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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 [email protected] 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
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- 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
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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?
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-42.8
-22.0
-20.4
-17.6
-10.2
-5.7
2.1
3.2
3.8
3.8
RUN
Unaffiliated
IRU
Unaffiliated
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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
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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
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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
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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
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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)?
