15/11/2021 - 09:30

A peek behind the curtain at Perth Festival

15/11/2021 - 09:30

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Perth Festival has released a dramatically changed program for 2022 along with its first-ever 12-month financial report since becoming a stand-alone company.

A peek behind the curtain at Perth Festival
Nathan Bennett (left) has revised the festival’s budget while Iain Grandage has needed to reshape its artistic program. Photo: David Henry

The team at Perth Festival had to make a tough call a couple of months ago.

Finally, given the ongoing uncertainty about COVID-19 restrictions and border closures, they concluded it was unfeasible to bring large numbers of interstate performers into Western Australia for the 2022 festival.

“We had a vastly different festival nine weeks ago,” artistic director Iain Grandage told Business News.

“In these past nine weeks … we’ve had to turn a large part of the festival program around to something completely different.”

The festival had been planning to bring in about 250 artists, technicians, and associated staff from interstate.

Executive director Nathan Bennett said he had been in constant conversations with WA Police and health authorities to understand likely border restrictions and the conditions for presenting the festival.

“We need certainty well in advance,” Mr Bennett said.

“It became clear as the situation in NSW deteriorated that the ‘extreme risk’ jurisdiction category was virtually impenetrable.

“What Iain and the team have managed to do in adapting the program is extraordinary, but there are events that were in the plan that can’t be presented.”

The change of plan has had a major impact on the festival’s expected ticket sales in 2022.

The original budget approved in July included box office sales of $3.6 million.

With changes to the program, expected ticket sales have been reduced to just $2.3 million.

That is even lower than this year’s pandemic-affected festival, which achieved ticket sales of $2.5 million.

Details of the festival’s financial performance have been published for the first time after a major restructure.

For nearly 70 years since inception, the festival was a business unit of the University of Western Australia.

The festival had no legal status, no assets of its own, and its board was a sub-committee of the university’s senate.

That quietly changed in February 2019, when it was incorporated as a charitable company limited by guarantee.

The company now operates with a much greater degree of autonomy, under the guidance of a proper governing board.

The new structure means the festival – like all major arts companies – must lodge annual financial statements with the Australian Charities and Not-for-profits Commission.

Qualified audit

Perth Festival’s 2021 financial statements included one big surprise: a qualified audit opinion from the Office of the Auditor General.

“A material uncertainty exists that may cast significant doubt about the company’s ability to continue as a going concern,” the auditor general concluded.

In reaching this conclusion, the auditor general noted that the festival generated a surplus in FY21, and had cash of $5.3 million and net assets of $3.7 million as at June 30.

Despite these positives, it said COVID-19 created uncertainty about the size and scale of the company’s operations and consequently the level of cash inflows and cash outflows.

“We had a lot of conversations with our auditor about this,” Mr Bennett said.

“Our auditors were of the view that was important for an organisation in the business of large-scale public events.

“That if we were to suffer any financial shocks, that could potentially have an impact on our going concern basis.

“I disagree.”

He is not the only one: no other major arts company in WA has had its audit qualified despite operating under the same conditions.

Mr Bennett said the festival was prepared for the worst-case scenario.

“We have a series of mechanisms in place to protect the ongoing viability of the company if there was some catastrophic financial shock like COVID shutting us down,” he said.

He noted that UWA was the festival’s 100 per cent shareholder and continued to stand behind it.

Other positives included “pretty strong” cash reserves and very robust analysis of different scenarios.

Mr Bennett said Lotterywest – the festival’s biggest funder – has agreed that it would not seek to recover ‘unrecoverable’ costs, if the festival had to cancel because of COVID-19.

He anticipated continued support from the festival’s philanthropic network.

In addition, Mr Bennett said the festival had shown it could be very nimble.

In this year’s festival, because of last-minute COVID-19 restrictions, it shifted the timing for hundreds of performances in a matter of days and transferred the tickets of 75,000 ticketholders.

“We know that it’s possible because we did it this year,” Mr Bennett said. “I’m confident in our ability to manage our finances and our risk management and our board shares that view.”

Corporate structure

Notwithstanding the adverse audit opinion, Mr Bennett describes the new corporate structure as the best of both worlds.

“We are absolutely part of the university, we are a wholly owned subsidiary, so the ultimate financial liability and reputational risk still sits with the university,” he said.

UWA still retains a degree of influence, as its senate needs to approve the appointment of festival board members, including recent recruit Ben Wyatt.

The university continues to support the festival, with an annual $630,000 grant and a range of legal, IT and human resources services.

Mr Bennett believes the new structure provides for stronger governance, with simpler reporting lines and clearer oversight.

He said the change was a smooth process, helped by the fact the festival had already operated its own bank accounts.

The benefits of being a charitable company include an exemption from payroll tax.

In addition, the festival was eligible for JobKeeper during COVID-19 but would not have been if it was still part of the university.

Financial position

Prior to publication of the festival’s financial statements, the best insight into its financial performance came from its 2021 Impact report, which said ticket sales at festival events totalled $3 million.

By comparison, the financial report said ticket sales totalled $2.5 million.

The difference was that the Impact report included shows such as Ballet at the Quarry, which were presented by the West Australian Ballet as part of the festival.

Notwithstanding this difference, the festival’s financial statements confirm its status as one of WA’s largest arts companies.

The only performing arts company to generate more income from ticket sales was Artrage, which runs the popular Fringe World (see table).

One of the festival’s strengths is the anchor funding it gets from Lotterywest.

Mr Bennett said the WA government agency had committed to provide $7.7 million per year over the next three years.

That’s up from $7.3 million in FY21.

“It’s very helpful to have a three-year commitment at that level,” he said.

The only other major arts company with a comparable funding commitment is the West Australian Symphony Orchestra, which gets about $7.5 million per year from the Australia Council for the Arts.

Collectively, the state and federal governments continue to be the main source of funding for most of the big arts companies in WA.

That was especially the case over the past year, when about $8 million in JobKeeper payments and other special COVID-19 benefits flowed to WA’s major arts companies.

Ironically, this helped all the major arts companies to deliver a bigger surplus than they achieved in the prior year, before COVID-19.

Clearly, a combination of JobKeeper and reduced operating costs (helped by fewer performances) was good for the bottom line. In the case of Perth Festival, its $630,000 surplus in FY21 compared to a deficit of $845,000 in the prior period.

Mr Bennett said the prior number was misleading as it covered a 17-month period with one-off factors.

“It’s a timing issue and there were some accounting requirements associated with the transfer of assets to the new entity,” he said.

Mr Bennett said the festival had delivered a modest operating surplus in every year he had been executive director.

He emphasised the festival had strong systems in place to balance financial risk and its artistic goals.

“There is always a healthy friction between the art and the business, and Iain and I are very good examples of how to manage that well,” Mr Bennett said.

“My job is to create the operating conditions for his vision to be realised and his job is to push that as hard as he can.”

Philanthropic focus

Perth Festival’s new corporate structure allowed it to obtain ‘deductible gift recipient’ status.

Mr Bennett believes this has provided a boost for its philanthropy program.

“The ability to fundraise in our own right rather than through the university has made it a much more compelling proposition for donors,” he said.

The increased focus on philanthropy is shared by all major arts companies and reflects the national trend away from corporate sponsorships.

That shift is more pointed in WA, where many arts companies are sponsored by mining and fossil fuel companies.

Mr Bennett agrees there is a broad conversation happening in WA about this topic but is supportive of the role played by business.

“As someone who has come to WA, it is very clear there is big business here that has a strong commitment to supporting the communities in which they operate, and the arts are part of that,” he said.

“What we have been able to achieve with the support of companies, and Chevron is the most notable example in our case, is to create an extraordinary amount of work for the people of WA.”

Mr Bennett expects the festival to bring in more than $2 million this financial year from philanthropic donations, up from $1.4 million in FY21.

Mr Grandage said this increase had been driven by the board.

“They are taking personal responsibility in the way that contemporary American arts organisations do,” he said.

Mr Grandage said arts companies needed to articulate the reasons people should donate.

“You need an argument that is persuasive and compelling and hopefully rewarding in a spiritual, artistic, cultural, lifestyle way,” he said.

Donations to the festival include some that are earmarked for commissioning works that will appear in future years.

“I see it as a core festival responsibility,” Mr Grandage said.

“That is somewhat different to how other festival directors perceive things.

“I want to build the stories that help speak of this place.”

2022 program

The program for the 2022 festival is set around the theme of the ocean.

The festival has commissioned multiple works, including two free events designed to draw big crowds.

These are the opening event, Escape, at Fremantle, and the closing event, Noongar Wonderland, at Perry Lakes.

Another festival commission is Patch’s Lighthouse, an all-ages show that moves through multiple theatres on the UWA campus.

Perth-based Aboriginal group Yirra Yaakin Theatre Company, a festival regular, will appear at His Majesty's Theatre for the first time, with its musical Panawathi Girl.

Fremantle Theatre Company is presenting an Australian adaptation of the play Mary Stuart, about Mary Queen of Scots and Elizabeth I of England.

This adaptation by WA-born playwright Kate Mulvaney was first performed by Sydney Theatre Company in 2019.

The Perth production stars Kate Walsh and Caroline Brazier. Perth’s major performing arts companies – Black Swan Theatre Company of WA, WA Ballet, West Australian Opera and WASO – all present works as part of the festival.

This includes the popular Ballet at the Quarry while WA Opera will perform Carmen at the WACA Ground.

Some of Perth’s smaller companies will also perform at novel locations. Dance companies The Farm and Co3 Contemporary Dance will perform at City Beach, while Perth Symphony Orchestra will perform at Rockingham and Yanchep.

Another novel venue next year will be Lawson Apartments in central Perth, which will be home to an immersive installation featuring the music of artist Ta-ku.

 

 

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