Financial review 2016/17

Review of the financial year from 1 August 2016 to 31 July 2017

Well positioned for the future

It has been another year in which the University has operated in challenging circumstances, facing headwinds in UK public sector funding, more political uncertainty and higher education funding pressures. The University is well positioned for the future, and we will continue to innovate to maintain our position and reputation as an influential and world-class institution.

The University has made good progress over the past year, and we are confident that the institution is well placed financially to deal with its short and longer term commitments. While the consequences of leaving the EU are still somewhat ambiguous, our new framework, which focuses on online education and international partnerships, will ensure continued stability.

Increased operational income

In an increasingly competitive environment we are pleased to have increased operational income by 4.3 per cent.

Total unrestricted comprehensive income for 2016/17 was £69 million, which was 55 per cent of total comprehensive income, representing funds available for reinvestment.

Funding council grants reduced by £2.7 million although there were significant offsets underlying the position. Recurrent teaching and research funding is on a reducing trend. However, funding for buildings and equipment was up by £3.4 million.

Our student population grew by six per cent in the year to 39,576 students. Tuition fee income rose by £23 million, up nine per cent. This growth was due to a seven per cent increase in international student headcount.  The decline in Scottish and EU tuition fees is offset from Rest of UK (RUK) fees.

Research income from grants and contracts grew by four per cent (£11.4 million) on the previous year to £265 million. The University achieved great success in winning research grants and contracts of £364 million, up by 36 per cent on last year’s total of £268 million and 19 per cent up on the previous record of £305 million reported in 2014/15.

Nearly a fifth of the University’s income, £157 million, is earned from other sources, three per cent lower (£4 million) than last year’s performance. Income from our endowment investments was £8.4 million, down seven per cent on last year, but the overall market return on investments (income plus capital appreciation) was 16 per cent (2016: 8.9 per cent). Other investment income grew by £1.6 million on last year and bank interest grew by £0.3 million to £3.4 million, an increase of 10 per cent.

Under Financial Reporting Standard (FRS)102, revenue recognition rules mean that we include income from new donations and endowments accepted in the year. Donations increased in 2016/17 by £13 million to £20million and we received £1.7 million from new endowments (down by £2.7 million on last year).

Group expenditure

Group expenditure increased year on year by three per cent (£29 million), reflecting controlled investment for growth.

Staff costs as a proportion of total operating income were 53 per cent, compared to nearly 54 per cent in the prior year (excluding Research and Development Expenditure Credit). £15 million of the increase (54 percent) was in academic and related support staff, with a further £8 million (30 per cent) invested in research grants and contracts staff as research income continued to grow.

Under FRS 102, we provide for our share of the University Superannuation Scheme recovery plan in the staff costs disclosure. In 2016/17 we have a net credit adjustment of £4.9 million as we unwind the opening provision.

Other costs, which include expenditure on subsidiary company activities, student accommodation, bursaries, premises costs and library services, have increased by £6 million (two per cent) from last year.

Depreciation accounted for five per cent of total spend (£47 million in 2016/17), up by 15 per cent (£6 million) on last year. This planned increase is due to the increased capital spend, reflecting the University’s ambitious capital programme and commitment to investing in quality infrastructure and equipment.

Interest and other finance costs are £15 million. Two thirds of the charge, £9 million, is interest payable on borrowing and finance leases and £6 million is the net charge on pension scheme liabilities.

Continued strength 

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.

This is the second year that we have aligned our Annual Report and Accounts to the International Integrated Reporting Framework, championed by the British Universities Finance Directors Group. Integrated reporting has provided a very useful framework within which we can demonstrate the huge value created by the University to our wide and distinctive group of stakeholders.

The above information reflects the audited accounts for the year to 31 July 2017, published in December 2017. Anyone interested in obtaining further information is invited to contact the University’s Finance Department.

www.ed.ac.uk/finance/accounts

Consolidated statement of comprehensive income and expenditure for the year ended 31 July 2017

Consolidated balance sheet as at 31 July 2017