FINANCIAL REVIEW FOR YEAR ENDED 31 JULY 2021
(continued)
NET ASSETS
At 31 July 2021, total net assets were £40.2m, an increase of £6.7m (20.0%) from the previous year’s figure of £33.5m which in part reflects further reductions (£5.0m) in long term bank loan and finance lease debt.
Our net current assets grew by 14.0% (2020: 6.6%) to £82.4m due to increased cash and current investment balances combined with reductions in creditors levels following careful cost management as we emerged from the pandemic, and debt balances at levels that continue to reflect effective credit control measures in the year. The 31 July 2021 cash and current investment balances represented net liquidity of 191 days (2020: 178 days) to meet ongoing short-term obligations.
The provision to fund the deficit in the LGPS remains high but unchanged from last year at £163.5m. Although this provision comprises a significant share (55.2%) of the total balance sheet group liabilities at 31 July 2021, the LGPS is completely independent of the Group, which has no control over its policies or decisions (note 31).
The pension provision reflects the assumptions used by the LGPS actuary at 31 July 2021. Since 31 July 2020 rising investment returns on the fund’s assets combined with an improved net discount rate of 1.6% (1.4% at 31 July 2020) based on rising AA Corporate bond yields have offset the rises in the projected life expectancy of current and future pensioners and increased inflation expectation assumptions.
While these re-measurements have served to increase the defined benefit obligations of the Scheme by £52.3m they were offset entirely by the same increase in the Scheme assets. This is positive news as greater reliance is being placed on asset returns to fund the obligations; historically the balance sheet liability and the cash contributions available to fund the pension deficit have diverged. Overall these changed actuarial assumptions and return on the fund result in a £9.9m positive movement in the statement of other comprehensive income.
CASH FLOWS, FINANCING AND TREASURY MANAGEMENT
During the year the University generated a net positive cash inflow of £22.4m from its operating activities before external financing costs and investments. This was utilised in part to make a further investment of £3.7m in our estates capital, service repayments on the bank loans and interest costs of £7.8m, and to set aside £7.5m in short term deposits, leaving a net cash increase for the year of £4.1m.
Total Group cash in hand (including cash equivalents, note 24) and current investments (note 19) increased by £11.5m at the end of the financial year to £110.7m. Cash equivalents are short term deposits held with Lloyds Bank on fixed short term (less than 3 months maturity) and AAA credit rated cash investment funds managed by Royal London Asset Management. Current investments are deposits held with Lloyds and Barclays Banks with an overall term of more than three months maturity.
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Middlesex University
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