Financial review

The University continues to show financial resilience and an ability to perform sustainably during economic challenges.

Financially sustainable

The University of Edinburgh continues to meet the challenges of an uncertain and rapidly changing environment and this year has been another great example of where we have achieved our financial objectives by delivering our ambitious plans through financially sustainable execution allowing us to excel as a truly global university.

For the first time, we report our financial results under the new Financial Reporting Standard (FRS 102).

New reporting standard

The familiar formats and terminology of previous years have been replaced and the composition of our ‘Surplus’ has changed to include capital grants, restricted resources (endowments, for example) and unrealised sums valued at a point in time.

2014/15 figures have been restated under FRS 102 for comparison.

In an increasingly competitive environment we are pleased to have increased operational income by 7 per cent which underlines the quality of our financial sustainability and demonstrates how the University is again well placed financially to deal with its short and longer term commitments.

Student and staff numbers

Our student population grew by 6 per cent in the year to 37,510 students.

Tuition fee income rose by £31.1 million, of this £14.2 million of growth was due to the fourth and final year of the new RUK fee regime, £16.4 million growth reflected 11 per cent increase in international student numbers.

Funding council grants

Funding council grants reduced by £4.3 million, reflecting funding cuts and the changed RUK funding regime.

Research Income from grants and contracts grew by 10 per cent on previous year to £253.9 million (£22.7 million).

Despite broader economic uncertainty, the University continues to be successful in winning research grants and contract awards, although this year’s award total of £268 million was down by 12 per cent on last year’s record of £305 million.

Other income (£164 million) is up by 12 per cent (£18 million).

Investments, interest and donations

Income from our investments was £10.2 million, seven per cent lower than last year, but overall value of investments (income plus capital appreciation) grew by seven per cent.

Other interest receivable was £3.1 million, down by £0.5 million on last year, due to reduced bank interest rates.

Under FRS 102, new revenue recognition rules mean that we now include income from new donations and endowments accepted in year, instead of deferring in the balance sheet.

This means we recognise restricted income immediately, regardless of when it is spent.

In 2015/16 we received £4.4 million from new endowments (up by £2 million), and £7 million from donations (down by £3 million).

Expenditure

Group expenditure increased year on year by 2per cent (£13.4 million), although if we exclude the impact of our share of the USS recovery plan, the underlying increase is 4per cent, reflecting controlled investment for growth.

Staff costs as a proportion of total operating income was 52.6 per cent, compared to the prior year restated comparator of 58.4 per cent, again including the USS recovery costs.

£10.9 million of the increase (54 per cent) was in academic and related support staff, with a further £2.8 million (14 per cent) invested in research grants and contracts staff as research income continued to grow.

The new accounting standard FRS 102 means that, for the first time we have included a provision for our share of the USS Pension Recovery plan within the staff costs disclosure.

The 2014/15 figure, £46.5 million represents the impact of the last Triennial valuation.

The 2015/16 figure, £10 million represents the increase in the USS pension provision in the past 12 months.

Other costs, which include expenditure on subsidiary company activities, student accommodation, bursaries, premises costs and library services, have increased by £22 million (eight per cent) from last year.

Depreciation accounted for 4.8 per cent of total spend (£40 million in 2015/16).

Interest payable is £12.8 million, just over half of the charge, £6.6 million, is interest payable on borrowing and £6.0 million is the net charge on pension scheme liabilities.

Income breakdown

To help the reader understand the Group financial performance, the ‘comprehensive income’ for the year (previously known as surplus) is broken down into its constituent parts:

• Unrestricted – available to re-invest in the business
• Restricted – which are committed funds, not surplus cash.

Total comprehensive income for 2015/16 was £56 million, but only 27 per cent of that, £15 million, represents funds available for reinvestment.

Strong balance sheet

We are pleased to report continued strength in the University Group balance sheet.

This strength was a key factor in securing long-term funding from which to invest in the transformational Estates Strategy and provides a strong covenant to the trustees of our pension funds.

All balance sheet financial metrics are resilient.

The above information reflects the audited accounts for the year to 31 July 2016, published in December 2016.

Anyone interested in obtaining further information is invited to contact the University’s Finance Department.

www.accounts.finance.ed.ac.uk

Consolidated statement of comprehensive income and expenditure for the year ended 31 July 2016

Consolidated balance sheet as at 31 July 2016