Annual Report 2019

Annual result

With a profit of NOK 79.6 million, the financial result for the Foundation BI Norwegian Business School for the year 2019 was good. Total turnover amounted to NOK 1,615 million as compared to NOK 1, 576 million in 2018.


The Foundation BI Norwegian Business School is the parent company in a group structure consisting of the wholly-owned subsidiaries BI-Bygget D-Blokka AS, Sandakerveien D-Blokka AS, Sandakerveien 116-118 AS, Bedriftsøkonomisk Institutt AS and Studentenes Hus AS. The business address of all the companies is Nydalsveien 37, Oslo. Among the subsidiaries only BI-Bygget D-Blokka AS has had any activities in 2019 through the letting of premises in the D-Blokka (D block). BI-Bygget D-Blokka AS owns 21.7 per cent, whereas the Foundation BI Norwegian Business School owns 78.3 per cent of the property in Oslo. The group’s turnover in 2019 totalled NOK 1,639 million, and the operating profit amounted to NOK 122.2 million.

The group’s property investments are financed by a mortgage with DNB Bank ASA, with all the property at Nydalen as security. In the course of the year, the group has paid ordinary instalments of NOK 48.0 million and at the balance sheet date the remaining mortgage totals NOK 547 million. Total financial items amounted to NOK 25.8 million in 2019. The actual value of the buildings at Nydalen are expected to substantially exceed the book value.

The group profit for the year before tax totalled NOK 96.4 million. Tax amounted to 5.2 million, and was related to the letting of premises both by the parent company and the subsidiary BI-Bygget D-Blokka AS. Profit for the year after tax totalled NOK 91.3 million.

The activities of the year generated a negative cash flow of NOK 56.4 million. At year end, NOK 173.6 million of the group’s drawing rights of NOK 200 million had been utilized, as against NOK 120.2 million at the same time in 2018. The group’s book equity as at 31 December amounted to NOK 960.2 million.


The Foundation BI Norwegian Business School obtained a growth in income of NOK 39.3 million from 2018 to 2019. The increase constitutes about 2.5 per cent and resulted in total revenues of NOK 1,615 million. This included government subsidies of NOK 347.8 million, or 21.5 per cent of the turnover. Revenues from teaching went up by NOK 15.0 million to NOK 1,186 million. This increase may basically be ascribed to a price rise for all programmes, as well as a growth in activities within the further and continuing education segment. The full-time programmes experienced a sharp decline in admissions in the autumn of 2018, the effect of which was also felt in 2019. The admission to the full-time bachelor’s programmes in 2019, however, was very positive, three new programmes at bachelor’s level were well received by the market. In the longer term, this will compensate for the decline in 2018. In the further and continuing education segment, growth was basically seen in in-house training programmes, particularly for the public sector, in addition to a substantial growth in income for our EMBA programme offered in cooperation with Fudan University in Shanghai.

Thee operating profit increased from NOK 74.1 million in 2018 to 103.7 million in 2019. The main cause of this sharp increase is a non-recurring impact due to the change in the pension scheme of the Norwegian Public Service Pension Fund as from 1 January 2020. This change is a scheme change and results in an extraordinary cost reduction of NOK 47.3 million in 2019. Adjusted for this non-recurring effect, the underlying operating profit amounts to NOK 56.4 million, which is lower than for 2018. A large share of the cost base is related to pay and social costs. If adjustments are made for the non-recurring effect related to pensions, pay and social costs have risen by 5.7 per cent. This is due to a good wage settlement for employees and a net growth in the number of faculty members. In the autumn of 2018, a new and bigger campus was opened in Trondheim and 2019 was the first accounting year with full-year operation of the new campus, which resulted in a stronger rent increase than justified by the price rise. IT costs go up due to increased licensing and maintenance costs for our support systems. The costs related to cooperating schools are also increasing due to an increase in the scope of activity for our joint EMBA with Fudan University. On the other hand, we see a sharp reduction in marketing costs by -15,4 per cent. Part of this reduction can be ascribed to the fact that the production of marketing materials takes place in non-annual cycles. As regards other cost items, there are only small changes.

Depreciation increased by NOK 1.4 million from 2018. This is due to an increase in investments of NOK 16.3 million from 2018 to 2019.

Net financial items (costs) are marginally different from 2018. This is due to a somewhat higher floating interest rate, which has counteracted the effect of instalments paid. In total, ordinary instalment of NOK 38.0 million on the mortgage with DNB were paid in 2019. On the balance sheet date, a total of NOK 173.6 million of the drawing rights of NOK 200 million had been utilized, which represents an increase of NOK 53.4 million as compared with 2018. The Foundation applies a financial hedging strategy which implies that a minimum of 33 per cent of the mortgage shall be hedged through fixed-rate loan agreements at all times. At the balance sheet date, the share of the loan that is subject to fixed-interest loan agreements totalled NOK 400.0 million. On the balance sheet date, the hedging degree is 96 per cent. The fixed-interest loan agreements have different terms (duration) and the first one expires in April 2022, whereas the agreement with the longest term expires in 2028. Over-hedging is expected from April 2021 until April 2022 when the first fixed-interest rate loan agreement falls due.

The cash flow for the year’s activities is negative with an impairment of NOK 56.4 million. The main reason for the negative liquidity development is found in the large payments to the pension schemes. In 2019 a total of NOK 145.7 million were paid to the pension schemes, whereas in 2018 the corresponding amount was NOK 84.6 million. Moreover, as mentioned above, investments have been higher in 2019 than in 2018. In 2019 the cash flow from operating activities was NOK 57.2 million as compared to NOK 122.2 million in 2018. The liquidity of the Foundation is considered to be satisfactory; nevertheless, pension scheme payments cannot remain at such a high level as in 2019. It is not perceived to be difficult to find neither short-term nor long-term funding, and the Foundation currently has an agreement with DNB on drawing rights with a varying framework over the year. During certain periods of the year there is no need for a drawing right, since the undertaking has excess liquidity during the periods at the beginning of each semester when the bulk of tuition fees is paid in.

Since the funding of the school is based on tuition fees, and since the school competes with public institutions that do not charge any fees, the market risk, particularly for full-time programmes, is substantial. The school is dependent on a large volume at bachelor’s level and a steady influx of students. The management team is addressing the market exposure on a continuous basis and is confident that the organization is prepared to deal with it in an adequate manner and that the Foundation is sufficiently solid to manage result variations. The application numbers for full-time programmes starting in the autumn of 2020 are promising and confirm that the Foundation offers attractive programmes of study. It is expected that admissions to full-time programmes in the autumn of 2020 will at least be at the level of 2019, and this is a good indication of the income for the next three years. In the time to come, there will be a focus on securing the position in the national market and on strengthening the position in the international market. The large volumes at bachelor’s level are expected to continue, and there will be a focus on growth for MSc programmes. This is in a market where according to the projections of SSB (Statistics Norway), the number of youth each year will decline slightly the next two years and then again slightly rise. The need for further and continuing education in the coming years is considered to increase. This assumption is supported by the current Government’s focus on further and continuing education. Working life is undergoing continuous change and this will result in an increased need for life-long learning. Even if volumes are already large in the further and continuing education segment, we expect to participate in this development also in the years to come. A strengthening of the support functions for externally funded research is expected to lead to an increased number of applications for external funding and to increase project funding from the Research Council of Norway and the EU. Already in 2020 a major project funded by the EU is being started.

The financial risk of the company is monitored and analysed on a continuous basis. Financial risk includes credit risk, liquidity risk and interest rate risk. Credit risk mainly consists of accounts receivable. This risk is considered to be small, since the company has good collection routines. Net losses on claims have been stable for many years and there is no reason to believe that this will change substantially. Liquidity risk is considered to be low, since the liquidity flow to the company is stable and predictable. Interest rate risk is considered to be limited. The company currently has an interest-bearing mortgage loan of NOK 417 million, of which the amount of NOK 400 million is hedged through interest rate swap agreements. In addition to the mortgage loan, comes the utilized portion of the drawing rights that will vary considerably during the year.  

The Foundation’s equity rose to NOK 911.6 million in 2019. The profit for the year contributed to an increase of NOK 79.6 million. An estimated deviation related to the pension scheme contributed to an increase of NOK 14.5 million.

The building at Nydalen has been depreciated by 1.5 per cent in 2019 and at year end its balance sheet value is NOK 1,440 million. Other fixed assets and operating equipment have been depreciated according to the same principles as in previous years.

On the balance sheet date, the remaining debt amounts to NOK 590.6 million including NOK 173.6 million of utilized drawing rights. The Foundation has entered into a new five-year loan agreement with DNB. On the balance sheet date, the Foundation meets the lenders requirement for covenant.

In accordance with Section 3-3 a of the Norwegian Accounting Act, we confirm that the going concern assumptions have been met.