University of Canterbury not out of woods yet

University of Canterbury not out of woods yet

February 25, 2015

The University of Canterbury is not out of the woods yet despite some encouraging financial progress and it remains on track for a return to surplus by 2019.

The university’s audited annual result for the year to December 31, 2014 was a $433.3 million surplus. This included $370.3 million from the earthquake insurance funded remediation and the final settlement and a net $66.6 million net gain attributable to further reviews of impairments and revaluations of buildings.

The result compares to the 2013 surplus of $76.3 million. The University’s consolidated business as usual result from its teaching and academic activities was a deficit of $3.3 million. This compares to the budgeted deficit of $10.5 million, and a 2013 comparable deficit of $3 million.

Vice-Chancellor Dr Rod Carr says the University still has work to do to return to sustainable operating surpluses but it is clear significant progress has been made in growing revenues and reducing and containing operating costs.

“We still have a long way to go as we seek to be on top of ongoing financial sustainability. This is an extra-ordinary result almost entirely due to the insurance settlement which goes directly toward remediating all our buildings on campus over the coming years.

“We are putting considerable effort into increasing student numbers, though the pipeline effect of lower student numbers in previous years continues to have an adverse impact on total enrolments.

“It has been helpful that the Government has confirmed its commitment in a contracted funding agreement to provide up to $260 million in support of two new capital initiatives in the building of the new Rutherford Science and Innovation Centre, and the extensive refurbishment and partial rebuild of the College of Engineering under the Canterbury Engineering the Future project.

“Under this contractual agreement, the Government has now provided $110 million in the form of a capital contribution to the University’s equity, with a further $100 million expected in late 2015 and up to $50 million if required in early 2019. The Government also confirmed that the Student Achievement Component of its annual funding will continue at pre-quake levels to 2018. This is subject to a two yearly review.

“We are grateful for the assistance the University continues to receive from Government and, through that support, its acknowledgement of the role the University plays in Christchurch and the economy, as one of the region’s largest employers,” Dr Carr says.

The University’s working capital has increased significantly over the last year, due mainly to the increase in receivables to reflect the insurance settlement and the receipt in 2014 of the first $100 million of the Government’s contracted financial support.

Without these amounts, working capital is largely the same as in prior years. Net operating cash flow is $38.1 million compared with $24.9 million in 2013, due mostly to increasing tuition fee receipts and efforts to keep expenditure restrained. Capital expenditure was $129.8 million of which $66.7 million related to earthquake remediation works and $25.8 million on the new engineering and science precinct projects.

After allowing for operating results, Government equity contributions, building and other asset revaluations and impairments and recognition of insurance proceeds, the total consolidated equity of the university has increased by $560.3 million year on year to $1.2 billion as at the end of last year.

The University has adopted a budget for 2015 that shows an operating deficit of $9.5 million before the impact of any further insurance proceeds, revaluations and impairment provisions, and budgeted capital expenditure of $224.4 million, including the $115.5 million of capital commitments disclosed in the financial statements as at 31 December 2014. The university is confident that it can absorb the operating loss as it rebuilds student numbers and associated tuition revenue.

The University is still ranked among the top three percent of universities in the world according to the QS world rankings. More than 14,500 students, including more than 1200 international students from more than 80 countries studied at the university last year with an increase in first year domestic and first year international students compared to the previous year.

The University had the largest number of postgraduate students and the largest engineering intermediate class in its history and a record number of new to University of Canterbury students from Auckland in 2014.

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