Annual Report and Accounts

Finance Director's foreword

Director of Finance Lee Hamill introduces our financial results.

"In a year in where we have worked hard to manage the impacts of a global pandemic, we have also remained focused on maintaining our high standards of financial performance and sustainability both in the short-term and for the years ahead.

Universities, along with most other sectors of the global economy, have certainly not been immune to the effects of Covid-19. And as we begin to understand the longer term impacts we will need to be flexible and agile in our response to the many challenges that are still to come.

In response to the unprecedented events of the past year we have re-prioritised our organisational plan, adapting the shape and focus of our University so that we can emerge from the pandemic as a stronger and renewed organisation.

Lee HamillDirector of Finance

Financial Impact of Covid-19

The financial impact of the Covid-19 pandemic has been felt right across the University significantly reducing some of our key income streams for the year. Income from our residences and catering has been particularly affected by Covid-19 and has reduced by £11m in 2019/20 when compared to last year. Other income streams negatively affected include research and commercial income from consultancy and veterinary services.

However, offsetting these pressures against our income streams were cost savings from our revised ways of working including reduced travel and utilities expenditure, for example. The University also sought support from the UK Government’s Coronavirus Job Retention Scheme for those staff placed on furlough during this difficult period. Despite the pressures we were experiencing, we continued to pay our furloughed staff 100% of their wages, topping up the funds received from the government scheme.

Colleagues from across the University, including our newly formed Adaptation & Renewal Team (ART), have been working tirelessly to manage and mitigate the impacts of Covid-19 on our students and our staff going forward. University finances form an important part of this work and we have taken forward a range of proposals that will enable us to make significant operational cost savings for the year ahead and on a sustainable basis thereafter. In addition, as the seriousness of the pandemic became clear we took the early decision to defer over £90m of planned capital expenditure that would have occurred in 2020/21 in order to preserve our existing cash balances which will be key as we navigate our way through the “new normal”.

Headline figures for the year

Despite the significant tests we have faced during the past year, our headline financial performance in 2019/20 was positive. The University’s total income grew by 2.2 per cent to over £1.12bn and our Operating Surplus was £48m or 4.2 per cent of total income. This is a good result when we consider the substantial impact Covid-19 has had on our income and expenditure in the year.

Operating Surplus is our key financial metric. It measures our ability to generate funds from our underlying operations that we can then reinvest back into University activities as well as an indication of future financial sustainability. In calculating our Operating Surplus figure we have removed non-cash accounting adjustments relating to our two main pension schemes. Our full financial results for 2019/20 are reviewed in more detail on pages 34 to 38, expanding on the table below.

 

Category 2020 total £m 2019 total £m
Income 1,125 1,102
Expenditure (1) (1,077) (1,027)
Exceptional item: Loan break costs - (14)
Operating surplus 48 61

Notes to table: 1. Excludes £144m decrease in USS provision in 2019/20 and £195m increase in USS provision in 2018/19 (both are non-cash movements)

Pensions

The sudden and significant shock to global investments in the first half of 2020 has undoubtedly added to the strain already faced by many pension funds across the economy. We provide a thorough account of the main developments on University pensions in the Financial Review. Our largest scheme, the Universities Superannuation Scheme (USS), agreed a new statement of contributions in September 2019 which reduced our future liabilities by £138m. In 2020 USS began the process for its triennial valuation and, as pensions is a long term issue, we remain committed to finding a long term, sustainable and affordable solution for the scheme. We also reported a non-cash actuarial loss of £53m this year, largely relating to our second biggest pension scheme. The Edinburgh University Staff Benefits Scheme (EUSBS) as a result of updated actuarial assumptions. As noted above both of these large movements for USS and EUSBS are non-cash in nature and are no reflection of the University’s operational financial performance.

Transforming our physical and digital Estates

Despite Scottish building sites and construction being suspended due to Covid-19, the implementation of the University’s Estates Capital Plan continues to progress, with projected spend to be £1.2bn over the next 10 years.

Capital investment in our physical estate in 2019/20 was £79m, with a total of five ambitious projects delivered. These include a

Health and Wellbeing Centre
The new Health and Wellbeing Centre for students

for our students, refurbishment at Edinburgh College of Art and an increased number of learning and teaching spaces.

Transforming our Professional Services

Our Service Excellence Programme was created to deliver change and improvement that makes it easier for our students to join and study with us, life easier for our staff and reduces costs so we can focus investment in the areas that will help us build our future.

Colleagues have been working hard to build new teams, services and ways of getting things done in HR and Finance. Most significantly we launched a new smart, web-based system that will enable these changes, helping us to deliver more user-friendly processes, consistent systems and smarter ways of working.

The programme’s work will also bring many improvements for students. From summer 2020, a new enquiry management service will provide a single point of contact and consistent service to all prospective students who contact us with an enquiry. For existing students, a new service called EdHelp will provide easy, coordinated access to information and services, online or on campus.

We’re incredibly proud of the work delivered to date by the Service Excellence Programme. What we’ve learned along the way has given us invaluable experience and insights which are shaping how we do things across our University for the better, now and in the future.

Transforming skills through Data-Driven Innovation

The Edinburgh and South East Scotland City Region Deal continues to go from strength to strength, securing £86.4m Government investment to date. Though still at a relatively early stage in its lifespan, the programme has already delivered notable achievements such as the announcement in January 2020 to partner with Legal & General on a £20m deal to launch the Advanced Care Research Centre, a seven-year multi-disciplinary research programme – the first of its kind in the UK.

More recently, we have become partners on a multi-disciplinary collaboration by winning a £23m bid to create an ambitious Global Open Finance Centre of Excellence in Edinburgh. The Centre will transform the sector, providing leadership, research and capability to seize opportunities and better understand the impacts of financial data for society, the economy and the environment. You can read about further progress in the Operational Review on pages 19 to 29.

Conclusion

The events of the past year have been remarkable, but we are a remarkable University. I remain confident that the we have maintained a solid financial platform to continue to enable our academic mission and to support our students, staff and communities as we work together to deliver our shared ambitions."