QMU Strategic Report and Financial Statements 2024 | Strategic Report

Strategic Report

Status
Queen Margaret University, Edinburgh is an autonomous Scottish higher education institution. The University’s governing instruments and arrangements are set out under the Queen Margaret University, Edinburgh (Scotland) Order of Council 2007, amended from 1 October 2019 through the Queen Margaret University, Edinburgh (Scotland) Amendment Order of Council 2019. The 2007 Order is made under section 45 of the Further and Higher Education (Scotland) Act 1992. The University is registered under the Companies Acts as a company limited by guarantee, with its registered office at Queen Margaret University Drive, Musselburgh, East Lothian, EH21 6UU. The University has been entered into the Scottish Charity Register and is entitled, in accordance with section 13(1) of the Charities and Trustee Investment (Scotland) Act 2005, to refer to itself as a Charity registered in Scotland.

Scope of the Financial Statements

The financial statements presented on pages 29 to 56 comprise the consolidated results of the University and its subsidiary company, QMU Enterprises Limited. QMU Enterprises Limited undertakes commercial consultancy work, utilising the expertise of the University’s academic and technical staff, and also deals with vacation letting of the University’s student accommodation. The University holds 50% of the issued share capital of Edinburgh Innovation Park Joint Venture Company Limited. Activity has increased in the Joint Venture, and development of the hub has progressed substantially through the 2023/24 financial year. As a result of this increased activity, the University has updated its accounting treatment, with further information is provided in note 13 to the financial statements.

The financial statements have been prepared on a going concern basis in accordance with Financial Reporting Standard 102 (FRS 102) and the Statement of Recommended Practice – Accounting for Further and Higher Education 2019 (SORP 2019), with the Accounts Direction issued by the Scottish Funding Council (SFC) and with the United Kingdom Companies Acts. Information on the process which has been undertaken to inform the decision to prepare the financial statements on a going concern basis is set out in section (A) in the statement of principal accounting policies.

Development of the Strategic Plan

The University’s strategic plan remains rooted in the University’s core values, and sets out a number of strategic goals, along with targets to be achieved by the end of the current plan period in 2025. To fulfil our purpose, we have developed a set of strategic goals, with associated outputs, that are underpinned by our values and our alignment to the internal and external environment.

These are to:

provide distinctive, accessible, high quality education;
deliver transformative research and innovation;
seek out partnership and collaboration;
invest in the long-term future of the university; and
embed sustainability across our portfolio and practices.

The plan is supported by a more detailed delivery plan. A key element of the delivery plan remains the inclusion of performance indicators against which the University Court monitors progress towards the achievement of the goals set out in the plan (both financial and non-financial). The University also has in place processes to manage identified risks that could inhibit progress in achieving those goals.

Results for the year

The Group's consolidated results for the year to 31 July 2024 are summarised as follows:

Consolidated Results for the Year to 31 July 2024
Finance Income/Outcome	2023/24	2022/23
	£��ǲ�	£��ǲ�
Total income	54.1	51.1
Total expenditure	(51.0)	(50.9)

Surplus /(Deficit) for the year	3.1	0.2

Actuarial gain / (loss) in respect of pension schemes	(0.9)	15.5
Unrealised surplus / (deficit) on revaluation of land and buildings	2.1	8.0

Total comprehensive income / (expenditure) for the year	4.3	23.6

The main changes in the underlying outturn position compared to 2022/23 were:-

An increase of £1.7 million in income from tuition fees and education contracts, with additional students on new programmes, including across our trans-national partnerships, as well as through new online courses;
An increase in SFC grants of £0.2 million, with core funding remaining flat this increase is driven by specific SFC funded grants;
A reduction of £0.1 million in income from research grants and contracts;
A small increase in other income of £0.3 million, improving on the strong performance in the summer schools and accommodation occupancy from prior year;
A total increase of £0.2 million in staff costs, however this was substantially improved by £1.9 million related to the reduction in pension provision adjustments; and
An reduction of £0.5 million in other operating expenses, reflecting strong cost controls despite wider inflationary pressures.

Additional information on the adjustments relating to the revaluation of land and buildings and
to actuarial gains and losses on pension schemes is provided in notes 12 and 21 respectively.

QMU Enterprises Ltd generated a profit of £476,000 (2022/23: £347,000), which was passed to
the University under deed of covenant.

Cash Flows and Liquidity
The result for the year, adjusted for the effect of non-cash items and interest, was a net cash inflow of £5.0 million on operating activities (2022/23, £4.5 million inflow). Overall cash balances increased by £1.2 million (2022/23; £2.2 million increase). Unrestricted cash balances at 31 July 2024 of £18.6 million (2023: £17.5 million) represented 149 days’ expenditure (2022/23: 141 days). Throughout 2023/24, the University has significantly increased capital investment to £3.1m (2022/23 £0.6m) on projects including a new finance system and extensive modernisation of the Learning Resources Centre.

Management of Principal Risks and Uncertainties

In common with other universities, Queen Margaret University has to manage its activities whilst facing significant pressures on its funding and its cost base. Significant risks facing the University include:

Scottish Government funding of tertiary education, allocated through the Scottish Funding Council (SFC), will continue to experience real-terms reductions over the next few years.
Pressure on staff costs will continue to build, both in terms of pay awards (where the University continues to participate in the UK-wide national negotiating framework) and also in terms of the cost of employers’ pension contributions.
Long term inflationary pressure on non-staff costs.
The ability to attract and retain staff, particularly in identified specialist areas, is becoming more difficult throughout the economy, including in the University sector.

The identification and management of risks is firmly embedded within the University’s governance arrangements. The institutional corporate risk register, which includes a description of actions undertaken to mitigate risks, is formally reviewed by the Senior Leadership Team and the Audit & Risk Committee as well as being discussed by the University Court. The Court also undertakes, from time to time, an exercise to agree its appetite for risk, and to ensure that residual risks, after the application of mitigating actions, sit within the agreed tolerance. A review of the risk management strategy adopted by the University Court in 2021 commenced during the reporting period, with a view to a revised risk register being in place early in 2025.

Financial Sustainability and Going Concern

The University Court has assessed the financial position of the University for the year ended 31 July 2024. The assessment period considered is the period to 31 July 2026 and further details of this assessment can be found on page 33. The University Court has assessed a number of factors as set out below and has concluded that there is an expectation that the University has adequate financial resources to continue to operate for the foreseeable future.

In reaching its conclusion, the University Court has considered the following factors:

At the balance sheet date the University had net current assets of £(4.2) million, excluding the Barclays Bank loan which matures in December 2024 net current assets are £11.7 million.
Cash balances at 31 July 2024 amounted to £18.6 million. The University had liquid reserves (cash and investments) as at 31 July 2024 equivalent to approximately five months’ operating cash requirements.
In the year to 31 July 2024, the University generated positive net cash from operating activities of £5.0 million. The University cash flow forecast shows an increasing operating cash trajectory over the period to 31 July 2025, with a reduction in cash after reducing outstanding borrowing to £10 million.
For the year ended 31 July 2024, the University generated a surplus of £3.1 million before adjustments for land, buildings and pension valuations. Excluding movements relating to pension adjustments, the University generated a small operating deficit of £0.2 million.
At the balance sheet date, the University had external financing liabilities of £18.0 million, of which £15.8 million is payable to Barclays Bank plc with the remainder being payable to the Scottish Funding Council. As set out in Note 16, the University has conducted a full market tender and conducted negotiations with prospective lenders, with the preferred option being approved by University Court, as well as from the SFC. The University has completed the refinance of the loan.
All bank loan covenants were complied with for the year ended 31 July 2024.
In relation to future years, Management has modelled downside scenarios based on a number of adverse scenarios taking place in financial year 2024/25 and 2025/26, a reduction of planned tuition fee growth, and pay and affected non pay costs remaining higher than forecast. In these scenarios, the University retains liquidity headroom and compliance with covenants through the going concern period with both plausible and available mitigating actions being undertaken. These mitigations include, but are not limited to, reducing uncommitted future spend on discretionary capital and maintenance programmes, increasing borrowing, reducing operating expenditure, and, only if necessary, reducing staff numbers.
Taking account of the business risks facing the University, we believe that the University and the group are well placed to continue to manage their business risks successfully.

In accordance with the recommendations from the Higher Education Financial Sustainability Strategy Group (FSSG), the University Court undertakes a formal annual assessment of the University’s financial sustainability. This process involves reviewing a common set of financial indicators, which have been applied to the University’s historical results and to the financial forecasts measured over a rolling five-year period, so as to reduce the impact of any one-off exceptional items arising in any year. The two key indicators which the University Court has agreed to focus upon to inform its considerations around financial sustainability are:

Earnings before interest, taxation, depreciation and amortisation (EBITDA); and
Net cash flow from operating activities less interest payable as a percentage of turnover.

The second indicator has been adapted from the basket of financial indicators recommended by the FSSG as it is a more appropriate measure for the University, given its relatively high level of borrowings as a proportion of its turnover. The targets are also set at a level which will allow compliance with banking covenants. The results of the annual review undertaken in October 2024, based on a rolling five-year period, were as follows:

Results of Annual Review Undertaken in October 2024
Indicator	Target	Average
EBITDA as a percentage of turnover	12%	14.5%
Net cash flow from operating activities less interest payable as a percentage of turnover	6%	10.2%

The EBITDA average percentage remains above the five-year average target. The “Net cash flow
from operating activities less interest payable as a percentage of turnover” indicator remains well
above target, reflecting the University’s relatively strong cash position.

Borrowings

Borrowings at 31 July 2024 amounted to £18.7 million (31 July 2023, £19.5 million). Of this amount, £15.8 million related to a secured loan facility with Barclays Bank plc taken out to fund the campus development at Musselburgh, and £2.4 million related to an unsecured loan from the Scottish Funding Council under the Financial Transactions scheme.

The Barclays loan was due to expire on 17 December 2024. Work progressed throughout the year to refinance the Barclays loan, with a full market tender being completed, negotiations conducted, and the preferred option agreed at University Court. On 27 November 2024, the University Court approved the proposed facility agreement for a £15m revolving credit facility with Santander, and the Barclays loan was successfully refinanced.

Pension arrangements

The University is involved in three pension schemes, as follows:-

Lothian Pension Fund

The Lothian Pension Fund is part of the Local Government Pension Scheme (LGPS) and is a multi employer defined benefit scheme. The scheme’s last funding valuation took place as at 31 March 2023 and set contributions from 1 April 2024. The funding valuation showed a positive position with an overall funding position of 157%. As part of the valuation the Fund trustees reduced the level of employers’ contributions from 1 April 2024.

The University’s share of the fund for 31 July 2024 is a net asset of £24.3 million (31 July 2023: £23.4 million net asset). The University has recognised the pension asset at 31 July 2024 in accordance with the accounting policy adopted as set out in accounting policy (D).

Scottish Teachers’ Superannuation Scheme

The University participates in the Scottish Teachers’ Superannuation Scheme (STSS). The
scheme is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The scheme is financed by payments from employers and from those current employees who are members of the scheme and paying contributions at progressively higher marginal rates based on pensionable pay, as specified in the regulations. The rate of employer contributions is set with reference to a funding valuation undertaken by the scheme actuary. The last four-yearly valuation was undertaken as at 31 March 2020.

Queen Margaret University has no liability for other employer’s obligations to the multi-employer scheme and, as the scheme is unfunded, there can be no deficit or surplus to distribute on the wind up of the scheme or withdrawal from it.

The scheme is an unfunded multi-employer defined benefit scheme. It is accepted that the scheme can be treated for accounting purposes as a defined contribution scheme in circumstances where the University is unable to identify its share of the underlying assets and liabilities of the scheme.

The employer contribution rate for the period from 1 April 2022 is 23% of pensionable pay, which increased to 26% from 1 April 2024. The employee rate applied is variable and is anticipated to provide a yield of 9.4% of pensionable pay.

Universities Superannuation Scheme

The Universities Superannuation Scheme (USS) is a hybrid pension scheme, providing defined benefits (for all members), as well as defined contribution benefits. The assets of the scheme are held in a separate trustee-administered fund. Because of the mutual nature of the scheme, the assets are not attributed to individual institutions and a scheme-wide contribution rate is set. The University is therefore exposed to actuarial risks associated with other institutions’ employees and is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. As required by Section 28 of FRS 102 (Employee Benefits), the University therefore accounts for the scheme as if it were a wholly defined contribution scheme. As a result, the amount charged to the consolidated Statement of Comprehensive Income and Expenditure represents the contributions payable to the scheme in respect of the accounting period.

The most recent fund valuation as at 31 March 2023 demonstrates both a material increase in the Plan value and reduction in the Plan deficit, driven by favourable economic conditions and resulting inflationary benefits. As at 31 July 2024, in accordance with USS guidance and increases in the Plan value, the University no longer holds a provision in respect of the USS provision, with the value credited to the Income and Expenditure.

Further details on pension arrangements are set out in note 21 to the financial statements.

Social Inclusion

Queen Margaret University is committed to widening participation amongst those who have previously been inhibited from entering Higher Education for social, economic or cultural reasons, and to taking active steps to maximise their persistence and success. Our refreshed Widening Participation Strategy focuses on increasing participation from non-traditional groups, including those that are: first generation to go to Higher Education; from low progression schools; reside in communities in the lowest 20% and 40% of the Scottish Index of Multiple Deprivation (SIMD20/40); articulating students from Scotland’s Colleges; disabled students; BAME students; male students studying Nursing and Allied Health programmes; ex-service/armed forces; estranged students; student carers and those who are care experienced.

Our approach to widening access offers built-in tailored support throughout the learner journey, including at points of transition. We work to raise awareness of higher education within target communities, including those local to the University. Our contextualised admissions process provides the basis for fair offers to study at the University. We publish our standard and minimum entry requirements for undergraduate programmes in our University prospectus and on our website. The prospectus includes information presented in simple, clear language and developed in accordance with the ‘Common Language’ guidelines produced by Universities Scotland.

We commit to making offers at the published minimum entry requirements to identified groups where we recognise that a range of factors has influenced attainment. We deliver a range of recruitment, outreach, pre and post entry activities to raise aspiration, encourage access and maximise retention from under-represented groups in line with our Student Experience strategy, Mainstreaming Report and Equality Outcomes, and underpinned by the University’s Outcome Agreement with the Scottish Funding Council 2023-24.

Fair Work First

We are committed to advancing the Fair Work First criteria, and address this commitment in the
following ways:

We have an appropriate channel for effective employee voice

We engage in constructive dialogue with our employees and their Trade Union representatives to address workplace issues and disputes.

Through our Joint Negotiation and Consultation Committee, we negotiate and consult with our recognised Trade Unions on agreed areas for such negotiation and consultation. Our recognised TUs are represented on major committees, including the University Court, Health and Safety and Equality and Diversity Committees. We provide facility time to promote and support regular engagement between our Trade Unions and their members.

We are committed to ongoing staff listening activities, including running a staff engagement survey every two years. Our governance arrangements also provide for staff and student voices to be heard through membership of all senior decision-making bodies.

We invest in workforce development

Formal and informal learning is delivered and encouraged across the workforce, with learning opportunities for employees at all levels delivered through our YourDevelopment calendar. Specific development opportunities for academic staff are provided through our Learning Enhancement and Academic Development (LEAD) team, and through our Research, Knowledge Exchange, and Development Unit (RKEDU).

We are committed to providing apprenticeships and other opportunities for young people. We provide training for employees to become Mental Health First Aiders, who volunteer to offer confidential support to other employees in times of vulnerability. We hold an institutional Athena Bronze Award and participate in the Disability Confident Employer scheme.

We do not use zero-hours contracts inappropriately

We abolished the use of zero hours’ contracts in 2014. We are committed to minimising our use of casual and fixed term contracts through the implementation of our Appropriate Contract Use Policy. We have a clear process in place to allow workers to move from a casual engagement to a temporary or open-ended contract where a longer-term need for the work has been identified.

We take action to tackle the gender pay gap and create a more diverse and inclusive
workplace

Our equality outcomes support several actions to ensure we continue to understand any actual or perceived barriers to employment and progression. We gather data to understand our workforce diversity and pay gap information and report on our progress annually through our Equality and Diversity committee to the University Court.

We support flexible working across the University, offering a wide range of working options, with all employees entitled to apply for flexible working from day one of employment. We offer employees the opportunity to adopt hybrid working, supporting employees to find the appropriate balance of home and on campus working.

We are committed to a working environment where carers and those with caring
responsibilities are valued and supported

We are a Disability Confident employer, encouraging the employment and retention of disabled people and those with health conditions. We make reasonable adjustments for employees with a disability or who have a short or long-term impairment that could affect their ability to work.

We commit to paying the Real Living Wage

We are an accredited Living Wage employer. The Living Wage commitment sees everyone working at QMU, regardless of whether they are permanent employees or third-party contractors, receive a real Living Wage. The University’s third-party contractors adopt the Living Wage as and when existing contracts are renewed.

We offer flexible and family-friendly working practices for all staff

These include Part time and term time working arrangements, Flexible and Hybrid Working, Maternity Leave, Partner Leave and Shared Parental Leave, Time off for Care of Dependents, Parental Bereavement Leave / Baby Loss Leave, Fertility Leave, Career Break, and Bereavement Leave

We oppose the use of fire and rehire practice

We only consider affecting change where there is a legitimate business need. We are committed to working with our Trade Unions to ensure there is effective consultation and negotiation relating to significant organisational change.

Student Satisfaction

The University participates in the National Student Survey (NSS). Results from the 2024 NSS showed that 72.7% of students at Queen Margaret University are satisfied overall with the quality of their course, a 1.4% drop in the standalone score for overall satisfaction. The positivity measure - the proportion of respondents who gave a positive answer – mostly matched or exceeded last year’s results. Benchmark data indicated that QMU exceeded the benchmarks by 0 - 2% in 9 of the 27 core questions (and by +7.2% for the question, ‘How well does the students' union represent students' academic interests?’), with five programmes achieving overall satisfaction scores of 90% or above.

However, on several programmes, student satisfaction was significantly below the benchmark for their subject areas across several questions, particularly in relation to course organisation and assessment and feedback. While that can partly be attributed to disruption to programme delivery and assessment because of localised industrial action over the last two years, the Student Survey Results working group has agreed a set of prioritised cross-university and programme specific actions to address below benchmark areas of performance.

Graduate Employment
The University offers a coherent, distinctive portfolio of programmes in healthcare, social sciences, creative arts, business, management and enterprise, and primary and secondary teaching - with a particular focus on meeting the employment needs of the public sector in Scotland. Consequently, over half of our undergraduate and postgraduate programmes provide students with the qualifications necessary to enter the health and education sectors. A significant proportion of those programmes (Nursing, Paramedic Science, and Initial Teaching Education) fall under the SFC’s controlled funded places.

The University offers the widest range of allied health programmes in Scotland and is one of only two providers in speech and language therapy, audiology, and in therapeutic radiography. Similarly, in addition to delivering the BA (Hons) Education Studies (Primary), our largest single cohort of students, we deliver postgraduate initial teaching education provision in 51��׻�� Economics (PGDE Secondary), acknowledged by SFC as a ‘hard to fill’ PGDE Secondary subject. We expanded our PGDE Secondary provision for 2023-24 to include another hard to fill subject, Religious, Moral and Philosophical Studies, as well as Business Education. These developments demonstrate the University’s ongoing commitment to ensuring its provision directly addresses the workforce needs of the Scottish public sector.

Our focus on graduate employability is being advanced through our Employability Strategy, which outlines the measures we take to create an environment in which students develop the skills and attributes needed to flourish in a rapidly changing labour market. It represents an agreement on the focus and priorities of the Careers and Employability team, programme teams and our external partners over the period 2021-2026. Developed against the backdrop of the COVID-19 pandemic, it includes projects which support students to navigate uncertain labour markets and the economic downturn, and to maximise opportunities presented by changing working practices across all industries and sectors.

As a result of our combined efforts to develop students’ employability, at 4.6%, the University has one of the lowest levels of unemployment in Scotland for its graduates 15 months after they have graduated. We are in top 5 of Scottish universities for the number of graduates in full-time employment 15 months after they have graduated. (Source: Graduate Outcome Statistics 2021/22 published by HESA in 2024).

Environmental Issues

The University recognises the wide range of climate change impacts that will influence our environment both locally and globally. While these have the potential to pose a significant threat to the sustainability of the University, we embrace our role in contributing to the delivery of real change through reductions in our own carbon emissions, as well as influencing the understanding and behaviour in our staff and students. To support our commitment, the University has signed up to the UN global back campaign ‘Race to Zero’ and is pleased to confirm that it is compliant with Scottish Government sustainability reporting in accordance with the Climate Change (Scotland) Act.

The University made its first significant contribution to climate change with the move to its sustainably designed and delivered campus in 2007. This was recognised through the accreditation of BREEAM excellent and CEEQUAL standards, with the former achieving the highest ever score recorded for an HE institution. The campus development reduced our annual operational carbon mission by 38% and the holistic approach we adopted to environmental sustainability has ensured that further operational based awards have been achieved. These include recognition for our low carbon IT solutions, renewable fuel sources and a range of active travel awards. Our ongoing commitment to the environment ensures that our CO2 emissions per student are regularly amongst the very lowest across the UK HE sector.

Our future ambitions are set out clearly in the University Climate Change and Net Zero Strategy – A Shared Common Future, approved by the Court in February 2023. We continue to deliver on the Climate Emergency and sustainability across the three pillars – environmental, economic, and social. The current target in our Climate Change and Net-Zero Strategy is for the University to be net-zero by 2044 with an interim reduction target of 42% by 2030.

As part of the annual operational planning process the Campus Services Directorate will establish targets for energy efficiency, waste management, travel and transport, as well as landscape and biodiversity. These are subsequently tracked through a series of key performance indicators relating to carbon, energy and waste management, with an annual review conducted. Substantive progress is being made towards this interim target, with the potential that this will be achieved significantly ahead of schedule.

While decarbonisation is a core element within the strategy, a holistic University-wide approach beyond simple carbon reduction is proposed which demonstrates committed leadership on climate change. It reflects our roles as a civic partner and in educating and inspiring future generations and researching the impacts of real-world climate change on society. The strategy draws on the role of the University as an enabler in educating and inspiring future generations in influencing sustained and embedded change rather than a focus purely on carbon metrics or the physical and operational boundaries on the University operations.

Future Developments

In order to take advantage of further opportunities as they arise, the University is continuing to focus on ensuring that its academic, infrastructure, digital, human resources and financial strategies are closely aligned. The University continues to make good progress in a number of areas which will ensure that it is able to achieve the objectives set out in its strategic plan during the period through to 2025. This will, in turn, allow the University to continue to generate an adequate level of cash in the short to medium term and to maintain an adequate level of reserves. The Court carries out regular monitoring of the University’s financial sustainability, as described above.

The funding environment for Scottish higher education institutions was already challenging, with sector-level evidence that funding for publicly funded teaching and research was insufficient to cover the full cost of delivery. Universities continue to face significant pressures on costs, particularly staff costs and inflation impacted non pay costs. In order to address this position, the University has a five-year proposition, covering the period to 2027.

This proposition involves targeting developments in three main areas, as follows:

Increasing postgraduate student numbers;
Developing new online provision at scale; and
Growth in transnational education partnerships.

Notable progress has been made in two of three development areas identified above. The University successfully commenced its first online course in 2023, and now has an offering of nine courses, with further courses under in the development pipeline. Transnational partnerships have been launched in new markets in Uzbekistan and Sri Lanka, and the University has a further partnership in India as well as expanded our course provision with our longest standing collaborator in Greece. This has delivered significant growth in TNE headcount, which the University forecasts to continue as programmes mature and further new opportunities. However, the University recognises the continuing challenging recruitment environment with respect to postgraduate students, which has limited our ability to increase student numbers.

The long-term financial health of the University will continue to depend upon its ability to grow and diversify its income base, and to control costs, whilst making available sufficient funds needed as an upfront investment to enable the growth areas noted above to take place.

On behalf of the University Court
Pamela Woodburn
Chair
20 December 2024

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Strategic Report

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