30 August 2015

Paines Plough 2014 (Act III - assets)


Having previously looked at revenue and expenditure, this third and final part will look at what those numbers really mean for Paines Plough and consider what we might expect to see from them in the future. Here's a quick recap:

£2013/20142012/2013Growth% Growth
Arts Council Portfolio funding314,344313,8015430.17%
Project Specific funding218,483299,896(81,413)-27.15%
Production Revenue139,844168,524(28,680)-17.02%
Donations & other18,09514,7233,37222.90%
Total Revenue690,766796,944(106,178)-13.32%
Support Costs294,545260,91633,62912.89%
Production/Running Costs321,493276,42145,07216.31%
Expenditure616,038537,33778,70114.65%
Profit74,728259,607(184,879)-71.21%

Given that Paines Plough has shown a profit for the last few years (also retaining £47,777 in 2012), it could start to look as if they're swimming in cash. However, it's worth remembering that in 2011 they posted a loss of £-137,045 and that their cash assets are heavily restricted.

In the last installment I mentioned that the 'safer' option for an arts business model is to take measured risks with production costs rather than adding overhead to the support costs (IE small overhead supported by principle activities rather than large overhead to be supported once the organisation 'scales') and this appears to be exactly what happened with the loss sustained in 2011. With the appointment of James Grieve and George Perrin as Artistic Directors in February 2010, Paines Plough took the decision to use up the majority of their reserves to expand their output in an attempt to attract additional funding. An astute gamble (with fairly limited downside given the organisation's position at that time) and there's no doubt that it has paid off for them.

The reserves mentioned above are an important consideration when looking at Paines Plough's overall financial position. Whilst the charity shows a profit of £74,728 for 2014, that does not represent unrestricted cash that can be used for any purpose. Paines Plough actually split their cash holding into a number of different funds:

- 'General Funds' are unrestricted and can be put to any purpose (as long as that purpose falls within core charitable activities). These funds are as close as a charity comes to a true cash asset. ACE portfolio funding and Production Revenue come under this heading.
- 'Designated Funds' are set aside from the General Funds for a specific internal purpose. For example, Paines Plough have made the strategic decision to isolate £40,000 of General Funds for Support Costs. This fund is intended to insure against the loss of an expected funding stream so will generally not be treated as unrestricted cash unless absolutely required.
- 'Restricted Funds' are those that must be spent on a specified project. Since funding can be received and spent in different accounting periods, Restricted Funds are often carried forward to the next period. These funds are an asset but not a truly fungible cash asset.

With that in mind, the below shows how Paines Plough's funds were split at the end of the 2014 period. In addition to the growth of the General Fund, the Designated Funds have been expanded and liabilities have been reduced by around £20,000. All in all, this paints a very healthy picture. Websites like DueDil report the organisation's cash at ~£500,000 but as you see below, this is not a true cash number because it is already allocated. 

£2013/20142012/2013Growth% Growth
General Fund92,31128,54763,764223.36%
Designated Funds40,00020,00020,000100.00%
Restricted Funds349,391358,427(9,036)-2.52%
Total Funds481,702406,97474,72818.36%

So what to expect from 2015? Well, construction of The Roundabout has been completed so a substantial amount of the Restricted Funds will no doubt be converted to a tangible asset. Designated Funds should remain constant and I assume the General Fund will be put to work expanding output or improving production values. Most fascinating will be to see if The Roundabout allows for Project Specific Funding to continue to grow and how that's traded off against Production Revenue and Production Costs. Following 2011's strategic decision to expand output, Paines Plough have been able to take another astute gamble by building themselves a pop-up venue. Just as the 2011 decision has allowed them to move up to the next level, there is reason to be very optimistic that The Roundabout will do the same thing for them over the next few years.

Returning to the original question of the sustainability of small-scale touring, I suppose it all comes down to perspective. From Paines Plough's perspective it certainly seems they are in a growth stage so sustainability is likely taken as a given. Do the 18 actors employed in 2014 consider small-scale touring a sustainable activity? On average, it looks like they were paid ~£2,400 for 11 performances each so... maybe? How about the writers? Well Paines Plough paid out £14,131 for 'Theatre Writing/Royalties and Commissions' in 2014 (could well be more not shown in their accounts from collaborative productions). This was over 8 productions for an average of ~£1,750 per year per writer. Assuming those numbers are correct, I doubt that writers really consider small-scale touring a sustainable platform for their work. Obviously Paines Plough is not the only employment for those artists and this is not a criticism of Paines Plough whose support for artists, new writing and small-scale touring deserves to be held in very high regard. However, there is much to be done before questions about the sustainability of small-scale touring from all corners of the audience are a thing of the past.

29 August 2015

Paines Plough 2014 (Act II - expenditure)

Act I

As previously mentioned, the principles behind sustainable small-scale touring are not particularly difficult to grasp (just get in the van and GO!!! Right?) but are difficult to implement, especially over a long period of time. One of the major tactical issues is the pressing need to keep costs down without compromising the production values. It's all very well securing a bunch of money from ACE but if you end up using that money to add overhead and drive up the cost of each performance then you're likely to fail long-term.

Thankfully, this is not the approach Paines Plough take. Focusing on touring work means they don't need to run a venue; just an office and rehearsal room. This results in minimal overhead which is fairly easy to scale up or down as required. The rehearsal room (and good relationships with many co-producing partners) means they don't need to spend money on space for their output. The spend on their office is around 8.5% of their revenue in 2014 (up from around 6.5% in 2013). More about overhead ratio later. They also focus on productions with only a few actors, where the actors and the set fit in a car that the stage manager can drive, thus keeping production costs down as well.

Probably worthwhile noting at this point that Paines Plough is a charity and is exempt from corporation tax on as long as profits go back into its charitable activities. Those activities are: the development of the arts through the production of plays, the development of artists and the encouragement of public engagement in the arts. As such, it's fairly easy to drop their expenses into 2 broad categories: Production Costs and Support Costs.

£2013/20142012/2013Growth% Growth
Support Costs294,545260,91633,62912.89%
Production Costs321,493276,42145,07216.31%
Expenditure616,038537,33778,70114.65%

Support Costs include all the things that facilitate the production of plays: office overheads (rent, insurance, utilities etc.), governance costs (legal, accountancy, audit fees etc.) and administration costs (in-house salaries, travel, training, IT support etc.). Production Costs are all the things relating to the productions themselves: salaries for actors, stage managers, set, travel, accommodation, storage etc..

The £33,629 increase in Support Costs from 2013 to 2014 mostly results from adding an additional 3 members of staff (8 in 2013 up to 11 in 2014, number includes part-time staff), repairs/renewals and an increase in travel/conferences. While we're talking about salaries, it's perhaps interesting to note that the average salary was just under £20k in 2013 but has dropped to just over £15k in 2014. The logical assumption is that this is the result of taking on additional part-time staff. Also noted in the accounts is the fact that no employee earned £60,000 or more. I'm sure nobody reading this needs reminding that the Office of National Statistics cites the median annual gross wage for inner London as £34,473. This article talks about how the theatre sector is built on the backs of artists but it's important to note that it doesn't necessarily stop there: the industry asks those involved at all levels to subsidise it by eschewing earning potential.

Returning briefly to overhead ratios, Support Costs were 42.6% of revenue in 2014, up from 32.7% of revenue in 2013. A large amount of project specific funding was received in 2013 for The Roundabout Auditorium so that suppresses that year's ratio. The key to a sustainable approach is to keep the support costs down but still have a robust setup in place to support the charity's activities. This may seem obvious but often younger companies (in all sectors) are drawn to a business model that demands they add overheard like there's no tomorrow and hope that eventually their activities will support their overhead costs and not vice versa. Ideally, risk taking should generally only be reflected in the Production Costs. For example in 2011/2012 Paines Plough used the majority of their 'designated reserves' to stage 'Wasted'. This was a strategic decision designed to increase their output and attract additional funding and worked well.

So it's interesting to look at the £45,072 increase in Production Costs. The largest single area of Production Cost spend in both 2014 and 2013 was 'Other Fees'. In 2013 this number was £96,786 but in 2014 it has come down to £68,826. That's almost a £28,000 saving, which is certainly something to be excited about. The additional spend on Production Costs was largely on actors, stage managers, set and sound/electrics.

Interestingly, the number of performances in 2014 was down to 204 from 239 in 2013. Not sure that what follows here is a robust metric (for many reasons) but this means that in 2014 the average cost of a Paines Plough performance was £1576, up from £1157 in 2013. It's difficult to get a real handle on this and clean up the data because although the last couple of accounts state the number of performances, I don't know if their programming works in tax years. I also don't know the details of their contracts with co-producing partners. That said, I'm more than happy to speculate since a cost increase of 36% per performance should result in a causality hunt.

As mentioned, the increases were largely in salaries for actors, stage managers, a bit of travel, set and sound/electrics. This means that things like publicity, tour contras and costumes/props are all about the same. Only 8 productions were staged in 2014, compared to 11 in 2013 so the average number of performances per production is actually up from 22 to 26. So it looks like slightly longer tours with more actors and more spend on set and sound are responsible. This is ignoring the type of production (assuming all small-scale) but that too would be a factor since larger scale productions could conceivably subsidise smaller ones.

What's frustrating when looking at expenditure in submitted accounts is the lack of transparency (not unique to Paines Plough's accounts and definitely not singling them out for this because their accounts are actually quite nicely broken down). It's generally difficult to pinpoint exactly how much money was given to actors, writers, directors, stage managers, sound designers etc.. It's also impossible to answer difficult questions such as where did that 'Other Fees' spend go? In a sector that relies so heavily on unpaid work, increased financial transparency would be a very positive step forward.

At the end of all these ins and outs, Paines Plough were left with retained income of £74,728 for 2014 which is certainly to be applauded. This is down from 2013's number (£259,607) but remember that funding for The Roundabout will be included in that number since the money wasn't spent in that period. As already outlined, Paines Plough's approach to overheads is what makes this small-scale touring model sustainable. It will be interesting to see what happens to the average cost per performance in the next set of accounts and how that number is linked to both Project Specific Funding and Production Revenue.

The third and final part in this series will take a quick look at Paines Plough's restricted and unrestricted funds and what turning a profit really means for a charity with restricted revenue streams.

Act III

27 August 2015

Paines Plough 2014 (Act I - revenue)

Whilst in Edinburgh this month, I took the opportunity to attend a couple of seminars dealing with the more ‘administrative’ side of theatre. That’s right, give me 3500 shows to choose from and I'm going to head straight for the nearest discussion about amortising your production costs.

At one of these seminars I listened to James Grieve (Paines Plough's Artistic Director) talk about how Paines Plough approach the business of small-scale touring. The principles are exactly as you’d expect (minimal actors, minimal set, fit everything in one car, stage manager drives and GO!!! Kind of...) but then someone in the audience asked “Is small-scale touring sustainable?”

From my own experiences of small-scale touring (musician. Kind of...), everything about it is terrible. The van will break down and leave you stuck in a motorway services for 14 hours. The routing will be ridiculous. You will have sleep on the floor in a half gutted house with a toilet that isn’t plumbed in (but many people have kindly used) next to a couple that will not stop touching each other. Or you can sleep in the van. In Ireland. In January.

Oh and also, it can cost a lot to do. You are touring small venues because you are unknown. Since you are unknown, nobody comes to see you which means there’s not really any money in it. Which means you keep telling yourself it’s an investment and next time it will support itself. So the question from the audience didn't really surprise me. It also didn't surprise me that James Grieve's response was that he does believe small-scale touring is sustainable. I suspect that Paines Plough would not have just got themselves a pop-up theatre (The Roundabout Auditorium) if he believed otherwise.

What surprised me was the way in which he said yes. It was so 'definite' that I made a mental note to look into exactly how sustainable small-scale touring is for Paines Plough.

Most of the below is taken from the 2014 annual accounts of Paines Plough Limited, which are the most recent accounts available at time of writing.

First part, revenue:

£20142013Growth% Growth
Arts Council Portfolio Funding314,344313,8015430.17%
Project Specific Funding218,483299,896(81,413)-27.15%
Production Revenue139,844168,524(28,680)-17.02%
Donations & Other18,09514,7233,37222.90%
Revenue690,766796,944(106,178)-13.32%

First thing to note, revenue dropped by around 13% year on year. A proportion of that decrease can be attributed to securing funding for The Roundabout Auditorium in 2013.

£314,344 (roughly 46% of Paines Plough's revenue in 2014) comes from Arts Council England's National Portfolio funding. Essentially no change year on year and looking ahead, there won't be much change in that number out to 2017/2018 according to ACE's data.

The decrease in Project Specific Funding (restricted funds that have to be used for their specified purpose) can be attributed to successfully securing funding for The Roundabout in 2013. However, stripping out the costs of The Roundabout from 2013 (very simply assume it cost the £150,000 received from The Andrew Lloyd Webber Foundation in 2013), Project Specific Funding would have actually shown a significant increase year on year.

Removing the costs of The Roundabout from 2013 does however mean that Production Revenue (unrestricted revenue that can be used for any purpose) drops from ~26% of revenue in 2013 down to ~20% of revenue in 2014. This is worth pointing out because Paines Plough do not have a large number of revenue streams and over-reliance on Arts Council England, grants and donations may not be 'truly' sustainable in the event of severe funding cuts (remember that The Department of Culture, Media and Sport has been modelling cuts of up to 40%).

The table below shows Production Revnue as a percentage of revenue for the past 5 years (unadjusted figure used for 2013).

20142013201220112010
Production Revenue139,844168,524228,40217056250184
Total Revenue690,766796,944626821463529318683
Production Revenue as a %20%21%36%37%16%

Funding The Roundabout may have suppressed the percentages in recent years but having secured such an incredible asset means that Paines Plough are perfectly poised to nudge that Production Revenue % number upwards over the next 5 years if they so choose.

An alternative would be to focus on Project Specific Funding. If a specific project has adequate funding then production revenue may not be required, allowing Paines Plough to reach a wider audience (using subsidised tickets for example). This would likely suppress future Production Revenue. As a highly collaborative organisation, Paines Plough's network is perhaps their greatest asset so it follows that the more they can expand that network through better funding for specific projects the better. I would assume extended reach also helps when it comes to ACE Portfolio funding.

The collaboration aspect is important when considering revenue. It seems clear that not all Production Revenue from every single production that bears the Paines Plough name goes through Paines Plough. For example, a touring production may be subject to a number of calls whereby venues, collaborative partners and Paines Plough themselves all take slices of the production revenue (not necessarily in that order). Again, this likely suppresses Production Revenue as a % of revenue: if Paines Plough were to do more 'in-house' they could report more Production Revenue but the collaborative nature of their work is what ensures their status as a powerhouse of new writing.

At least as far as reported revenue is concerned, I am not surprised James Grieve was so certain in his reply to the question of sustainability. What will be interesting over the next few years is seeing whether The Roundabout is used to fuel growth and drive Paines Plough towards self-sufficiency (increasing Production Revenue as a % of revenue) or whether it demands ever increasing subsidies to maintain and attract the right audience numbers.

Act II
Act III