The last year has been like playing Snakes and Ladders.
As we work through Q1 2021, we enter the next stage of tackling Covid-19 when the UK Government urges us to be optimistic but patient and are soon to set out their roadmap towards easing of restrictions; the return to schools in England is already in the diary for early March. Then there is the Budget…
Reflecting over the last year, the whole spectrum of education has adapted; from virtual Governance – senior leadership – teaching & support – pupils – front & back of house and across all other operational aspects of a school, and of equal importance the circumstances of the school fee payers.
For independent schools we have seen deferred capital projects, planning consents granted for under-utilised buildings/land and surplus assets sold to realise cash or reduce debt.
As the pandemic took hold, revenues compressed not only school fees, but other income sources such as event income and holiday clubs evaporated, then the inevitable conversations with fee payers around concessions plus furloughing staff and how this impacted on the operation of the business and workloads of non-furloughed staff. Many independent schools with boarding, granted fee concessions or at worst charged day rates, the latter were also being discounted.
There have been news articles purporting overall turnover of some school operators being 5% to 10% lower than the previous year. Based on the last handful of settings we have appraised these headline figures are not in dispute, but to get the whole picture, we have seen examples of stabilised income and with cost savings (eg furlough and/or business rate reductions) the impact on net surpluses has been less stark. One recent set of P&L’s demonstrated a 5% reduction in Net Income but with a 1.5% enhancement to YE 2020 EBITDA.
Fluctuations are to be expected in all trading operational going concerns with movement across the KPI’s and to a degree, asset valuations over any given period. The pandemic has clearly impacted on values but with continued hands-on-management along with prudent costs controls, the well managed independent schools will continue their journey of recovery. Some operators have restructured the ‘new norm’ not to include some of the ‘old ways’.
An important aspect is to identify the reasons for fluctuations, act accordingly and get property assets appraised on a regular basis.
So how does your property asset value look against your P&L?
Article written by David Mathieson, Director (Education) at Aitchison Raffety. Contact David via email firstname.lastname@example.org or call 01494 480809.