Oxford University Press Annual report of the Delegates, 2003/2004 (abridged)

"Even if, implausibly, OUP were able to persuade the [Charity] Commisioners that teaching the Chinese to speak English is a legitimate charitable aim within the remit of the University of Oxford (in which case it would be a legitimate charitable aim for anyone else), nothing could be inferred from this about the shifting, or flogging, of pallets of paper... This distinction between education and book-trading becomes especially clear in our new Internet Age: if the University's and its Press's aims are purely charitable and educational, why don't they simply download all of their teaching materials onto a free Chinese website?" - The Remedy, page 254. In the Vice-Chancellor's and the Chief Executive's reports below, Akme has highlighted two key, notably strident (provocative?) paragraphs in bold maroon.

Contents (printed page numbering)
03 Foreword by the Vice-Chancellor
04 Report of the Secretary to the Delegates
06 Geographic Report: International Branches
18 Preamble to Financial Report
19 Abstracts of the Combined Balance Sheet of the Trading Operations as at 31/3/2004 (+2003, restated), plus the year's Combined Results
20 Abstract of the Statement of Recognized Gains and Losses of the Trading Operations for the year ended 31/3/2004 (+2003)
21 Abstract the Combined Balance Sheet of the Delegates' Property and Reserve Fund as at 31/3/2004 (+2003)
22 Abstract of the Combined Statement of Financial Activities of the Delegates' Property and Reserve Fund for the year to 31/3/2004 (+2003)

Homily on back cover:: Oxford University Press is a Department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide.

Foreword by the Vice-Chancellor

Worldwide publishing continues to further our scholarly mission

The Press had a successful year in 2003/04. It continued to produce high-quality and innovative publishing across its range of businesses, and at the same time delivered a strong financial result.

A particular highlight was the publication of the first phase of Oxford Scholarship Online, only three years after the project was initiated, and a year after the system 'build' began. This huge database of more than 700 cross-indexed and cross-referenced monographs has been enthusiastically received by librarians, researchers, and teachers. It is a refreshing approach to publishing scholarly monographs; it is an important experiment for the academic and library community; and it is an initiative that only Oxford University Press has the resources to launch.

The Press's print output has, however, not decreased. More than 1,300 new scholarly titles were published during 2003/04; the long list of publications at the end of this report testifies again to the Press's success in fulfilling its mission to 'further the University's objective of excellence in research, scholarship, and education by publishing worldwide.'

The financial contribution made by the Press has become increasingly important to the rest of the University in recent years. Last year the value of the guaranteed minimum annual transfer was increased to £12 million. I am extremely pleased to report that the actual transfer for 2003/04 was well in excess of that minimum at £17.8 million, with an in-kind contribution of a further £0.7 million.

In the Delegacy Ralph Walker retired after 10 years. He was instrumental in helping to make the Press the leading scholarly philosophy publisher in the world. The rigour and clarity of his thinking will be missed. He is succeeded by Roger Crisp. We also appointed a third external member of Finance Committee: David Levin, chief executive of Symbian.

Sir Colin Lucas
Vice-Chancellor
University of Oxford

Report of the Secretary to the Delegates

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OUP maintains creditable performance despite currency volatility

The Press conducts over 80 per cent of its business outside the UK and, as a result, has more exposure to currency movements than do many other businesses. In 2003/04 this exposure, particularly to the weakness of the US dollar, was highlighted more than in previous years. Our sales of £388.7 million showed a like-for-like growth of 6.2 per cent, even though the headline figure indicates a 1 per cent decline on 2002/03 sales, which included an additonal (sic) three months of journals sales. To give an idea of the scale of the movements, our turnover for 2002/03 of £392.5 million is reduced to £374.5 million at latest exchange rates, an adjustment of 5 per cent. In the context of this currency volatility, alongside the continued economic downturn in the USA and the outbreak of SARS in Asia early in the year, this was a creditable performance. It compares well with the published results of both our scholarly and commercial competitors.

The Academic Division had another excellent year with some remarkable publishing successes, solid sales growth, and a noteworthy increase in surplus. Higher education, law, medicine, reference, and academic trade titles all performed well. The Journals Division did extremely well to meet their original sales budget in the year that saw the bankruptcy of one of the main subscription agents, RoweCom, at the height of the renewal season. Demand for our online journals is increasing rapidly and we have been particularly successful in signing deals with library consortia worldwide. Our journals business has also led the way in experimenting with open access models in the journal Nucleic Acids Research: an initiative that is totally appropriate for in organization such as the Press, which is part of the scholarly community.

Like the rest of the US publishing industry, we experienced difficulties in our main markets: libraries, retail stores, and higher education. Cuts in state budgets continued to damage libraries' ability to acquire; throughout most of the year the retail market suffered the effects of a weak economy with stores reluctant to take chances on new titles and with returns remaining extremely high; and the higher education market experienced lower growth than it has in the last eight years. In the first full year of the newly acquired Grove Dictionaries of Music and Art, sales of the online versions performed strongly but print sales were affected by funding cuts.

The International Division produced its best set of results ever. Kenya and South Africa had exceptionally good years with strong performances from Australia, China, India, Malaysia, and Pakistan. The majority of this growth came from local schools markets supported by dictionary publishing, and higher education publishing in selected markets. In India and Pakistan we continue to publish the leading titles on South Asian history, politics, literature, and economics.

UK schools experienced a funding crisis in 2003/04, which led to a 12 per cent decline in spending on primary textbooks and a 7 per cent decline in secondary book spending. In these tough conditions the UK Education Division performed well in actually growing its primary sales and substantially increasing its market share on the back of the updated Oxford Reading Tree scheme. We saw substantial growth in our sales of electronic resources to schools because of the ring-fenced funding provided by the government. There is a perverse irony in the government's refusal to provide funding specifically for textbooks, which most schools desperately need, while it over-funds the provision of electronic resources which most schools regard as nice-to-have extras.

The ELT Division had another year of solid sales growth which produced a record-breaking net result. We continue to win market share despite greater competition from international and regional publishers, and in the context of ongoing uncertainty surrounding educational reforms in a number of markets. Italy, Spain, Turkey, Eastern Europe, and Asia all performed well. The US market was weaker than usual because of cuts in government programmes.

Our business in Spain established itself in 2003/04 as one of the country's leading schoolbook publishers. Building on the base of our success in ELT, we have created in six years a Spanish language textbook business that is the third largest secondary publisher in the industry. We experienced very strong growth in Spanish publishing while ELT maintained its commanding position in a year of limited change in the market.

The post-tax surplus of the Press increased from £58 million in 2002/03 to £60.6 million in 2003/04. It is worth highlighting that the figure of £58 million for 2002/03 included £8 million of non-recurring items; on a like-for-like basis, therefore, the figures show a 21 per cent increase. All the Press's operating divisions, with the exception of OUP USA which had a difficult year, delivered their budgeted surplus: this was a result achieved in part by steady sales growth but also by strong and effective management which has been instrumental in achieving further improvements in key operating ratios. This record level of trading surplus has been underpinned by very good cash generation.

University presses have suffered particularly badly in recent years. They have been exposed to the steadily declining market for scholarly monographs and the problem last year in the USA of cuts in state budgets for the funding of university and public libraries. We occupy a unique position amongst university presses. We publish more scholarly monographs than anyone else and more than we used to (10 per cent more in 2003/04 than five years ago). We also publish across an extraordinarily broad range of subjects and market levels. The worldwide spread of our operations is unrivalled. And the expansion of the Press in recent years has been such that the scale of our undertakings is more than three times that of the next largest university press in the world, Cambridge.

This diversity could be seen as a disadvantage: it potentially causes dilution of our investment where others might better concentrate their energies through publishing with a narrower focus. On the other hand, some of the benefits of such diversity can be seen in the results of the Press this year: for example the going has been tough in US institutional and consumer markets, and the UK and Canadian schoolbook markets. Sales in these markets suffered as a result but overall performance was bolstered by strong performances by our businesses in Spain, Italy, East Africa, and South Africa where we achieved remarkable growth in our publishing for schools. In this respect the scale and breadth of the Press's operations is a great strength.

It is also important to emphasize how the Press's consistent level of success in its educational publishing (in particular its ELT and school publishing programmes) has underpinned the Press's core scholarly mission. Almost all of the Press's academic and scholarly publishing is centred in the Academic and Journals Divisions in Oxford, in OUP USA in New York, and in our branches in India and Pakistan. We do not expect this publishing to be loss-making in overall terms but without the financial success that has come from educational publishing the Press would not generate sufficient funds to support its long- term, large-scale scholarly and reference publishing. In 2003/04 the costs of subventing the Oxford English Dictionary and the Oxford Dictionary of National Biography were £6.4 million. We have committed £2 million to the development of Oxford Scholarship Online which we launched in late 2003 to an enthusiastic response from the library and scholarly community. The Delegates would find it difficult (if not impossible) to sanction investment in these publishing initiatives, which are so important to the needs of the scholarly community, without the confidence that comes from the financial strength of the Press.

Over and above its publishing investment, in recent years the Press has been providing substantial and increasing financial support for the rest of the University. The guaranteed minimum annual transfer was initially set at £9 million in 1999 and was increased in 2003 to £12 million. Strong financial performance has allowed the Press to exceed this amount in every year since 1999. Transfers are calculated on the combined results of the Trading Operations and the Delegates' Property and Reserve Fund, and are set out here for the last five years. In 2002/03 the Effective Operating Reserve (EOR) was run down by the special transfer of £60 million to enhance the academic mission of the University. The rebuilding of the liquid funds in the EOR was seen as a priority and I am pleased to be able to report that we are well on the way to this target with the EOR standing at £42.8 million at the end of 2003/04. We are likely to achieve the goal of restoring the reserve to full funding (c. £60 million) by the end of 2004/05. The annual transfer for 2004/05, based on this year's results, will be £21.4 million.

Henry Reece
Secretary to the Delegates and Chief Executive.

WINNER OF AKME'S
Charitable Paragraph of the Year Award, 2004

Geographic Report 4. International Branches

As the year began political instability in several International Division territories was causing concern; reductions in funding, particularly in aid-dependent countries, seemed a definite possibility, and we thought that SARS might cause a serious downturn in China and possibly in other markets. In fact, SARS appeared to have little effect on sales in China, aid money held up, and the International Division produced its best result ever. Sales growth saw a substantial double-digit increase over the previous year and the net result reached an unprecedented level.

Financial Reports

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Abstract of the Accounts of the Trading Operations and the Delegates' Property and Reserve Fund of Oxford University Press for the year ended 31 March 2003

Introductory note

The Delegates wish to observe that:

(a) the abstracts of Accounts are drawn from the full audited accounts of the Trading Operations and the Delegates' Property and Reserve Fund of the Press;

(b) with regard to the abstract of the combined Balance Sheet of the Trading Operations, the short-term cash position is substantially stronger at 31 March than at other times of the year;

(c) a proportion of earnings and cash balances arising in certain overseas countries is not available for use elsewhere;

(d) the Delegates' Property and Reserve Fund was established during the year ended 31 March 1984 in order to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Trading Operations. The Fund holds and manages the properties of the Press together with the income arising therefrom. Since the Press is a charitable enterprise and does not enjoy the protection of limited liability, the purpose of the Fund is as follows:

(i) to provide protection to the University against its having its credit called upon to underwrite any future liabilities of the Press's Trading Operations. The volume of net liquid reserves appropriate to achieve this objective is determined by the size of the Press's Trading Operations;

(ii) to provide the Delegates with a source of finance from which they may make grants for specific University projects.

Statement by the Auditors to the Delegates of the Oxford University Press

We have audited the full accounts of both the Trading Operations and the Delegates' Property and Reserve Fund of Oxford University Press for the year ended 31 March 2004 and submitted unqualified audit reports thereon to the Delegates.

Our audits have been carried out as prescribed by the Statutes of the University and according to instructions received from the Delegates and approved United Kingdom Auditing Standards.

(Signed)
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors

Crawley, 6 July 2004

Abstract of the Combined Balance Sheet of the Trading Operations as at 31 March 2004