The financial result for 2014 reflects a surplus consistent with the University's long term targets. During the year the University's financial position was further bolstered by strategic capital investments, primarily in new student accommodation facilities on the Callaghan campus.
Unless stated otherwise, references to the University in this section are representative of the Consolidated Group's results described in the full financial statements.
In 2014 government contributions to the University decreased by $4.0m as part of a government plan to drive cost efficiency across the higher education sector. After adjusting for the one-off impact of capital grants in 2013 ($26.4m), total income growth in 2014 was steady at 3.3 per cent (2013: 3.3 per cent).
The University voluntarily wound up one of its controlled entities (UoN Services Limited) and increased its capitalisation threshold from $1,000 to $5,000. The new threshold aligns the University with others in the sector, making benchmark comparisons with our peers more meaningful. The change resulted in a one-off loss on disposal of fixed assets ($7.8m) in 2014.
Expenditure controls remained strong in 2014 with an average increase of 2.0 per cent across all categories of expense, compared with an increase of 4.7 per cent between 2012 and 2013.
The University continues to maintain a strong asset base to support current and future operations. Net assets increased by $60.5m from $1,132.3m in 2013 to $1,192.8m at 31 December 2014. This increase includes the annual revaluation adjustment for the University's land and buildings, which increased net assets by $12.3m (2013: $22.4m). The increase in net assets also includes a valuation adjustment of $7.2m to financial assets at the year end (2013: $17.7m).
At 31 December 2014 the University had a positive liquidity ratio (current assets divided by current liabilities) of 2.5 (2013: 2.3). The University's higher current assets balance in 2014 ($229.9m compared with $186.0m in 2013) reflects the need for greater liquidity to fund capital projects in the first quarter of 2015 and the timing of the rollover of investments.
The University continues to invest for the future and maintained a tangible asset replacement ratio (capital expenditure divided by depreciation) of 2.7 (2013: 2.6).
The University's operating activities generated cash of $90.4m during 2014 (2013: $86.3m). There was a significant cash investment in property, plant and equipment again in 2014, with a cash outlay of $93.7m (2013: $93.8m). These funds were used to maintain existing infrastructure and to build new student accommodation facilities which added an extra 778 beds, thereby doubling on-campus accommodation. The University's cash and cash equivalents at the end of the year increased by $6.6m to $19.3m. The increase in the closing cash position was necessary to provide funds for the final payments for the student accommodation project in January 2015.
The Finance Plan strategic priorities for 2014 were:
We continued to invest in the renewal of existing facilities and targeted strategic investment in Newcastle Institute for Energy and Resources (NIER), the Medical Sciences Building and Tamworth Education Centre (TEC). The NeW Space project will support the revitalisation of Newcastle city centre and initial site preparation work commenced in 2014 for this state-of-the-art, collaborative facility.
As part of our commitment to building capability, an external review of the Finance function was completed in April 2014 and resulted in the introduction of a strategic program of realignment to enable Financial Services to respond to the challenges of an ever-changing higher education environment. Several financial management initiatives flowed from this review:
- strengthening the budget framework We implemented the first stage of a dynamic budgeting model to provide flexible forecasting solutions. This incorporates a revised budget approach to provide transparency, consultation and partnering with the University's Faculties and Divisions.
- managing salary expenditure A staff profile framework was introduced across the principal operating activities of the University that supports improved salary expenditure management.
- access to financial information for decision-making Understanding the financial impacts of the rapidly changing higher education environment continues to be a key focus for Financial Services. Preparedness to respond is vital for ongoing sustainability and in 2014 management examined a range of scenarios and consequent operational and structural actions.
Leveraging our innovative research findings to deliver valuable solutions to the community was a major focus area in 2014. Revenue from consultancies and contracts grew by 11.1 per cent to $78.2m in 2014 (2013: decrease of 7.5 per cent). The ability to source a higher proportion of funding from industry is evidence of our closer relationships with industry, business and the community in 2014.
Planned activities for the year ahead include:
- reviewing key drivers of our financial performance, including pricing and program viability, and re-examining our cost base to ensure ongoing financial sustainability
- implementing the second phase of the budget model which aims to incentivise long-term performance and ensure financial accountability and ongoing financial sustainability
- further refining the Long Term Financial Plan
- continuing to invest in core education and research strategies that support and improve the student experience
- establishing alternative sustainable revenue streams.