What this means in practice:
That we will continue to invest in ACCA’s unique combination of reach, relevance and resources because, taken together, they are our differentiator in the profession and represent our greatest source of competitive advantage, now and into the future.
Strategic measure applied:
Net operating surplus.
Why we use this measure:
This is our financial surplus after accounting for the costs of strategic investment and is an indicator of our financial strength i.e. how much of our annual operating income is available to build our balance sheet reserves so that we have the long-term financial resources required to fulfil our strategic ambition.
This key performance indicator is consistent with the operating surplus reported in our statutory accounts net of finance costs.
Our aim each year has been to achieve a small net operating surplus. This, together with investment income, has been added to reserves. In each year, outperformance has been achieved by strong cost management that has enabled budgeted contingency to be released to net operating surplus.
The launch of our Strategy to 2020 and the growth ambition embedded within it has resulted in us targeting a net operating deficit for the financial year to March 2017. We are investing in a range of initiatives that will deliver sustainable growth over a number of years, and expect to return to net operating surplus in the year to March 2018.
We exceeded our net operating surplus target. Actual net operating surplus was £4.3m compared to a target deficit of £5.0m.
Underpinning that strong financial performance, we have experienced another year of strong income growth.
|Year||Income (£ million)|
Our growth in the number of students and members, together with the introduction of two additional exam sessions increased our income to £175.7m, representing growth of 7.2%.
During the year, we continued to invest in our sales and performance management capability; this has enabled us to compete successfully in a marketplace that increasingly is seeing new market entrants and new product offerings. Strategic pricing initiatives and rate card pricing in key markets have ensured that our offering remains competitive and affordable.
Our Strategy to 2020 has identified the scale of the opportunity for future growth and we expect our income to continue to grow strongly year-on-year.
Obtaining value for money from investment of our members’ funds remains a key objective, whether to support our growing global footprint, or in the continued development of our exam offering. We adopt close monitoring to ensure that costs remain tightly controlled and maximum value achieved; in the year to 31 March 2016, we delivered a cost saving of just over 4% compared to the original budget.
|Year||Expenditure (£ million)|
The rate of increase of 9% in operating expenditure exceeded the growth in income during 2015-16. Much of that increase was due to investment in strategic initiatives, primarily in our exam portfolio and the move to four exam sessions to ensure that our qualification continues to lead the profession in terms of content and method of delivery. Focused investment on strategic initiatives will ensure that we are positioned to maximise opportunities in future years.
Going forward, our Budget for 2016-17, which was approved by Council in March, contains specific efficiency targets that will ensure that we maintain our cost focus and obtain value for money from our financial resources.
Our expenditure on strategic investment expenditure, including the exam portfolio and IT infrastructure, amounted to £18.6m. This will affirm we are well positioned to successfully manage our growth ambitions. We have several key multi-year projects in progress that seek to transform the way we do our business, improving the customer experience and ensuring our fundamental building blocks are robust and have the agility to support our business model.
That programme of strategic investment expenditure is likely to continue into the future.
Variance from target for these key components of net operating surplus are summarised below:
|Strategic investment expenditure||4.7|
|Income from fees and subscriptions||-0.1|
|Income from operating activities||-2.2|
Although our income growth was slightly less than target, our ongoing strong cost control enabled operating expenditure, including budgeted contingency, to be released into net operating surplus.
There are a range of transactions that arise after net operating surplus is accounted for, including investment income and other comprehensive income.
Our total comprehensive income for the year to March 2016 amounted to £5.7m.
|Net operating surplus||4.3|
|Gains on property||4.1|
|Loss on investment portfolio||-0.5|
|Loss on foreign exchange hedging||-0.2|
|Total comprehensive income||5.7|
Our investment income was ahead of target because of the additional £25m that was invested in the previous year and represents the dividends received on our investment portfolio together with interest on cash deposits.
The value of our investment portfolio at March 2016 was £83m, including dividends reinvested offset by unrealised losses amounting to £0.9m.
During the year the decision was made to sell the two freehold properties in London. 10/11 Lincoln’s Inn Fields was sold prior to the year-end for £11m while 29 Lincoln’s Inn Fields was sold shortly after the year-end for £14m. The realised gain on the disposal of 10/11 Lincoln’s Inn Fields is included within net operating surplus.
We operate defined benefit pension schemes in the UK and Ireland, both of which are closed to future accrual. These schemes are valued each year-end and actuarial gains or losses are taken to comprehensive income. This year, the actuarial losses amounted to £0.8m, driven by the effect of low bond yields on the discount rate used to value the pension liabilities.
Our balance sheet has continued to grow strongly.
|Year||Funds and reserves|
Council has a long-term target to build the Accumulated Fund to 60 days of operating expenditure. At March 2016, the Accumulated Fund represented 76 days of operating expenditure.
Council also monitors balance sheet liquidity, measured as the number of days of operating expenditure held in liquid assets (investments and net current assets). At March 2016, the liquidity measure was 106 days (compared to a long-term target of 120 days).
Total assets have grown from £180.0m to £189.0m. At March 2016, our investment portfolio value was £82.8m and our cash balances were £43.4m.
More detailed financial information is available in our consolidated financial statements.