The BI Norwegian Business School institution delivered good financial results in 2014. BI’s total turnover was MNOK 1,407 in 2014, compared to MNOK 1,395 in the preceding year.
The Group
At the beginning of the year, the Foundation BI Norwegian Business School acquired the D block in the BI building in Nydalen by assuming all shares in the building’s holding company and domestic company. The holding company, BI Bygget D-blokka AS, is a leasing business and has a substantial balance sheet value as owner of the section. The Foundation has full control over the company, which is considered not to be of an insignificant value, ergo triggering a requirement for consolidated financial statements.
The BI Norwegian Business School Group consists of the parent company - the Foundation BI Norwegian Business School, as well as the wholly owned subsidiaries BI Bygget D-blokka AS, Sandakerveien D-blokka AS, Bedriftsøkonomisk Institutt AS, Sandakerveien 116-118 AS, and Studentenes Hus Nydalen AS
The Group’s turnover in 2014 was NOK 1 432 million. The operating profit ended at NOK 145 million.
The Group’s real estate investments are financed through mortgages in DNB ASA. At year-end 2014, the remaining balance on the mortgage was NOK 1 277 million. The Foundation has granted a subordinated loan to subsidiary BI Bygget D-blokka AS. At year-end 2014, the remaining balance on the subordinated loan was NOK 189 million. The loan was granted on commercial terms. Total financial costs for the Group amounted to NOK 51 million.
Following the investment in the D block, BI Norwegian Business School had the total property mass appraised. An external analysis firm estimated the value of Campus Nydalen at just over NOK 2.5 billion.
The year’s profit before tax came to NOK 111.8 million. Tax costs for the year totalled NOK 1.5 million, and are related to the leasing activity in BI Bygget D-blokka AS. Net profit thus amounted to NOK 110.3 million for 2014.
The Group has the ambition to generate a positive cash flow over time. BI delivers satisfactory cash flow generated from operations. Depreciations are higher than before due to historic investment levels. In 2014, the investment level in fixed assets fell somewhat compared with the previous year. However, the Foundation also invested in the D block. This was financed through taking up long-term debt. The overall increase in net liquid assets was NOK 47 million. The Group has satisfactory liquidity. As of 31 December 2014, the Group’s book equity was NOK 493 million.
Foundation BI Norwegian Business School
In 2014, BI Norwegian Business School achieved a total turnover of NOK 1 407 million, compared with NOK 1 395 million the year before. This is an increase of just below one per cent. The turnover figures include invoiced rent and overhead costs for tenants. State contributions of NOK 258 million were received in 2014, amounting to 18.3% of the operating revenues (NOK 246 million and 17.6% in 2013).
The operating profit for 2014 came to NOK 134 million. This is identical with the operating profit in 2013. Challenging times in the Norwegian energy sector led to the loss of income from already planned courses and programmes for central business players. Income growth was somewhat reduced for this reason. Due to a plan change in the Norwegian Public Service Pension Fund (SPK), this year’s pension cost was NOK 22.6 million lower than expected. Depreciation for the year increased by NOK 21.7 million due to considerable investments in digitalisation of both students’ interaction with the school and of processes associated with planning, implementation, as well as supplementary work relating to examinations.
In February 2014, BI sold all shares except for one in the Lithuanian business school ISM. Gains from the sale amount to NOK 12.1 million. The amount has been recorded under financial income. The Foundation granted a subordinated loan to a subsidiary. Of this, NOK 6.6 million have been charged in interest for 2014. Net financial items are a cost of NOK 27.1 million compared with a cost of NOK 59.8 million in 2013.
The year’s pre-tax profit came to NOK 106.9 million. There is no tax cost for 2014, due to no payable taxes and no recording of deferred taxes on losses carried forward. The annual profit after taxes was thus NOK 106.9 million. The corresponding figure for 2013 was NOK 73.9 million.
BI Norwegian Business School has the ambition for the Foundation to generate positive cash flow. Investments in fixed assets were somewhat lower in 2014 compared with the previous year. The overall increase in net liquid assets was NOK 41 million. Financing of the D block acquisition was provided though assuming new long-term debt. The Foundation has satisfactory liquidity.
The Foundation follows a financial hedging strategy. This entails that between 33% and 67% of the mortgage must always be hedged with fixed interest agreements. At year-end, the degree of hedging is in the lower end of the framework. The Foundation is exposed to limited currency risk. Transactions of a substantial size are hedged according to the strategy.
As a consequence of being financed by student payments, BI Norwegian Business School is exposed to significant market risk. The Foundation depends on a large volume of students at bachelor level and a steady inflow of students. BI’s management continuously addresses market exposure and is certain that the organisation is equipped to handle this correctly, and that the Foundation is robust enough to withstand fluctuations in results.
As of 31 December 2014, the Foundation’s equity was NOK 490 million, compared with NOK 548 million as of 31 December 2013. This year’s deviations from estimated pension costs amounts to NOK 165 million and has been recognised against the foundation’s equity (cf. Note 14). The deviation is largely explained by the significantly reduced discount rate, but also by other minor adjustments of preconditions when calculating the pension liability.
The Nydalen building has been depreciated by 1.5% in 2014. Other fixed assets have also been depreciated according to the same principles as in previous years.
Of the outstanding balance of NOK 1276.5 million, NOK 33.5 million falls due in six instalments; the first instalment is due 20 April 2016. Annual instalments amount to NOK 90.5 million. The remaining balance falls due on 20 December 2018. BI has the opportunity to pay instalments of at least NOK 10.0 million between due dates. BI Norwegian Business School satisfies the lender’s requirements for safeguarding the terms.
BI Norwegian Business School has satisfactory liquidity
In accordance with Section 3-3 a of the Norwegian Accounting Act, we confirm that the going concern assumptions have been met.
ANNUAL PROFIT AND ALLOCATIONS:
| This year's allocation (use) of research development funds | MNOK (8.2) |
| This year's allocation (use) of funds for MSc and PhD scholarships | MNOK (5.2) |
| Transfer to other equity | MNOK 120.5 |
| TOTAL ALLOCATIONS | MNOK 106.9 |
| Foundation capital | MNOK 1.3 |
| Research development fund | MNOK 44.6 |
| Fund for MSc and PhD scholarships | MNOK 5.8 |
| Other equity | MNOK 438.0 |
| TOTAL EQUITY | MNOK 489.7 |
Allocation of research development funds takes place through the annual budget process. Designated guidelines have been prepared for allocation of the fund for MSc and PhD scholarships.