The consolidated 2018 net operating result for The University of Western Australia and its subsidiaries was $29.1 million, representing a margin of 3.1 per cent.
The Australian university sector has entered a period of government-led funding reductions, with a combination of State and Federal Government policy changes directly affecting the financial health of the sector and, with that, the University.
At a federal level, these manifest themselves via funding caps associated with Commonwealth-supported tuition fees, as well as a Commonwealth funding reduction to major research funding councils. These measures coincide with State Government immigration policy changes regarding international student migration, along with a legislated increase in payroll taxes. These measures affected the University in 2018 and will continue to do so in future years.
As a community-based, not-for-profit organisation, the University's ability to directly invest in teaching, research and community programs is diminished by these changes.
Despite these headwinds, the University is continuing its strategy to diversify its sources of income, increase its appeal to students and challenge non-essential costs to continue investing in world-leading education and research priorities.
In addition to the aforementioned government policy pressures, the 2018 net result of 3.1 per cent was also diluted by volatility within global investment markets associated with the University's investment portfolio. While continuing to contribute positively to the University's net result, the investments underperformed their long-term benchmark in 2018.
Within the University's 2018 net investment return of $28.3 million, a new accounting standard, AASB 9 Financial Instruments, added $7.1 million to the net result, predominantly from the University's underlying investment in Education Australia Limited. AASB 9 permits entities holding unlisted equity assets to record their valuation movements through profit and loss. The University has adopted this approach as it aligns with its treatment of other financial assets held. Further detail on the impact on AASB 9 can be found in notes 1.4, 6.2 and 6.6 of the annual financial statements.
As expected, and in line with the second deed of gift, the University did not receive any further payment during the year from the Minderoo Foundation associated with the Forrest Research Foundation (2017, $27 million).
A summary of key movements in the University's net result between 2017 and 2018 is shown below.
Changes in net result
|2017 net result||81.8|
|Forrest Research Foundation||(27.0)|
|Australian Government grants||(7.7)|
|State Government payroll tax||(1.2)|
|2018 net result||29.1|
- Income down $39.1m on FY17
- Net result down $52.7m on FY17
- Underlying result down $7.2m on FY17
The University monitors its financial performance using a financial measure referred to as the ‘underlying result', which is widely used by the Australian Group of Eight universities as a measure of a university's capacity to operate sustainably. The underlying result adjusts the University's net result for items that are one-off or restricted in nature, such as research grants received where the expenditure will occur in future years.
The table below shows a reconciliation from net result to underlying result.
Reconciliation from net result to underlying result
|2018 $m||2017 $m||2016 $m||2015 $m||2014 $m||2013 $m||2012 $m||2011 $m|
|Consolidated operating result||29.1||81.8||25.9||33.1||91.7||124.8||102.2||50.0|
|University operating result||28.6||81.4||25.8||32.4||91.2||124.8||101.8||50.0|
|Endowment and gifted funds||18.7||(84.2)||(42.5)||(51.2)||(42.3)||(89.9)||(63.1)||(7.5)|
|Research and other specific grants||(12.3)||14.3||(4.4)||2.5||(2.5)||(8.0)||(7.7)||(16.8)|
The University has a strong financial balance sheet, with net assets of $1.99 billion. Capital expenditure was $71.4 million in the year, compared with $86.5 million in 2017. The majority of capital expenditure relates to our capital program commitments associated with modernising UWA's campus which will be disclosed separately in the Annual Report.
The University operates a debt facility with the Western Australian Treasury Corporation (WATC). As at December 2018, the University's total borrowings were $142.6 million, a reduction of $3.2 million in the year. Total debt facilities approved between the University and WATC are $210 million. The facility is used to fund long-term capital program works.
The Financial statements for the University in 2018
Click on the Financial statements below to download the Excel document.