Finance Director's foreword
Director of Finance Lee Hamill introduces our financial results.
Having taken up the position of Director of Finance in January of 2019, I would firstly like to offer my sincere thanks to the many colleagues, students and friends of the University who have so wholeheartedly welcomed me into the role.
With the launch of our new Strategy 2030, and against the backdrop of an increasingly volatile and uncertain external environment, it is more important than ever that we remain focused on maintaining our high standards of financial performance and sustainability in the short, medium and long term.
I am therefore pleased to report a strong operating performance for the year delivered in the context of a challenging set of circumstances for the Higher Education Sector and economy as a whole. I remain confident that the University has a solid financial platform to enable our academic mission and to support our students, staff and communities as we work together to deliver our shared ambitions.
Headline figures for the year
Our headline performance for the year was positive, with the University’s total income growing by 12 per cent to £1.1bn and our key metric of Operating Surplus improving to £61m, or 5.5 per cent of total income. In calculating our Operating Surplus figure, we have removed a non-cash accounting adjustment relating to movement in our USS pension provision. This leaves us with a more effective measure of our ability to generate cash from our operations to reinvest in University activities and an indication of future financial sustainability. Our full financial results for 2018/19 are reviewed in more detail on pages 34-38 of our Annual Report & Accounts with a summary of income and expenditure presented on page 34, expanding on the table below.
|Category||2019 total £m||2018 total £m|
|Exceptional item: Loan break costs||(14)||-|
Notes to table: 1. Excludes USS increase in provision (non-cash movement)
Pensions Impact It has been another turbulent year for our largest pension scheme, the Universities Superannuation Scheme (USS), and we provide a thorough account of the main developments on pages 35-38 of the Financial Review.
A revised statement of contributions, resulting from the March 2017 valuation, was agreed during the year resulting in a non-cash charge of £195m. A new statement of contributions, resulting from the scheme’s March 2018 valuation was agreed after our financial year end, in September 2019. Had that been agreed prior to our financial year end at 31 July 2019, the net, non-cash, charge for the year would have been £136m lower at £59m. Due to the timing of this announcement, post 31 July, this is reported as a non-adjusted postbalance sheet event in the financial statements.
As in 2018, the University will seek to manage any potential impact of the ongoing pensions dispute on teaching, the student and staff experience and on the services we provide. We continue to support the ongoing work of the Joint Expert Panel in finding a long-term sustainable and affordable solution for the USS scheme.
The University also recorded a non-cash actuarial loss on our funded pensions schemes of £70m during the year, driven in the main by various changes to actuarial assumptions for the Edinburgh University Staff Benefits Scheme (EUSBS).
The net impact of the USS non-cash charge and University’s non-cash actuarial loss relating to our funded pension schemes was £265m in the year. Combined with a £4m gain on disposal of assets and an unrealised gain on investments of £37m, the pension charges convert our £61m Operating Surplus into a comprehensive expenditure of £162m. When this is compared with the prior year’s equivalent figure of net comprehensive income of £171m, driven by a £101m non-cash actuarial gain on our funded pension schemes, this reporting format further serves to highlight the current volatility in pension accounting.
These presentational items in the financial statements should not distract from what was a strong operating performance in the year.
Transforming our physical and digital estates
We have continued to invest in the University’s physical estate to provide innovative, safe and sustainable places to support worldclass academia. Capital investment in our physical estate was £143m with a total of 15 wide-ranging projects delivered, including a number of new build and refurbishment projects providing an increased number of teaching, learning and study spaces and better facilities for our staff and students.
As outlined in our Operational review, completed projects included the Lister Learning and Teaching Centre, the Bayes Centre, The Law School, alongside a significant number of other improvements.
Our work to transform the former Edinburgh Royal Infirmary complex into the Edinburgh Futures Institute continues at pace and is on schedule to open by the end of 2021. The Wellbeing Centre at Bristo Square, the Centre for Tissue Repair at the BioQuarter and the Large Animal Research and Imaging Facility (LARIF) at Easter Bush and new additions to our King’s Buildings campus are all planned for 2020/21.
This year also saw great strides being made in the transformation of our digital estate with the procurement of a complete refresh of our University’s campus data network.
The University’s Estates Capital Plan was approved by Court in April 2019 and projected spend over the next 10 years is £1.4bn. A number of these projects are directly related to the City Region Deal and require significant capital investment in early years to develop the physical infrastructure to support its activity.
These important investment plans were further supported and enhanced this year by an additional £250m of borrowing via a private placement. We secured this additional long-term funding, at terms of up to 30 years, in its entirety from one of our existing lenders with an average cost of borrowing of less than 2.7 per cent. Our ability to raise additional capital at such historically low levels has also enabled us to repay £36m of expensive historic debt early during the year.
Transforming our Professional Services
Our Service Excellence Programme is an essential component in our University 2030 strategy and aims to make our University an even better place to study and work. The programme focuses on five areas; Finance, Human Resources (HR), Student Administration & Support, Student Recruitment & Admissions and Core Systems. Each area has an ambitious agenda that will help transform services, processes, systems and ways of working; reducing duplication, making things simpler for our people and ensuring we are fit for the future. We have made significant progress in the last 12 months, seeing the focus shift firmly from planning to delivery of successful projects. Most significantly, following a comprehensive procurement process, our Core Systems Programme is now well underway. Experts from across the University are now working with our technology partners, Inoapps and Oracle, supporting the design and delivery of a new system for Finance and HR that will underpin and enable our new services and processes.
Transforming skills through Data Driven Innovation
As a partner in the £1.3bn Edinburgh and South East Scotland City Region Deal, we are making significant progress in the delivery of the £660m DataDriven Innovation (DDI) Programme – the largest component of the City Deal.
Since the Prime Minister and First Minister visited the University in August 2018 to sign the City Deal, the DDI Programme has been laying the foundations for our 15-year plan to increase the impact of research and data analytics expertise. We are also playing a leading role in the DDI Skills Gateway, which aims to improve data skills for all the region’s citizens, especially among disadvantaged and hard-to-reach groups. You can read our case study on the impressive Bayes Centre, the first of five DDI hubs, on page 39, and find out more about the our institutional links to the project in our Operational Review.
Finally, I would like to pay a word of special thanks to our student body who continue to challenge and inspire to drive the University forward – just look at our impressive and historic University Challenge victory this year! As our students are foremost in our plans, it is therefore fitting that we commissioned talented University student photographers to capture many of this year’s Annual Report and Accounts images.