Board of Trustees Report

Annual Result

The Foundation BI Norwegian Business School achieved good financial results in 2016 with a profit of 86.5 million. BI's total turnover was 1.514 million in 2016 against 1.451 in 2015.

 

The Group

The Foundation BI Norwegian Business School is the parent company in a group structure consisting of subsidiaries BI-Bygget D Blokka AS, Sandakerveien D-Blokka AS, Sandakerveien 116-118 AS, Bedriftsøkonomisk Institutt AS and Studentenes Hus AS. All companies have business address in Nydalsveien 37, Oslo. Of the subsidiaries, only BI-Bygget D-Blokka AS has had activity in 2016 through the rental of premises in D-Blokka. The group’s turnover in 2016 was 1.532 million, and the operating profit was 137.4 million.

The group's property investments are financed through a mortgage at DNB BANK ASA, with security in the entire property portfolio in Nydalen. The mortgage is during 2016 repaid by 90.5 million and the outstanding balance at the end of the year amounted to 1.163 million. The Foundation granted an interest-only subordinated loan to its subsidiary BI Bygget D-Blokka AS in 2014, and at the end of the year the outstanding balance was 174 million. The loan is granted on market terms. In 2016, the group's financial expenses were 46.9 million. Real value of buildings in Nydalen is expected to be well above accounted value.

The group’s profit before tax was 94.8 million. Tax expense was 2.0 million and this relates entirely to rental operations of its subsidiary BI-Bygget D-Blokka AS. Profit after tax was thus 92.8 million.

Cash flow for the year's activities is positive and has strengthened the group's liquidity position with 80.5 million during the year. The main reason for the strengthening is a significantly lower level of investment than budgeted, combined with good operating results. The group has a satisfactory liquidity.

The group’s recorded equity as at 31 December 2016 was 766 million.

The Foundation BI Norwegian Business School

BI Norwegian Business School obtained revenue growth of 62.5 million from 2015 to 2016. The increase amounted to approximately 4.3% growth and resulted in a total turnover of 1.514 million. This constituted State aid of 277.5 million, or 18.3% of revenue. Teaching revenues rose by 4.6% to 1.159 million and income from externally funded research fell by 8.1%, from 35 to 32.5 million. Other revenue was 44.9 million, of which 24.1 million were rental revenues.

Operating profit was 123.7 million, which is 44 million more than in 2015. The main reason for this is a strong growth in revenues and 22.0 million lower expenses related to pension plans as a result of changes in actuarial assumptions and non-recurring items as a result of change in the disability pension scheme in Storebrand. There are increased costs associated with the lease of premises, a consequence of the creation of a separate "assessment centre" in the D-block, and that IT costs are increasing in connection with previous years' investments in digital solutions.

Furthermore, depreciation fell by 5.9 million from 2015 due to lower investment in 2016 than in 2015. The reason is related to the weak number of applicants in the spring that resulted in the postponement of several investment decisions for the following year. Investments in 2016 totalled 32.2 million.

Net financial income (expense) is at approximately the same level as in 2015. A total of NOK 90.5 million in mortgage loans was repaid to DNB in 2016. The Foundation provided a financial hedging strategy, which involves securing between 33% and 66% of the mortgage at all times through fixed rate contracts. On the reporting date, the share of the loan that is tied up in fixed rate contracts amounts to 550 million. Fixed interest contracts have different durations, and the first ends in 2018, while the longest ends in 2028. The hedging ratio on the reporting date is 47%.

Cash flow for the year's activities is positive and has strengthened the Foundation's liquidity position with 62.9 million during the year. The main reason for the strengthening is a significantly lower level of investment than budgeted, combined with good operating results. The Foundation has a satisfactory liquidity.

In virtue of being funded by student payment, BI Norwegian Business School is exposed to significant market risk. The Foundation relies on a large volume at bachelor level and steady influx of students. The BI Management addresses the market exposure continuously and is confident that the organization is equipped to handle it correctly and that the foundation is solid enough to tolerate fluctuations in results.

BI Norwegian Business School’s equity rose to NOK 750.6 million in 2016. Net income contributed to an increase of 86.5 million. Actuarial losses relating to the pension scheme went the opposite way and reduced equity by NOK 42.2 million. Total equity increased by NOK 44.3 million in 2016.

The building in Nydalen is depreciated by 1.5% in 2016 and has by the end of the year a carrying value of 1,508 million. Other construction and equipment funds are depreciated using the same principles as in previous years.

Outstanding debt at the reporting date amounts to 1.163 million. In 2016 instalments corresponding 90.5 million have been paid. The remaining loan matures on 20 December 2018. In addition to ordinary instalments, the foundation has the option to pay extra instalments of at least 10.0 million between maturities. On the reporting date the foundation meets the lender’s requirements for covenant.

In accordance with the Accounting Act §3-3 a it is confirmed that the prerequisites for continued operations are present.

Annual results and dispositions

The Board proposes the following allocation of profit:

Perennial supply / (use) of research development fund

 (-9,1) million

Transfer to other reserves

95,6 million

Total allocated

86,5 million

 

The Foundation’s equity pr. 31 December 2016 amounts to:

Foundation capital

1,3 million

Research development fund

22,3 million

Other equity

727,0 million

Total equity

750,6 million