changes included:
- £5.1m (4%) increase in staff costs resulting from changes to pension contributions, the impact of auto-enrolment for pensions and the annual pay award
- £2.6m (15%) increase in depreciation costs as capital expenditure on the University's facilities and infrastructure continues
In line with prior years, a number of key performance indicators are monitored to ensure financial sustainability. These are reported regularly to Council and charts showing some of the key measures over a five year period are provided in this report.
These measures include:
- Staff costs as a percentage of total expenditure
- Ratio of public to private income sources
- Operating surplus as a percentage of turnover
- Bank debts as a percentage of reserves
In an uncertain economic and regulatory environment, there is an increased focus on cash management as a key element of financial sustainability. The University priorities the mitigation of counterparty risk over the need to derive maximum returns from its investment of cash and equivalent balances.
The Finance Committee regularly reviews the investment strategy and currently limits investments to a maximum period of 100 days. During the year the University entered into arrangements to fix the interest rates on the vast majority of its long term borrowings. The only remaining variable rate debt is matched by the institution's minimum cash holdings ensuring a natural hedge against rising interest rates for this balance.
The University has expanded its forward forecasting beyond the traditional five-year time horizon. This included a fundamental review of capital expenditure plans for the period and a strategy with regard to long term borrowings. The University does not anticipate any substantial increase in external debt in the medium term to support core operations.
The consolidated cash flow statement for the University indicates a net cash inflow from operating activities of £34.9m with cash and short term investment balances rising to £80.5m at the year end. External long term borrowings reduced by £2.1m (3%) during the year as capital repayments were made. No new borrowings were drawn down during the year. As a result of the improved cash generation from operations, offset by continuing capital expenditure, net funds rose by £6.1m to just under £11m.
As a result of the surplus for the year, the University's reserves (excluding the pension liability) rose from £146.7m to £164.9m. With the pension liability (for the Local Government Pension Scheme) taken into account the movement was from £101.5m to £100.8m, the pension liability having increased as a result of actuarial assumptions regarding bond yields and the discount rate on future liabilities deteriorating since the last valuation. This is a non-cash item.
The University continues to operate three pension schemes. The Universities Superannuation Scheme (USS) is open to all academic and academic related members of staff. The Local Government Pension Scheme (LPGS) the majority of other staff. Some standalone pension scheme operate within the wholly owned subsidiary companies. A small number of staff remain in the Teachers' Pension Scheme (TPS) but this is closed to new members.
Only liabilities relating to LGPS currently appear in the balance sheet. USS is a multi-employer scheme and TPS is state funded. This disclosure will change next year with the transition to new financial reporting standards for the HE sector. As outlined above, the University's share of the deficit within LGPS increased during the year. A triennial valuation of USS is currently underway and will be reported upon next year.