Financial review
Finance foreword
This financial year has been all about responsiveness and resilience. We left 2019 excited about our continued growth and the opportunities in our new academic strategy. In January 2020 our world leading epidemiologists were starting to analyse the spread of a new virus; by March 2020 we had just a few weeks to move the whole university online as we closed all our campuses except for our COVID-19 research. It is a testament to everyone at Imperial how quickly and effectively this transition was managed.
It is also during this year that our financial strength, with our large cash reserves, and access to ample credit, allowed us to act calmly and thoughtfully.
The pandemic also came as we were approaching the end of a major phase of capital expenditure that stretched over many years; work on most large projects was already completed, with the final ones completing soon after restrictions eased. Thus, we have not had to halt work on projects because of financial concerns and there has been no significant financial impact from delaying commitments to new projects.
This resilience and responsiveness is apparent in our total net comprehensive income for the year, which was at the top end of our range of forecasts we developed back in March as we considered the possible impact of the pandemic. This result was boosted by a large movement in the pension provision and a gain on the sale of a long-held asset that had been recorded at depreciated cost. If not for the movement in pension provision, this year we would have recognised our first operating deficit in the last five years.
Management focuses more on net cash generation as a guide to our financial performance in a year and again here the out-turn exceeded our most probable expectation back in March. Although there was an inevitable dip in cash receipts from accommodation and use of our facilities for events or by external parties, our core areas of tuition fee income and research funding were not adversely impacted.
Tuition fees are mainly collected in the early part of the academic year and research funders continued to advance cash even though we could not always proceed at the rate originally planned. A lot of the apparent increase in cash generated is timing-related, with working capital increasing by around £37 million.
Although the financial performance last year was strong given the circumstances, this is no time for complacency. A significant proportion of the other operating expenses reduction in 2019–20 represented deferral of spend, not efficiency saving. We have needed to invest ahead of the start of the new academic year to ensure we are ready to deliver multi-mode teaching and are able to welcome back students and staff to campus in a safe way.
Our scenario planning over the last six months has reminded us of the scale of the exposure we have to international students in our funding model and that we have yet to find a sustainable long-term solution to funding our research activity that does not rely on their contribution; we continue to engage with government on this point.
Finding a sustainable long-term solution to USS pensions is another challenge that will come back this year and next year we face the further uncertainty caused by Brexit. It seems inevitable that 2020–21 will present many operational challenges too as we respond to the developments in the ongoing situation with respect to COVID-19.
There are definitely opportunities as well as risks on the horizon, and our new academic strategy sees us well placed to embrace these. It is important that we continue to retain the financial flexibility to respond when the time is right.
Mr Muir Sanderson
Chief Financial Officer