Head of Corporate Services Overview
University Group operations recorded a consolidated deficit of $1.67 million in the year to 31 December, 2008, compared with a surplus of $0.05 million the previous year.
The fall in the consolidated surplus reflects the effects of a further $1.228 million loss from the commercialisation of intellectual property within the University's subsidiary, WaikatoLink Limited (2007: $0.73 million loss) and the losses arising from the University's associates – primarily the University of Waikato Research Trust, which had a first year operating loss of $0.90 million.
WaikatoLink Limited did not record any significant sales of intellectual property during 2008, but continued to build its portfolio of projects in preparation for sale. During the year, the subsidiary increased the value of its capitalized Development Projects by $2.4 million – which represents the investment made in preparing intellectual property for sale.
The operating environment continues to be challenging, with the Group having difficulty growing revenue without significantly increasing its expenditure. Total consolidated revenue increased by 2.7 percent in 2008, mostly due to $6m increase in the University's Government Grants received under the new funding regime. However Group labour costs have increased by 4.7 percent over the year, reflecting the buoyant labour market, and offsetting the revenue growth.
For the University only, a surplus of $1.22 million was recorded as compared to a $11.67 million deficit recorded in 2007. This deficit was due to the University transferring accumulated research funds of $14.5 million to its newly formed controlled Trust, the University of Waikato Research Trust. The Trust was created to provide funding for the advancement of education and academic research at the University. The funds transferred represent accumulated surpluses generated from externally funded research and have been previously committed to fund continuing research activities. The cost of the transfer was eliminated on consolidation. For 2008, the Trust recorded a deficit of $0.90 million, as the University funded research activities that would have previously been funded out of the University directly.
The University's surplus of $1.22 million is $4.39 million less than budget and $1.65 million less than the previous year. This represents 0.6 percent of total revenue and is less than the 3.5 percent target set in the University Strategic Plan.
The University's revenue was of $190.55 million was $6.25 million or 3.3 percent higher than last year. It exceeded budget by $3.48 million or 1.86 percent, in spite of a further 9.7 percent decrease in international student enrolments from those budgeted. Offsetting this decrease was growth in Government funding through the new Tertiary Education Commission funding regime of $3.84 million and an increase in domestic tuition fees of $1.56 million. Domestic student enrolments were slightly down by 1.1 percent on budget, but encouragingly new students increased by 3.3 percent. The increase in new domestic students tuition fees was a result of students enrolling in higher tuition fee courses than that budgeted.
Research revenue of $21.89 million exceeded budget by 6.0 percent but declined by 6.0 percent from the previous year. This is the first decrease in research income since 2001 and reflects the completion of large research projects in 2008 and the decrease in new projects. The balance of research income received in advance as at 31 December 2008 is $0.77 million higher than the previous year and over the last five years, research revenue has increased by 22.1 percent, reflecting the University's commitment to being a research led University and its commitment to research excellence.
Overall, University labour costs were on budget, but were 2.6 percent higher than 2007. This reflects the increases in salaries and wages of approximately 4 percent off set by certain labour costs incurred by the University of Waikato Research Trust on internal research activities.
Other operating costs increased by $4.71 million or 8.26 percent in 2008 from 2007 and by $7.94 million (14.76 percent) against budget. With inflation peaking at 5.0 percent during 2008 and the University's costs relatively fixed, the University was unable to decrease its operating costs from 2007 and, in fact increased its expenditure as it worked to grow revenue. The University commenced a 3 year programme at the end of 2008 to reprioritize its activities and to review its operations to ensure the University's cost structures match its revenue streams.
The University again generated strong operating cash flows, recording net cash flows from operations of $23.95 million – down slightly by $0.6 million (or 2.4 percent) from 2007. These cash flows were reinvested back into the University's Campus and resources, with the University spending $24.36 million on capital expenditure.
In 2007, the University launched a significant capital works programme, beginning with the redevelopment of the University's retail area and construction of a new student centre, located at the centre of the campus. During 2008, the majority of the retail redevelopment was completed and the preparation of the student centre began with the University spending $7.01 million on these two projects. The retail development is due to be completed in March 2009 and the student centre major projects is planned to be completed in stages by 2011.
Raymond McNickle
Head of Corporate Services
