Financial Statements 2019/2020
This positive cash inflow is generated from the net of operating and financing activities in the year.
Cash in hand and short term deposit levels fluctuate throughout the year due to the timing of tuition fee and other receipts, operating and capital programme expenditures. The average monthly cash balance of the University in the year increased from £82.9m in 2018/19 to £88.6m this year, with the balance ranging from a minimum of £68.2m to a maximum of £110.6m over the year.
These cash in hand levels are in line with our target to maintain a minimum working capital cash level at two months of expenditure. The University recognises the importance of continuing to maintain this level of cash, particularly in the current climate of uncertainty. We have taken a number of measures to preserve our liquidity levels, including increased scrutiny over recruitment decisions, pausing capital expenditure where possible and careful management of budgets. In addition, the University is in regular discussion with its banks to review loan covenants and ensure we have ready access to funds. Our banks (Lloyds and Barclays) have worked collaboratively with us to mitigate the impact of COVID-19 and its implication on our financial performance and bank covenants. As a consequence of those discussions we have amended the bank covenants for 2019/20 and agreed in principle new covenants for 2020/21. The partnership and support from the Banks is very valuable to us.
Risks
The ongoing COVID-19 outbreak means that we are still operating with a high degree of uncertainty, both in the short and longer term. Since March 2020 we have mitigated the risks posed by the pandemic in a number of ways. These include adopting a continuum blended learning model for the 2020/21 year which is flexible enough to enable us to respond as conditions change, enacting plans to ensure costs are controlled and liquidity levels remain healthy, and extensive scenario planning that allows us to be agile and respond quickly to the ever evolving situation, depending on the position on student recruitment and retention in the coming year. It is however impossible to capture all the
potential longer term effects of the pandemic with any certainty, given its implications for all areas of the University’s activity, including technology, learning, data security and liquidity.
Even in its normal business, the University is exposed to a number of risks as a result of several external factors including UK policy decisions, our future relationship with the European Union and new levels of competition for student recruitment. As stated above, COVID-19 accentuates these risks in many ways.
Actions are being taken to mitigate those risks that threaten the achievement of the University’s strategic aims. The University has a well-established set of procedures to assess and manage risks at both the corporate and departmental level which includes the corporate risk register. In addition, we established an Incident Management team to manage the initial crisis caused by the pandemic and moved to a reconfigured governance model to plan for the return to campus and the new Academic year.
The key risks which could directly threaten financial sustainability are outlined below:
— Policy, Regulation and Compliance Higher Education continues to remain high on the Government agenda, and policy continues to change and evolve at pace. The impact of COVID-19 has accentuated this, with the University needing to respond over the summer promptly to both the initial introduction of a student number cap and the adjustment to this policy following the revision of the mechanism for awarding A-Levels. The sector is still awaiting the Government’s response to the Post-18 review of education and funding in 2019, which could impact on both policy and fee levels.
The University will continue to plan for a variety of scenarios and to proactively influence Government and other stakeholders’ policies. Our strategy seeks to mitigate for the uncertainty by looking to further diversify our income streams and ensuring we are pro-active in managing our cost base.
Middlesex University
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