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