Treasurer’s report

TREASURER’S REPORT by Andrew Parker

It will be no surprise to anyone that Covd-19 was the dominant influence on our finances this year. However, careful management has enabled us to maintain a secure financial position.

As expected, coronavirus had a dramatic impact on our income in 2019-20. Conference income was £1m lower than expected because Easter and early summer conferences were cancelled. Rental income was down by £0.8m because our students were not in college during Trinity Term and we released them from the obligation to pay rent. Commercial income was also down, as our tenants struggled to survive under the Covid lockdown, and endowment income also suffered.

The impact of this reduced income was partially offset by the sharply reduced level of activity from Easter onwards and the government’s furlough scheme. Overall, we were able to reduce our expenditure by c. £0.8m. We also benefitted from the generosity of our alumni community in the form of unrestricted donations and legacies.

All these factors combined to produce an operating deficit of just over £1m. However, we also saw our investments in Oxford University Endowment Management and Newton suffer a capital loss in the year of £6.6m and a downwards adjustment to the value of our commercial retail properties.

Overall, net college assets reduced by £8m from £232m down to £224m. Given that in the previous year college net assets grew by just under £7m, the impact of Covid-19 is all too apparent.

This level of deficit is typical of a mixed college of our size. There are some smaller colleges with smaller endowments who fared considerably worse than this, and some are having to contemplate significant corrective action, including redundancies.

A taste of things to come

Against the grim economic background of Covid-19, the decision to refurbish our kitchen and pantry at a cost of £4m might seem counter-intuitive. However, it has proven to be the right one. The business case for these works was clear some time ago, with the kitchens not having received any major investment since the mid1990s and our catering team often nursing outdated equipment heroically to the conclusion of another Guest Night. The funds we built up over several years for these works were severely impacted by Covid, and we initially thought to postpone our Summer 2020 start. However, we revised our view once the scale of the downturn became clear, with asset values set to deteriorate further and our negotiating position with contractors significantly improved. The decision paid off: we were able to take £2.2m out of our investments without incurring any capital loss (the balance being funded by a temporary overdraft), while the absence of any conferences over the summer allowed us to make an early start and get ahead of schedule. With a following wind the work should be completed by June 2021.

Sadly, 2020-21 looks set to follow the pattern of 2019-20. Endowment income will continue to fall, reflecting reduced capital values and lower dividends. Our commercial tenants will continue to struggle and will look to us for support. Our conference income will be affected and we will need to fund sharply increased costs for academic pensions as the USS pension fund deficit continues to rise. On the upside, our student numbers have largely held up thus far, reflecting the phenomenal effort of both academic and support staff to meet their needs during this time.

Given these projections, we have looked to trim our cloth accordingly without compromising long-term capability or the support we give our students, academics and staff. We expect this to reduce costs by £500k. As such, we anticipate an operating loss, before any further adjustment to the value of our investments, of c. £0.75m.

We are fortunate that the growth in our endowment in recent years has given us the financial heft to absorb these losses. We had built up unrestricted reserves of £1.5m, which will broadly cover the 2019-20 loss, but when capital values recover, we will need to dip into our endowment to restore our liquidity and cover the 2020-21 deficit.

All of this serves to highlight the incalculable value of our Donors’ support. Your generosity in recent years has enabled us not only against the worst of the current shocks. We cannot thank you enough for this – and I hope that when I next write, the world might perhaps have started on the long road back to normality.

YEAR IN NUMBERS

Amount raised: £2,057,998 Number of alumni who donated:

1,167

Percentage of alumni who donated:

18%

Number of friends who donated:

75

Revenue from legacies last year:

£640,564

Number of views for online events since March: to transform the College in times of plenty, but insulate ourselves

20,000+

International reach of online events:

34 countries