financial resilience for the future justin bokor advisory · justin bokor advisory hefc, august 5th...

Financial Resilience for the Future

Justin Bokor Advisory

HEFC, August 5th 2019

All frameworks, tools, data and other intellectual property presented in this document are copyright Justin Bokor Advisory.

For more information, contact Justin Bokor at justin.a.bokor@gmail.com or by phone 0499 777 840.

- What are the long-term trends in university profitability?

- What have been the key drivers of university profitability?

- How can we measure university financial resilience?

- What does the financial resilience of different universities tell us?

- How can we model the impact of future scenarios?

Topics

2 © Justin Bokor Advisory

3 © Justin Bokor Advisory

0

2

4

6

8

10

2009 10 11 12 13 14 15 16 17

What are the long-term trends in profitability?

HE sector operating result

% of revenue

2011 Universities start

growing in advance of

demand-driven system

2012 Introduction of

demand-driven system

2014, 16,

17

Boom years in

international

2009, 10,

13, 16, 17

Boom years on DJIA

4 © Justin Bokor Advisory

Sector really,

really wanted

the return of

the demand-

driven

system

Please Explain…

What have been the key drivers of university profitability?

0

2

4

6

8

10

2009 10 11 12 13 14 15 16 17

15. Institutional agility and culture

16. Workforce productivity

17. Financial resilience

1. Strategic alignment

2. Strategic upside

3. Strategic risk exposure

4. Brand and market strength

5. Market growth alignment

6. Market performance

7. Research performance

8. Student success

12. Channel mix and adaptability

13. Operating model adaptability

14. Alignment to new technologies

9. Product-market fit

10. Product innovation

11. Industry connectivity

Organisational

Agility

Channel and Operating Model Readiness

Product

Alignment

MarketPower

Strategic Fit and

Adaptability

Part of the Future Readiness IndexTM

Measuring university financial resilience

Method and sources

- Primary research(interviews, surveys)

- Data analytics

- Proprietary frameworks

- Desktop research

- Comparative analysis

© Justin Bokor Advisory

- Operating margin, adjusted for fluctuations in investment income and donations

- EBTDA

- Growth in EBTDA

- Self-financing ratio

- Liquidity

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Measuring financial resilience

4.7

7.8

19.6

20.1

29.5

31.0

37.3

38.8

40.4

42.4

Unaffiliated

IRU

Regional

IRU

Go8

Unaffiliated

Unaffiliated

Go8

Unaffiliated

Go8

7 © Justin Bokor Advisory

Financial Resilience: Bottom 10 universities in Australia

Score out of 100

Note the spread of institutions

63.2

63.8

64.3

64.7

67.4

67.4

67.9

72.1

72.5

82.4

Go8

Regional

Go8

Regional

IRU

Regional

Go8

Unaffiliated

ATN

Go8

8 © Justin Bokor Advisory

Financial Resilience: Top 10 universities in Australia

Score out of 100

Note the spread of institutions

How can we model the impact of future scenarios on university finances?

9 © Justin Bokor Advisory

-42.8

-22.0

-20.4

-17.6

-10.2

-5.7

2.1

3.2

3.8

3.8

RUN

Unaffiliated

IRU

Unaffiliated

10 © Justin Bokor Advisory

GFC Scenario: Bottom 10 universities in Australia

Regional

IRU

Go8

IRU

IRU

Go8

Investment income and donations, 2008 vs 2007

- Uni A -53%

- Uni B -59%

- Uni C -68%

- Uni D -75%

- Uni E -81%

- Uni F -194%

Operating surplus / loss – Assuming reprise of GFC

$m

11 © Justin Bokor Advisory

Flat year in international: Bottom 10 universities

-32.2

-31.0

-21.0

-12.5

-9.6

-7.4

-5.3

-3.0

-2.4

-0.7

Regional

IRU

Go8

IRU

IRU

Go8

Regional

IRU

ATN

Unaffiliated

International student market revenue

2012 vs 2011 = 0.3% growth

Revenue growth/decline - Assuming a 'flat year' in the international student market

$m

-7.9%

-6.3%

-2.9%

-2.7%

-2.4%

-1.0%

-0.9%

-0.4%

1.0%

1.2%

Regional

ATN

12 © Justin Bokor Advisory

Decline in international: Bottom 10 universities

IRU

Regional

Regional

IRU

Unaffiliated

IRU

Unaffiliated

Regional

International student market revenue

Average 2012 decline (19 universities) = 5.6%

Operating surplus/loss, assuming a decline in the international student market

% of revenue

© Justin Bokor Advisory13

Downturn in global financial markets coinciding with decline in international student market

- Changes in government policy

- Acceleration of online

- Disaggregation

- New entrants

- New technologies

- Climate change

Other scenarios?

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Group discussion

16 © Justin Bokor Advisory

Sector really,

really wanted

the return of

the demand-

driven

system

Please Explain…

What have been the key drivers of university profitability?

0

2

4

6

8

10

2009 10 11 12 13 14 15 16 17

17 © Justin Bokor Advisory

Death spiral scenario…

Examples: Health insurance, Media

What could trigger a

‘death spiral’ in the

university sector?

What could you do

about it (at your

university)?

18 © Justin Bokor Advisory

For more information

Justin Bokor

justin.a.bokor@gmail.com

0499 777 840