Tuesday, 25 February 2014 3:25pm
The University achieved an operating surplus of $36.5 million for the year ended 31 December 2013, largely due to three one-off items.
Chief Operating Officer John Patrick says he is pleased with this end-of-year result, which was announced at the University Council meeting today.
“Although it was largely three one-off items, totalling $12.3 million, that lifted the surplus above the budget, it was nevertheless pleasing to see the success of careful budget management by staff. This meant that most of the University’s divisions and departments were able to finish the year within their budgets,” he says.
The most significant one-off item, at almost $8 million, was the result of reaching agreement with the University’s insurers on the final costs of the repairs to the medical school buildings in Christchurch. These buildings were heavily damaged in the devastating 2011 earthquake, Mr Patrick says.
“The repairs were extensive and although they took place over several years, the final costs were not available to the insurers until late in 2013 and, while the recovery was included in the surplus figure for the year, the actual cash will not be received until early 2014.”
Mr Patrick says the second one-off item was thanks to “stunning success” in the market by Pacific Edge Limited, a publicly-listed biotechnology company, which originated at the University of Otago.
“The University enjoyed unrealised gains of almost $2.5 million from the increase in the value of its shareholding at year end,” he says.
A further $1.9 million was added to the surplus following an unexpected reduction in the estimated cost of future liabilities for staff retiring gratuities, long service leave and sick leave. This liability, which is calculated annually, can fluctuate significantly from year to year due to movements in interest rates which are used by actuaries to discount future liability values to present day ones.
“Despite these three items being non-cash in nature, it was also pleasing to achieve cash-flows from operations that were very close to budget,” he says.
“Maintaining strong cash-flows is the key to funding investment in new equipment and campus infrastructure, particularly the major building projects on the University’s Priority Development Plan, such as the expansion and renovation of the Dental School, which is in the planning stages and will be the single largest project ever undertaken by this University.”
The financial position of the University continues to be strong, with equity now totalling just over $1.2 billion and no external debt.
“The University community has worked hard to live within its means, and generate economies, during what has been a very difficult period of global financial instability,” says Mr Patrick.
“The excellent result for 2013, even after allowing for the one-off items described above, is testament to the prudent financial management of a University community committed to excellent outcomes.”
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