We continue to be focussed on delivering our University Strategy 2021-26 providing a high-quality educational experience, excellent research and supporting the health and wellbeing of students, staff and other members of our community on whose efforts our success is built. Our performance in national league tables, where we are in the top 10 for all the four major tables, and our significant improvement in global rankings, up 18 places to 132nd in the QS ranking, indicate some success to date.

Our financial strategy is based on generating sufficient operating cashflow to fund the investment in people and infrastructure that our strategy describes. Council and the Executive Board monitor financial performance by reference to our internal measure of surplus, Historic Cost Operating Surplus (HCOS). This provides a more meaningful measure of our operating performance and excludes the material valuation adjustments which are shown in the Statement of Comprehensive Income (SOCI). Further explanation and a detailed reconciliation of the deficit shown in the SOCI to HCOS is included below.

In 2024-25, our income from teaching and accommodation grew, driven by our growth in student numbers, both home and overseas, in what continues to be an increasingly competitive market. Expenditure also increased, albeit at a slower rate than income. Overall, there was an increase in surplus to £21.3m from £9.8m in the previous year (on the internal HCOS basis). To deliver our financial strategy we established a 5% Operating Surplus to Income target in 2023 and have achieved that target in 2024-25 (5.1%), two years earlier than planned. The financial environment for the sector is increasingly challenging year on year. Inflationary pressures have continued to impact upon us. Our utilities costs remain high, and we continue to see increases in inflation across the range of product categories that we buy. Similarly, inflation continues to add to the pressure for higher pay. Conversely, the majority of our debt is fixed so our interest cost is not greatly affected by the increase in interest rates, and we have been able to benefit from the higher rates available on cash deposits.

We continue to retain significant cash and investment balances in preparation for supporting future investments in our Strategy and for the refurbishment of the original 1960s and 1970s buildings on campus. Operating cash inflows were £48.4m (2023-24 £40.4m) and we spent £40.5m (2023-24 £58.3m) on capital investments, including the acquisition of a leasehold interest in our John Wood Court student residences.

HCOS is one of seven Key Performance Indicators that we use to measure our financial performance and sustainability. This report describes the seven Key Performance Indicators (KPIs) and then describes the Income, Expenditure and Balance Sheet data that the KPIs are drawn from. These KPIs were approved by Council in May 2019. The report concludes with an outlook for the future.

Key financial performance indicators

Historic Cost Operating Surplus/total income

The SOCI shows a deficit before gains and losses of £18.5m (2023-24 £75.2m surplus).

The table shows a reconciliation between this figure and the HCOS.

KPI - 1. HCOS/Total income

Our HCOS surplus is disclosed in the table above as the best measure of our ability to generate cash and as such represents the level of surplus required to generate cash to fund our capital expenditure programme and meet loan payments.

Improved student recruitment, other income and continuing cost control led to an improved surplus of £21.3m, 5.1% of income.

A commentary on income and expenditure is included later in this review.

HCOS takes the income and expenditure values recorded in the SOCI and adjusts them for valuation or material one-off items. These items are either infrequent, for example, capital grants or subject to market valuations, for example, pension valuations and so distort the underlying recurrent operating activity. Removing these items allows us to set and monitor a budget surplus at a consistent percentage of income. Including these items in the budgeted surplus would mean that as a percentage of income our target surplus could be materially different year on year and would make consistent reporting of the surplus challenging.

The rationale for these adjustments is described further below.

KPI - 2. Adjusted EBITDA

Adjusted EBITDA is widely used by the sector and provides a sector comparison of operating performance. The metric is earnings before interest, tax, depreciation, and amortisation, it is also adjusted to remove pension provision. EBITDA for 2024-25 is 15.5% of income (2023-24 12.0%). This is in line with previous years except 2021-22, when the IAAPS capital grant increased income, on a one-off basis.

KPI - 3. Ratio of interest payable to income

Interest payable to income is the metric used to show how much of our income is spent on paying the interest on our loans. Similar measures are used by some of our lenders to assess our financial performance. In 2024-25 our result was 2.1% (2023-24 2.2%). The majority of our borrowing is at fixed rates so our additional income created an improvement in cover.

KPI - 4. Net debt to net assets – Gearing - Historic cost basis

Our gearing (on a historic cost basis) has decreased to 0.8% this year (2023-24 2.3%).

Net Debt to Net Assets is a measure to show the extent to which our assets are financed by debt. Whilst low compared to many sectors we have a high gross debt value relative to the HE sector. This reflects our financial strategy to borrow to fund investment whilst maintaining a high level of liquidity. Gearing is also a metric monitored by lenders and whilst the definition of debt varies our financial covenant gearing levels are well below the 50% threshold set by lenders.

In 2024-25 our Net Debt (on a historic cost basis) fell by £15.3m to £9.9m (2023-24 £25.2m), as a result of our strong cash generation in the year.

KPI - 5. Ratio of current assets to current liabilities

The ratio of current assets to current liabilities is known as the current ratio. This shows our ability to cover our current liabilities by current assets. Our financial strategy is to maintain high levels of liquidity and we have borrowed in advance of capital expenditure, so the ratio is higher than many in the sector. The ratio has increased slightly in the year at 3.1:1 (2023-24 2.8:1). As we invest in refurbishing our estate, we would expect this ratio as well as our Net Liquidity Days (KPI 7) to reduce.

KPI 6. Net cash inflow from operating activities as % of income

This measure shows the cash flow from our ongoing regular activities as a proportion of total income. It does not include long-term capital expenditure or investment returns.It can be used to determine our ability to self-finance new investments or reduce debt. Operating cash inflow is £48.4m which represents 11.6% of income (2024-25 £40.4m and 10.3%). The increase from last year is due to the improved HCOS result.

KPI 7. Net liquidity days

This metric indicates the number of days that we could operate without generating any cash inflows by showing the ratio of expenditure to income expressed in days. Our strategy is to retain high levels of liquidity and as a result our ratio is 234 days (2023-24 282 days). Last year’s figure included the USS credit in expenditure.

Income

Total income increased by £26.5m (6.8%) from £391.2m to £417.7m.

Tuition fee income increased by 8.7% to £238.5m. This was mainly due to an increase in full time home (up by £7.7m) and overseas students (up by £11.4m). Tuition fee income represents 57% of total income.

Total funding body grants increased from £41.2m to £43.7m. The increase was derived from specific grants with recurrent grants unchanged. Research grants were unchanged at £50.6m (2023-24 £50.6m).

Other income at £71.2m has increased by 4.4% (2023-24 £68.2m). This is due to the increase in income from residences, catering and conferences of £4.3m in 2024-25.

Endowment and donation income for 2024-25 remains unchanged from last year at £4.3m.

Tuition fee income

Tuition Fee income increased by 8.7% to £238.5m (2023-24 £219.5m).

Fees from full time UK students rose by £7.7m (7.1%) to £115.8m. This increase came from an increase in the number of home undergraduate students, with home post graduate income unchanged.

Fees from full time overseas students (including EU students who now pay the overseas rate) rose by £11.4m to £100.7m. The increase was almost entirely from overseas undergraduate income, up £10.2m. Income from full time overseas students now represents 42.2% of all tuition fee income.

Fees from part-time students, short course and training student grants remained unchanged at £22.0m.

This table summarises the standard registration population headcount for the years.

Expenditure

Expenditure reported in the SOCI increased by £120.2m to £436.2m. Last year’s figure included a credit of £98.2m for the release of the USS pension provision.

Last year’s recurrent expenditure, excluding the USS release, was £414.2m. The increase in recurrent expenditure in 2024-25 is, therefore, £22m (5.3%). Of this increase £18.8m relates to higher depreciation resulting from capital investments and valuation increases in previous years. Excluding depreciation, the increase is £3.2m (0.9%).

Our staff costs at £215.4m have increased by £7.4m (3.6%) over 2023-24, whilst average FTE numbers increased by 104 (3.1%) to 3,471. Academic department staff costs were £118.0m for 2024-25, 54.8% of total staff costs before pension adjustments.

Other operating expenses at £135.6m have decreased by 1.5% from £137.6m.

In the analysis of expenditure by activity (note 10), Academic Department expenditure increased by £9.2m to £160.7m and represents 36.8% of total expenditure (2023-24 36.6%). When combined with Academic Services this rises to 45.8% of all expenditure. Research grants represent 7.3% of total expenditure, premises 15.5%, and residences, retail and catering 13.2%.

Central Administration expenditure increased by 4.5% from £24.4m to £25.5m.

Staff and student facilities expenditure decreased by 2.5% to £19.2m. Residences, retail and catering operations expenditure increased by 11.0%, to £57.7m. There was a similar increase in income for this area of 8.6% (note 5).

Research expenditure increased by 8.9% to £31.7m, despite the corresponding income remaining unchanged (note 4).

Depreciation and impairment increased by £18.8m, to £76.2m (an increase of 32.8%) reflecting increased asset values and the higher levels of capital investment now being made.

Other comprehensive income

The total comprehensive income in the year is £62.9m (2023-24 £226.5m).

This table summarises those entries reported after deficit for the year on the SOCI of £9.7m (2023-24 surplus £81.0m) and reason for the change from 2023-24.

Balance sheet

Fixed assets

Our capital additions in 2024-25 were £40.5m (2023-24 £53.7m). The combination of this with depreciation and the revaluation gain reported in the table above saw fixed assets increase from £1,195.7m to £1,226.7m.

Current assets

Current assets increased by £37.8m to £267.8m. Of this our investments increased by £29.4m to £226.2m, which is due to strong operational performance in the year and the lower level of fixed asset expenditure.

Creditors, amounts falling due in less than one year

These increased by £3.7m, to £85.4m, with an increase in deferred income of £2.7m and taxation payable of £3.0m, partly offset by a decrease in trade payables of £2.3m. Loan repayments due next year remained unchanged at £2.1m.

Creditors, amounts falling due in more than one year

These increased by £9.5m to £203.9m (31 July 2024 £194.4m). The main movements are the new finance lease on the John Wood Court student residences of £18.2m partly offset by the bank loan repayment of £2.1m in year and the gain on valuation of loan notes of £6.1m.

Pension provisions

Pension provisions have decreased by £7.6m to £nil in the year.

The USS is a multi-employer scheme with no basis to accurately identify our share of the assets and liabilities and therefore our deficit. At 31 July 2023, our balance sheet included a liability of £96.0m for future contributions payable under the deficit recovery agreement which was concluded on 30 September 2021, following the 2020 valuation when the scheme was in deficit. No deficit recovery plan was required from the 2023 valuation, because the scheme was in surplus. Changes to contribution rates were implemented from 1 January 2024 and from that date we are no longer required to make deficit recovery contributions. The remaining liability of £98.2m was therefore released to the income and expenditure account in 2023-24.

LGPS is also a multi-employer scheme in which liabilities and assets can be established for individual employers. Following positive investment performance and a reduction in the estimated value of the scheme’s liabilities, the fund is now reported to be in surplus at 31 July 2025 by £16.9m (31 July 2024 deficit of £7.6m). This surplus value has not been recognised as a non-current asset within the financial position due the requirements of FRS102 around defined benefit plan assets. Further details regarding this are included within the accounting policies: critical accounting estimates and judgements section and are also set out in note 25. Contribution rates are determined by triennial valuations which use a different set of assumptions. The scheme undertook its most recent valuation on 31 March 2022. Our cash contribution rate is 20.7% for future service.

Loan notes

Certain of the University’s loan notes (with a cost of £94.6m) are subject to foreign exchange options held by US investors to protect against future foreign exchange exposure should we decide in the future to repay part or all of the debt early. Under FRS102, these instruments are classified as non-basic and recognised at fair value. The contractual payments arising from the loan notes are unchanged by the accounting treatment.

In the year, a gain of £6.1m (2023-24 loss of £2.1m) has been recognised through the statement of comprehensive income and expenditure to reflect the movement in fair value. The corresponding reduction in the value of the loan notes from £66.9m at 31 July 2024 to £60.8m at 31 July 2025 is reflected in the balance sheet.

Going concern

After reviewing the University’s forecasts, which cover the period to 31 July 2027 (the outlook period), and carefully considering the current and forecast levels of available cash and short term investments, student number forecasts and capital investment requirements, Council confirms that it has reasonable expectation that we have adequate resources to continue in operation for the foreseeable future. In reaching this conclusion it has considered a downside scenario in student recruitment levels; however, Council is satisfied that the strategies, plans and policies in place will help ensure that the University has sufficient funds to meet its liabilities as they fall due over the outlook period.

Council regularly reviews performance using the key performance indicators included in this review in areas that are relevant to financial sustainability. Council, through Audit and Risk Assurance Committee (ARAC), regularly reviews strategic and operational risks and any financial assessment of these as determined by management. Council, through Finance Committee, reviews the compliance with financial covenants in our loan documentation and is confident that the agreed covenants will be met throughout the outlook period. Council is not aware of any material uncertainties related to events or conditions existing at the date of signing these accounts, that cast significant doubt upon the University’s ability to continue as a going concern. Therefore, Council continues to adopt a going concern basis for preparing the Annual Accounts.

Financial risk and outlook

2024-25 has seen a continuation of the growth in student numbers from both home and overseas. Despite the substantial recruitment pressures in the UK higher education sector, we are continuing to plan for further modest growth over the next few years.

To deliver and support this growth, we recognise that we need to invest in our physical and digital estate both to accommodate growth and modernise our original 1970’s buildings. We are also mindful of the impact the built environment has on our carbon emissions and our ability to meet our carbon targets.

As part of our planning, we have developed a fifteen-year capital requirement amounting to approximately £1.3 billion to cover our physical and digital investments. We recognised the need to increase our operating cashflow to fund this investment, and consequently, in 2023, we set ourselves the target of increasing our annual HCOS operating surplus to 5% by 2027-28 and to maintain it at that level thereafter. As described above, we have realised a surplus of 5.1% of income in 2024-25 ahead of target. We know that in an increasingly competitive market, and against a number of financial headwinds for the sector, maintaining this level of performance will be difficult. It will require contributions from all faculties, central teams and commercial areas. Whilst we are seeking to increase our cash generation to fund investment, a higher operating cashflow will also stand us in good stead in the event of a greater than expected deterioration in sector finances. Ultimately, we could defer some of our capital expenditure to ensure our sustainability, though this would impact our student experience, research and other ambitions.

Our capital strategy is essential to ensure the University continues to deliver world class education and research for our students, staff and community, as well as support the achievement of our net zero target by 2030. However, we will face risks in its delivery, in respect of capital cost inflation, availability of construction and digital resource, execution risk and debt servicing costs if interest rates remain substantially above levels seen in recent years.

We continue to experience cost pressure in staff and operating expenses with higher inflation rates. Fixed regulated fees have constrained our ability to offset cost inflation in recent years. The recent announcement to increase home undergraduate fees by inflation on an annual basis is very welcome and will be important in ensuring our long-term financial sustainability. However, the positive benefit from this change will take around four years before it compensates for the recent increase in the Employers National Insurance and the proposed levy on international student fee income.

The risk of continued increases in pensions costs has declined markedly in recent years but increased signs of distress are evident within the sector as a whole. In addition to the inflationary pressures described above we are most significantly impacted by our ability to earn tuition fee income. The demographic trends for home undergraduates will remain positive for the next few years but will start to be more challenging in the next decade. More importantly for our financial performance is our income from non-regulated fees. We operate in a global market for international students and are impacted by the policy of our own as well as our competitors’ governments. UK immigration rules have had an impact on recruitment and the proposed levy will further impact our overseas tuition fee income. The UK’s relative market position will continue to present both a risk and an opportunity for us.

Our aim is to deliver quality with focus. Principally, quality in the education and experience we offer our students and quality in the research we undertake. Our expectation is that this commitment to quality will continue to provide us with a strong market and financial position and enhance our ability to best navigate future opportunities and risks.

Martin Williams
Director of Finance

Signed on behalf of the Council
20 November 2025