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Financial Performance

Income and Expentiture

Results for the Year 2015/16
£000
2014/15
£000
Variance
£000

Income

297,979 277,831 20,145
Expenditure (269,697) (267,825) (1,872)
Surplus before gains/(losses) 28,279 10,006 18,273
Gain on disposal of fixed assets 10,360 8,560 1,800
Share of operating deficit in joint venture (31) (5) (26)
Share of operating surplus in associate 14 19 (5)
Surplus before tax 38,622 18,580 20,042

Income - Year on year growth £20.1m (7.3%)

Growth in tuition fee income of £23.5m, 11.2%, in the year to £233.0m, recognises the popularity of the University in the student recruitment market. The material increase in income reflects both the shift in funding from Funding Body grants to tuition fee, and strong demand.

The reduction in funding body grants by £6.6m, 20.3%, to £26.1m, is consistent with the sector trends, and demonstrates the shift in funding to tuition fees that has been taking place since 2012. The growth in other income by £3.0m, 10.5%, is primarily a result of an increase in residences income.

Research grants and contract income (excluding Research and Development Expenditure Credit (RDEC)) shows a year-on-year improvement of £0.7m, (12.6%), to £6.1m in 2015/16. While the increase is largely driven by an uplift in the volume of research grants, the potential for further growth will be enabled by ongoing investment in recruiting high-performing research staff, enhancing the quality and number of researchers at the University.

Income analysis

 9% Funding body grants

 11% Other income

 2% Research grants and contracts

 78% Tuition Fees and education contracts

Expenditure Analysis

 5% Depreciation

 33% Other operating expenses 0.9%

 2% Interest and other finance costs

 60% Staff costs

Expenditure - Year on year growth £1.9m (0.7%)

Staff costs of £160.3m in the year (an increase of £8.0m year on year) equates to 53.8% of income, compared with 54.8% in the prior year. The increase in employment costs being the result of the University’s continued investment in student-facing academic and high-profile research staff, and pay inflation arising from national pay settlements and pension contribution changes.

Other Operating Expenses includes internally funded bursaries and the University’s Student Support Package, and totals £11.2m in the 2015/16 financial year. This sector-leading Student Support Package is awarded to provide widening access and participation opportunities to students from lower income families.

Additional planned investment in IT software and hardware of £1.2m compared to 2014/15 was allocated to help transform the facilities available for students and staff. Maintenance cost increased by £1.3m on the prior year, helping to ensure that the estate is continuing to adapt to accommodate the future needs of students and staff, whilst improving the environmental sustainability and impact of the University. 

Other gains

The sale of our Didsbury site, as part of the University’s campus consolidation strategy, has resulted in £10.4m of exceptional profit for the University, and generated initial cash receipts of £4.6m in 2015/16. An anticipated £14.8m (£9.9m for part A, and £4.9m for the subsequent part B of the development) of further staged payments are planned to follow over the next three years, as the development of the Didsbury site progresses. This will help to fund the next phase of our capital and estate investment.

Fixed assets - Year-on-year reduction £10.1m (2.2%)

During the year the University acquired the Platt Lane sporting facility for £3.1m, whilst disposing of part of the Didsbury campus (£4.0m), and accelerating the depreciation on some Cheshire Campus residences facilities (£1.7m) which are no longer in use by the University.

The Estates Strategy, and underpinning masterplan, is now in the process of being updated to ensure alignment with the emerging academic priorities established by the new Strategic Framework. The University is particularly conscious of the need for its built environment to remain fit for purpose, affordable and adaptive to the University’s future needs, and within the context of a potentially fast changing HE sector landscape.

A finalised Estates Masterplan programme to 2026 (informed by the current review and update of the Estates Strategy) will progress through the University’s Governance process, with Board consideration anticipated late Autumn 2016. A funding/ financing strategy is being developed in parallel over the next six months. Much will depend upon the scale, pace and mix of Estate investment activity in determining the optimal funding strategy for the University. However, the University’s financial strength ensures that there is a good range of options available to fully fund, without taking undue and significant risk.

Trade and other receivables - Year-on-year growth £9.9m (98.0%)

Payment for the sale of the Didsbury part A site is received in instalments, with an amount of £9.9m recognised within Trade and other receivables to reflect the future instalments associated with the ongoing development of the Didsbury site.

Total reserves

Total reserves continue to grow, currently at £378.9m (2014/15: £359.4m), attesting to solid financial health the University has generated and maintained year on year. Coupling the reserve position, positive net cash and healthy surplus demonstrates the financially sustainable way in which the University is managed and this will allow continued investment in students, staff and facilities in support of its strategic priorities and goals and its continued development.  

Net cash

The University aims to generate healthy operating cash flow levels (2015/16: £46.5m) to fund the future long-term investments, whilst still maintaining financial KPTs.

The graph below charts net liquidity days over the past 6 years; a period in which 87.7% of a £350m capital programme was self-funded. Net liquidity days has increased from 143 days in 2014/15 to 199 days in 2015/16.

Cash resources (investments and cash and cash equivalents) stand at a healthy £139.1m at 31 July 2016, with year-on-year growth driven in large part by the strong operating performance and capital receipts. External borrowing has reduced by £2.8m year on year as a result of scheduled capital repayments.

The graph below charts debt levels relative to cash over the past 6 years and demonstrates that the University is in positive net funds throughout the period.  

IAS 19 pension liability

The valuation of the Greater Manchester Pension Fund on an IAS 19 accounting basis as at 31 July 2016 has given rise to a net deficit of £132.9m (2014/15 deficit £107.8m), reflecting a year-on-year movement of £25.1m. This valuation movement reflects the inherent volatility of the pension valuation, and the significant sensitivities around key assumptions; in particular, the negative movement in 2014/15 primarily reflects a lower discount rate that has been applied to determine the present value of Pension liabilities.

A summary of the key IAS 19 sensitivities is as follows:

Change in assumption 31 July 2016 Approximate % increase to liability Approximate monetary value £m
0.5% decrease in the real discount rate 11% 48,173
1% increase in member life expectancy 3% 12,872
0.5% increase in salary increase rate 3% 14,078
0.5% increase in the pension increase rate 8% 33,036