First accounts for New College of the Humanities

New College of the Humanities limited and its for-profit owner, Tertiary Education Services limited, have just published their first sets of annual accounts.

Perhaps unsurprisingly, these are abbreviated: each set comprises only a balance sheet for 30 November 2012 and a very short set of accompanying notes. The information available is therefore much less than with an established university or company where the shares are publicly traded.

What can be gleaned is that the parent, Tertiary Education Services, has run a deficit of £4.3million – turnover and expenditure are not disclosed – since its launch. It is supported by share issues that had raised £7.35million in investment by last November.

Its latest reported capital structure (August 2013) shows that 146 500 shares have been distributed, each with a nominal value of £1. Some of the shares were purchased at a £111 premium, which leads me to include that current investment has reached about £10million.

This is smaller than many might have anticipated. TES has not acquired any tangible fixed assets: altogether, these are only valued at £91 000 and cover office equipment, fixtures and fittings and the value placed on ‘improvements’ made to its leased property in Bedford Square. Instead, TES held nearly £3million in cash and has loaned money to New College of the Humanities, the subsidy responsible for teaching, to support losses there of £212 000 and separate liabilities amounting to £538 000.

The group structure is not charitable, unlike say public or independent schools that charge similar fees; the academic goal – creating an independent liberal arts college – depends on gaining degree awarding powers: the asset in which investors are now most interested (consider the £200million Montagu Private Equity paid for College of Law). Such venture philanthropy is therefore fundamentally ambiguous.

NCH only opened its doors in September 2012, which means that what figures have been published reveal little regarding its two operating months. The use of an accounting year that runs from December to November is awkward for an academic business with those £18 000 annual fees covered in three installments (September, January and April). Again, no turnover is disclosed.

Those whom NCH terms ‘Exhibitioners’ are charged only £7 000 per year, while ‘Scholars’ pay no fees: these students made up ‘30%’ of 2012’s total intake of 60. Here, I was surprised to see that only Scholars are exempt from an additional charge of £600-800 to cover the examination fees levied by the University of London (NCH is not a university and does not have its own degree awarding powers).

As to future strategy, NCH’s attempt to found a free school in Camden has been postponed and it is still unable to unable to sponsor international students from outside the EU. Its home students are ineligible for government student support (towards either fees or living costs).

However:

 “The directors are confident that the envisaged student intake in the financial year 2013 will more than cover the operating costs of the college and result in a profit being realised in the 2013 financial year.”

Technically, owing to its constituting articles, any such profits must be retained by the subsidiary and cannot be passed on to the parent. Money moves out of the subsidiary in other ways: for example, fees for ‘services rendered’ such as administration and catering. These appear to comprise the entirely of TES’s income.

That is, a surplus for NCH is one thing, recovering the investment behind TES is another. The relevant accounts make no such positive prediction about the latter’s profitability: it is a ‘going concern’ owing to ‘current and anticipated bank facilities’.