9. Financial Overview

University Group operations recorded a consolidated surplus of $8.85 million in the year to 31 December 2010, compared with a surplus of $10.74 million in the previous year.

The continued strong financial performance of the University Group operations this year is largely due to the University receiving increased Government funding for equivalent full time students of $2.97 million and maintaining student tuition fees even though total equivalent full time student numbers slightly decreased by 1.80 percent. These increases were offset by deficit of $1.57 million recorded by University subsidiary WaikatoLink Limited, and a fall in surplus of $1.75 million in the University of Waikato Research Trust.

The deficit in WaikatoLink Limited was largely due to a write-down of $0.9 million in the carrying value for intellectual property being developed for commercialisation. WaikatoLink Limited did not record any significant sales of intellectual property during 2010, but continued to develop its portfolio of projects in preparation for sale.

The University of Waikato Research Trust recorded a drop in revenue of $1.75 million in 2010 as a result of significant funds being transferred to the Trust in 2009 after the completion of a number of large research projects within the University. These transfers were not repeated in 2010.

Overall, the University Group achieved revenue growth of 2.3 percent which saw revenue push through the $210 million mark for the first time - recording total revenue of $211.61 million, up $4.67 million from $206.94 million on 2009. The University Group has now recorded continuous revenue growth for over twenty years.

The decrease in Government funded students of 154 equivalent full time students to 8,546 reflects the University commitment to adhering to the funding caps set by Government and as a result limiting entry places in July 2010. However the level of domestic students enrolled in the University not earning Government funding decreased from 6 percent in 2009 to 2 percent in 2010. Numbers of full cost international students remained static in 2010 as compared to 2009.

Research income decreased slightly by $0.34 million to $27.46 million, reflecting a year of consolidation after significant growth in prior years.

The University’s revenue of $207.93 million was $3.57 million or 1.7 percent higher than last year. It exceeded budget by $6.69 million or 3.32 percent, primarily driven by increased Government funding and student tuition fees as mentioned above.

The operating environment continues to be challenging, and the University has put in significant effort to control costs with operating costs 2.5 percent lower in 2010 than 2009. However the University only grew revenue, which increased by 1.7 percent, by incurring an increase in expenditure of 1.6 percent. The most significant cost increase was general staff employee benefit expenses which increased by $2.97m or 6.8 percent. Academic staff employee benefit expenses increased by only 1.32 percent or $0.96 million.

The University only surplus of $9.37 million is $1.80 million more than budget and $0.40 million more than the previous year. This represents a return of 4.51 percent on total revenue (compared with 4.39 percent in 2009) and exceeds the 3.5 percent target set in the University Strategic Plan. It is also well inside the guidelines of 3.0 - 5.0 percent promulgated by the Tertiary Education Commission. The University is now two years into its three year programme to reprioritise its activities and to review its operations to ensure the University’s cost structures match its revenue streams. It is pleasing to see that the University is producing solid financial results year after year. However there is still work to do to ensure that the University has the mechanisms in place to consistently produce sufficient surpluses to ensure its long term financial health.

The University Group again generated strong operating cash flows, recording net cash flows from operations of $30.90 million - up by $2.85 million (or 10.14 percent) from 2009. These cash flows were reinvested back into the University's campus and resources, with the University spending $24.67 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. In March 2009, the retail development was completed on time and within budget. Construction commenced on the student centre at the beginning of 2009 and this development will be completed in stages by September 2011.

The University reviewed its fair value of its building and infrastructure assets at year end however it was considered that there was no significant movement in the valuations of these assets and as a result no increase to the carrying value of these assets. In 2009 the carrying value of the building and infrastructure assets was increased by $22.22 million.

Andrew McKinnon
Chief Financial Officer

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