15 December 2015

Northern Stage 2015

As one of the top producing theatre companies in the UK and the largest in North East England, Northern Stage is arguably a reasonable barometer by which to gauge the theatrical health of the region. As mentioned here, it is a stretch to claim that theatre across the UK has thrived in the face of cuts to public subsidy. Significant growth has certainly been achieved over the last few years by The National Theatre and other London theatres but this is by no means universal across Arts Council England's National portfolio. Northern Stage's 2015 accounts map the rocky theatrical landscape outside the M25.

Back in 2010, Northern Stage received £1.3m from ACE as their core funding. In 2015, their portfolio funding from ACE was £1.6m. Adjusted for inflation, Northern Stage are receiving pretty much the same amount of core funding that they were five years ago and there won't be much growth in that figure over the next few years. By the time we get to the end of this funding cycle, it seems likely that Northern Stage will actually be receiving less core funding in real cash terms (they aren't alone in this). In 2010, that core funding was 52% of Northern Stage's £2.5m incoming resources. In 2015, ACE portfolio funding constituted  56% of Northern Stages's £2.85m incoming resources (which was actually down from 61% in 2014). The chart below shows the percentage of each organisation's revenue derived from National Portfolio Organisation status in 2014 (the last year for which all organisations have data available).

The nature of ACE preserving a 'balanced' portfolio means that some organisations will be subsidised more heavily than others. Subsidy should theoretically offset some of the uncertainty resulting from producing art, hence certain types of art require larger subsidies if they are difficult to commoditise or expensive to create: theatre ticks both boxes because of the unrepeatable nature of live performance and a commitment to large spend on production elements. 'Contact' are interesting to consider in the chart above: since their core values emphasise the centrality of young people to the organisation they're operating in a much more restricted fashion than an organisation at the other end of the scale with a more open charitable aim (like BAC) so you would expect a higher level of subsidy. It's equally interesting to look at Albatross (Geese Theatre Company) and wonder whether their low ratio means that their focus on working in prisons and related agencies opens up additional revenue streams (seems unlikely) or Geese could be considered underfunded (more likely). Portfolio funding is a complex and slippery beast (as is analysing it).

Northern Stage are clearly very reliant on ACE's NPO funding, which is slightly disconcerting given that their output and audiences are not particularly niche. In 2015, Northern Stage also received an additional £66,751 from ACE for presentation of an Edinburgh programme (£45,000) and from ACE Catalyst funding (£21,751 match funding for sourcing additional income streams - full Catalyst Year 2 report here). Other major grants include £41,750 from the Newcastle City Council (down from £83,500 in 2014) and £40,000 from the University of Newcastle. Northern Stage is surrounded by the University of Newcastle campus which begs comparison to Warwick Arts Centre. The University of Warwick contributed £1.3m to Warwick Arts Centre in 2014, equating to ~23% of WAC's £5.6m revenue and this is relationship that certainly seems to be paying off. Northern Stage receive 1.4% of their revenue from their in-kind partnership (rental of the theatre from the university 'costs' £40k annually) which suggests there might be significant room for development.

Development remains a serious consideration for Northern Stage in 2015, as the utilisation of a Business Development Manager and retention of a fundraising consultant demonstrate. There has certainly been some success on this front, increasing income derived from existing assets (commercial hire, skills workshops and set building) by £48,000 (up to £116,000 from £68,000 in 2014) and forging new relationships with funding bodies. One point of interest is the café bar: rather than a parent/child gift aid relationship (as seen at BAC, Soho and many others), Northern Stage have outsourced the operation to privately owned catering firm McKenna's. This makes it difficult to gauge the effectiveness of the channel as a revenue stream for Northern Stage (being a small limited company, McKenna's can opt out of filing a full set of accounts). Given how much impact the café bar can have on a theatre's bottom line, the decision to outsource is 'interesting' but then it's much easier to advocate taking on additional cost, risk and operational complexity at a distance than up close.

It was expected that Northern Stage would post a loss in 2015 given that the last time the organisation reported a profit was back in 2007. This sounds incredibly dramatic but it's largely due to the amortisation of the £9,000,000 refurbishment of the theatre in 2006. All those restricted funds received for refurb were written on as fixed assets so there are substantial depreciation charges every year (£347,397 in 2015). In their 2015 financial review Northern Stage actually report an unrestricted surplus of £12,485 (following on from an unrestricted surplus of £52,480 in 2014), so it depends how you look at it. I prefer to look at profit after depreciation because although those costs are not actual cash expenditures, fixed assets have a limited lifetime and do require maintenance (unless of course you plan to ask for £15,000,000 in 25 years time for the next refit).

Approximately 50% of Northern Stage's expenditure is on salaries for their reported 87 members of staff. BAC spend about the same amount (~£1.5m) on their 67 members of staff but report more than twice the revenue (£5.8m Vs £2.85m). Also worth remembering that BAC's numbers include café bar employees but Northern Stage's do not. This means that Northern Stage have overhead of ~£120k a month just for salaries (the theatre is rented in kind from the university so this is likely the bulk of overheads). For 2015/2016 the board have actually adjusted the reserves policy down to 2 months operating costs. The unrestricted reserves currently stand around the £260,000 mark: not the most comfortable position to be in. Also worth noting that the creditors (amounts falling due within one year) figure on the balance sheet below is not covered by the reserves:

Please do not misunderstand this analysis: Northern Stage are by no means on the brink of impending doom. Although they are very heavily reliant on ACE, have a lot of overhead, do not have a great deal of cash on hand and are not diversifying their revenue streams at the same rate that other organisations based in London are able to do (for a variety of reasons: corporate sponsors are much less inclined to give large amounts outside London for example).

Northern Stage are surviving.

Not thriving.

And do not for one second think that they are alone amongst the 178 ACE portfolio organisations that are neither the NT or the RSC (sidenote: it would be nice to see solidarity/trickle down payments from those organisations that are thriving).

It's very difficult to talk about arts organisations if they're having a hard time. ACE won't necessarily name an organisation that receives emergency funding and with very good reason: it is incredibly difficult to attract money when it is well known that you don't have any. In addition to this, the arts are not renowned for excellent financial analysis (neither is the business world) and nor should they be (although I did see an article today that was cited by a high profile arts writer as 'excellent analysis'. The article consisted of numbers from a table written down as words.). Unfortunately, operational complexity is growing rapidly across all organisations and there is a real need to try and get a handle on such big, slippery beasts. The sooner we get comfortable talking numbers, the better we can take care of each other.