6 December 2015

Battersea Arts Centre 2015

2015 has not been easy for the Suffolk red-brick and Bath stone former Battersea Town Hall. Nor can it have been easy for the organisations residing within. When Bachelard wrote "It is better to live in a state of impermanence than in one of finality.", it seems unlikely he had the poetics of temporary office space in mind.

Grade II listed, 80 rooms, peppercorn rent, needs work

March's fire was the principle cause of concern when considering BAC's 2013/14 accounts: what would the true cost be and how would BAC cope with associated fundraising challenges, increasing levels of operational complexity and no doubt several project management nightmares? This was a potentially toxic mix of problems best weathered by a cash rich organisation. Ever cautious, my assumption was that we would have to wait another year to get a true feel for the impact of the fire. Whilst this remains true for the operational side of things, significant adjustments were actually made to the balance sheet in 2014/15.

Before examining the 2015 financial statement and balance sheet, it's worth noting that BAC is a group and that the following will focus on the group accounts. 'Battersea Arts Centre' is the parent organisation and operates a wholly-owned subsidiary: 'BAC Enterprises Limited'. 'Battersea Arts Centre' is a registered charity with the primary purpose of advancing education in the arts for the benefit of the public. 'BAC Enterprises Ltd.' is a limited company focused on running venue hire, the café-bar and all commercial trading operations carried out at Battersea Arts Centre. At the end of the financial year 'BAC Enterprises Ltd.' pays all profits on which tax would otherwise be due to 'Battersea Arts Centre' via Gift Aid.



The first thing to note is that BAC achieved a significant increase in income in 2015 (up 25% from 2014's figure). It's worth taking a moment to appreciate the growth that BAC have had in this area and that this period's incoming resources are around 4.5 times what they were when David Jubb became Artistic Director back in 2004. The chart below documents that progression.


Incoming resources are certainly never the whole story but it doesn't hurt to be an arts organisation enjoying long-term growth in that area. Of course, it's also worth examining BAC's success in a wider context: Hampstead Theatre and Soho Theatre are historically of similar size in terms of incoming resources to BAC and all three also operate a group structure with separated commercial operations (obviously all three are also located in London). There are differences in terms of ACE portfolio funding between the three: Hampstead receive ~£875k annually, Soho ~600k and BAC ~£700k. Unfortunately Soho Theatre's 2015 accounts are not available at the time of writing (hence no figure for them on the chart below) but I will endeavour to update once available. The takeaway from the comparison is that seems BAC's growth over the last few years has been mirrored by their immediate peers.



Less of a success story in 2015 was the income gifted to BAC by BAC Enterprises Ltd., which you can see denoted on the financial statement (under both income and expenditure) as 'Commercial trading operations'. Over the last few years, profits generated by BAC's commercial arm have averaged ~£135,000 and haven't dropped below six figures. In 2015 the surplus was only £3,312. This has been attributed to reduced turnover as a result of the temporary closure of the events side of the business and reduced footfall due to building works begun in September 2014. However (focusing on the child accounts momentarily), BAC Enterprises' cost of sales has actually increased dramatically to £354,936 (up from £296,948 in 2014), reducing gross profit. Not what you'd expect given that all of the demand constraints mentioned previously should have been identified in advance. In addition to this, the creditors figure (amounts falling due within one year) has almost doubled from £67,529 to £122,115 (although the majority of this appears to be owed to the group so will likely end up written off). For comparison: in 2014 Soho Theatre's bar turned over ~£1.5m with a gross profit of ~£1m.

Returning to BAC's group financial statement; grants and donations increased 21% in 2015 to just under £3.8 million. Trying to create a 21st Century theatre in a 19th Century building is an expensive business and around £2.1 million of BAC's grants and donations are related to building regeneration works (ACE Renew contributing £594,445, Heritage Lottery Fund £829,085 and other sources £699,560).

The remaining £1.7 million includes £150,000 received in kind from Wandsworth Borough Council since the premises will essentially be provided rent free until 2028. An equivalent charge relating to the in kind payment is included in the expenditure. Wandsworth Council also have a service agreement in place with BAC where they contribute ~£100,000 annually (included under charitable activities income).

BAC also received £667,186 in 2015 as designated project specific funding related to their charitable cause (£190,992 for participatory activities, £414,259 for developing and staging theatre, £30,575 for other causes and £31,360 for supporting theatre makers), approximately 11% of all incoming resources. Designated funds for the building represented 37% of all incoming resources. Annual ACE Portfolio funding represented 12% of all incoming resources.

Expenditure on charitable activities increased almost £1 million in 2015. Producing costs decreased by approximately £100,000 but there were jumps in operational spend (up ~£108,000) and marketing and press (up ~£100,000). However, the big increase is mostly due to writing off damages from the fire which is mostly accounted for as depreciation/impairments under support costs. This excludes the ~£55k restitution costs shown in the financial statement above.

In 2015, BAC paid out £147,166 to artists for their share of the box office. Admission fees and programme income was £660,227, which means ~22% goes back to artists. BAC state that they work with over 400 artists annually, so that works out to ~£368 per artist (or 1 week each at London Living Wage level). Elsewhere in the accounts BAC state that they spent £513.7k supporting theatre makers but no clear breakdown of which theatre makers received what is provided (not a reporting requirement but transparent financial flows and clearly substantiated numbers are always a win). When considering these box office numbers and the amount trickling down to artists, it's difficult to put out of your mind how much money that Grade II listed building demands, even preceding March's fire.

The impact of the fire is not immediately obvious on the balance sheet below:


A lot of the tangible assets value is however actually made up of 'Work in progress' (£1.5m) rather than being in the property itself (which was written down by ~£900k to £2.57m) . Fixtures, fittings and equipment were also written off but additions help balance this out. The building was fully insured and Aviva accepted indemnity for replacement, rebuild and costs of business interruption, hence £500k appearing in 2015 income. The majority of the insurance money remained unspent at year end and significant contributions will have come in after March 31st as well. The position that BAC are reporting certainly seems favourable although risk no doubt remains on the operations side.

The real difficulty for BAC is the building itself. I'm a big believer that architecture significantly influences the activity that unfolds within, whether it's the reinforcement of structure and hierarchy (consider the archetypal production building: factory floor downstairs, managerial suites upstairs) or aspirational schools (£80m Holland Park School with their bespoke Ercol chairs). So it makes absolute sense for an arts organisation's home to be a wonderful building of local significance with the capacity to inspire. However, part of me also wonders if Wandsworth Council are providing something of a poisoned chalice: a building that requires so much cash to run, maintain and upgrade that it hampers the development of the organisation within.