UTAS: In more trouble than Burke and Wills?

 

UTAS is in more trouble than Burke and Wills.

The UTAS Council meeting on 27^th April 2023 discussed the 2023 financial forecast. The minutes, reproduced below, make bleak reading.

The Council “discussed the challenging conditions facing the University in 2023” and proceeded to discuss ways “to generate a positive EBITDA in the coming years.” What that implies is that current projections must show negative EBITDAs.

The acronym EBITDA stands for Earnings Before Interest Tax Depreciation and Amortisation, essentially the cash earnings before interest and depreciation (NB UTAS doesn’t pay tax). It’s a standard measure of the cash available to service borrowings and to pay for capex amounts (new buildings say).

UTAS’ EBITDA in 2022 was $30.9 million. To be in negative territory in 2023 reveals an alarming downturn.

A business might break even from a profit perspective, but adding back depreciation and interest gives a figure for cash earnings.

If UTAS has negative cash earnings, it can only survive by running down its investments or borrowing more. Even if capex spending is zero, it means UTAS is borrowing to pay interest. Ouch.

Running down investment and borrowing more was the plan for financing the Hobart move. Without that UTAS survival changes would be greater as universities traditionally have a larger buffer of cash and investments than most in the private sector.

The minutes suggest future challenges will start to be addressed in October. This highlights the nature of UTAS’ business. Whilst others might be able to implement changes more rapidly, UTAS is tied to the cycle of the academic year. It’s going to have to live with cash haemorrhaging for the rest of 2023 and hope things can be put into place post October to take effect before the 2024 academic year.

The 2022 Annual Report reflected “(t)hese past three years have been among the most challenging our University has ever faced.”

It’s going to get worse. Far worse.

 

Extract from minutes of UTAS Council meeting 27^th April 2023

3.4 *2023 Financial Forecast and Strategic Questions

University Council discussed the challenging conditions facing the University in 2023 including a decline in student numbers, the removal of the CGS Guarantee in 2024 and intense competitive pressures in the economy and the sector and the resulting financial consequences for the 2024 – 2026 period. Members considered a range of potential options and actions consistent with the agreed right-sized modelling for the University in order to generate a positive EBITDA in the coming years.

In considering the proposed actions to address the funding challenges, the following aspects were raised in discussion:

·         Members encouraged exploring untapped opportunities for the University to partner with industry, government, and community to plan for future Tasmania.

·         Noting the trends in growth and decline across a variety of degree offerings over time, the question of size, scale and what right-size might mean for the University was considered.

·         Council noted that the results of the national student experience survey data indicated that the University of Tasmania had higher score in overall student satisfaction than any Group of Eight university.

·          Members discussed options for the University to take advantage of its distinctiveness to compete against strong sector competition, through promoting distinctive course offerings and experiences for students.

·         Consideration of options to address the funding challenges would remain a priority for Council, to be agreed before the strategic planning process in October. Council noted that management would be preparing a paper on financial modelling including proposed funding options for consideration at the June Council meeting.

Resolution 27-04-2023-UC-3.4(1)

University Council noted the challenging conditions facing the University in 2023 and the financial consequences for the 2024 – 2026 period