What this means in practice:
That we invest in ACCA’s unique combination of reach, relevance and resources, as our differentiator in the profession and our greatest source of competitive advantage, now and into the future.
Strategic measure applied:
Net operating surplus/deficit.
Why we use this measure:
This measure is used to demonstrate the extent to which we have exercised good financial discipline and also how we have invested against our strategy during the year. This KPI measure is consistent with the operating surplus reported in our statutory accounts, net of finance costs.
Financial performance in 2017-18
On a like-for-like basis, our financial performance was well ahead of expectations for the year, delivering a net operating deficit of £8.6m. One-off gains on the disposal of investments, which were subsequently reinvested, amounted to £33.4m and resulted in a net surplus for the year after tax of £16.7m.
The financial year 2017-18 saw us breaking through the £200m barrier for the first time. Total revenue was £201.1m, which represented a 10.4% increase on the prior year. This was achieved by a combination of strong growth in our student and member population; increased student activity in the number of exams sat as a result of the four exam sessions now fully embedded; and increases in the number of exemptions awarded, representing an improvement in the quality of student acquisition.
Revenue (£ million)
|Year||Income (£ million)|
Despite an increasingly competitive marketplace which has seen new market entrants and new product offerings, our continued focus on strategic pricing initiatives and commercial relationships in key markets has 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 revenue to continue to deliver sustainable growth, although at a lower rate than previously anticipated.
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; this is demonstrated in our ability to deliver a like-for-like operating deficit which was ahead of expectations.
Operating Expenditure (£ million)
The rate of increase of 11.7% in operating expenditure exceeded the growth in revenue during 2017-18, although it should be noted that it was broadly in line with the original budget (0.5% favourable). Much of the increase resulted from ongoing investment in activity to ensure that we continue to attract and develop a customer base which delivers sustainable growth. This includes enhancing ACCA’s presence in various markets through office relocations, moving to SaaS solutions for IT and investment in strategic initiatives to move to the computer-based exam model, ensuring that we continue to lead the profession in terms of content and method of delivery. We also continue to invest in member-focused activity, which is borne out by the increased customer satisfaction metrics delivered during the year. Focused investment in strategic initiatives, including the ongoing improvement to our core infrastructure, will ensure that we are well positioned to maximise opportunities in future years.
Going forward, our Budget for 2018-19, 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 resource utilisation.
Our expenditure on strategic investment, including the exam portfolio and IT infrastructure, amounted to £21.2m. This was against an original budget of £19.5m. During the year, it became clear that additional funding would be required to ensure our key markets and supply chain were aware of, and supported, the changes to the syllabus and exam delivery. A programme was established to undertake the necessary marketing, tuition support, business readiness and partner incentivisation across our key markets. The main aim was to improve the exam uptake and to ensure that the change to deliver F5 - F9 papers by computer-based-exam (CBE) was accepted.
This affirms that 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 in a digital environment, improving the customer experience and ensuring our fundamental building blocks are robust and have the agility to support our business model.
Our programme of strategic investment expenditure is planned to continue as we implement our strategy.
The main variances from target for the key components of net operating deficit are summarised below.
Net operating deficit (£ million)
|Fees & Subs||+2.9|
|Strategic Investment Fund||-1.5|
Our revenue growth was much higher than target and our ongoing strong cost control enabled operating expenditure, including budgeted contingency, to be released into net operating deficit.
Other financial information
There are a range of transactions that arise after net operating deficit is accounted for, including investment income and other comprehensive income.
Our total comprehensive result for the year to March 2018 amounted to a deficit of £2.5m. Realised gains on the disposal of investments of £33.8m were recognised in the profit and loss account and previously recognised net unrealised gains of £27.1m were recycled through other comprehensive income under IAS1 and subsequently reclassified. Other comprehensive income also included unrealised gains on investments and currency reserve movements.
Total comprehensive result (£ million)
|Net operating deficit||-8.6|
|Other comp income||-23.8|
During the year, ACCA revised its investment strategy to seek further diversification of the portfolio with reduced volatility. As a result over £80m of investments were realised in the first quarter of the year and reinvested in new funds. This crystallised gains of £33.8m due to the strong performance in previous years. The value of our investment portfolio at March 2018 was £106.2m, an increase of £7.7m, and demonstrates another year of good performance, following the reinvestment.
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 gains amounted to £4.6m, which was driven by a change in the financial assumptions e.g. small increase in the discount rate and a fall in the inflation rate.
In the ordinary course of business ACCA undertook a review of its various income streams and ascertained during the year that there was additional income chargeable to corporation tax. This was disclosed and agreed with the UK tax authorities and the liability settled in the year.
The balance sheet remains very strong and provides ACCA with a platform to continue to deliver sustainable growth.
Funds and reserves (£ million)
Council has a long-term target to build the Accumulated Fund to 60 days of operating expenditure. At March 2018, the Accumulated Fund represented 77 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 2018, the liquidity measure was 205 days compared to a long-term target of 120 days.
Total assets have grown from £202.2m to £208.0m. At March 2018, our investment portfolio including short-term cash funds was £131.2m and our cash balances were £17.2m.
More detailed financial information is available in ACCA Consolidated Financial Statements.
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