‘Big fat canary in the coalmine’: Sydney Theatre Company strives to secure future | Stage

Sydney Theatre Company’s board has addressed concerns about the company’s viability before the release of its 2019 annual report, which shows an operating loss of $7.75m and warns about its future financial position.

Auditors from KPMG assessing STC’s financial statements said there was “material uncertainty” that “may cast significant doubt” on the company’s ability to continue.

STC’s chair, the former Commonwealth Bank chief executive Ian Narev, said in his report that the company had embarked upon a plan to secure its future “with external advice under the Safe Harbour provisions of company law”, which allow companies to continue trading while insolvent.

STC’s executive director, Patrick McIntyre, told Guardian Australia: “We’re not insolvent at the moment but, with all the revenue switched off, it’s reasonable to assume we could face some insolvency issue this calendar year.

“It depends on how long the crisis goes for. I think we’re all in serious threat of going under. I think we’re a big fat canary in the coalmine.”

McIntyre said the company had done everything it could to reduce costs, focused on lobbying federal and state governments for further arts relief, and worked with industry bodies to develop a plan to get back on stage. But the uncertainty was real.

“Reserves have been depleted and the appetite for risk is very low – we don’t know when we’re reopening and we don’t know how audiences will respond to us reopening,” he said. “We believe that it’s in the best interest of all our stakeholders for the company to survive. That’s what the board is really focused on doing.”

STC have cancelled six productions so far and reviewed staffing levels, with most permanent staff working reduced hours. Casual and contract staff employed on a show-by-show basis have lost their jobs.

The company’s board of directors prepared cash-flow forecasts for 12 months based on six weeks leading up to 30 April and expectations for the months ahead. Those forecasts formed the basis of its assessment that the company was a going concern.

The forecasts, however, assumed that plays would go ahead from September, and that the 2021 season would go ahead as planned.

The projections also rely upon the New South Wales government being “favourably disposed” to give further financial assistance to the company, and that costs for its rebuilding project would not blow out.

McIntyre said STC was “still waiting on clarity” from state and federal governments about how much assistance they would provide.

“The state government has a process and they will arrive at a number and we will then configure our plans and adjust accordingly,” he said.

Between 10% and 12% of STC’s revenue comes from government grants. In 2019 this amounted to $3.44m of a total $34.5m.

Like most major performing arts companies in Australia, STC reports on the calendar year to align with production seasons. The company has been reporting steadily increasing losses from its core operations (the basic business of putting on theatre, before fundraising and grant revenue has been taken into account) for the past five years, from a deficit of $6.7m in 2015 to $13.3m in 2018. These have been only partially offset by revenue from government grants and philanthropy.

McIntyre said the company would look at re-evaluating the size and scope of its productions when it moves back into its Wharf premises at the end of 2020 – something he maintains it is on track to do. The company vacated its premises on Pier 4/5 in the Walsh Bay arts precinct in June 2018 to make way for capital works.

McIntyre said the goal of a September reopening didn’t feel “unachievable”.

“The unsettling thing at the moment is we can’t have certainty on that,” he said. “We are obviously watching Victoria very carefully and considering what would happen if that were to happen in NSW as well.”

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