The show must go on
Entertainment and live events have been hit hard by the pandemic owing to their reliance on human interaction. Nick Scott hears how three CAs are reimagining the sector for a new, socially distant reality.
To call the figures “eyebrow-raising” would be an understatement. In September, PwC’s annual forecast included the prediction that global cinema revenue would drop by some 65.6%. In October, Cineworld announced the temporary closure of all its UK and US screens, while Odeon Cinemas made a quarter of its chain weekend-only opening. In August, 76% of respondents to a live events industry survey said they’d lost more than three-quarters of their business since March.
Even television – which might be expected to thrive with people stuck indoors – suffered so badly from plummeting advertising revenue and production delays to hit shows such as Line of Duty that the UK government felt compelled to launch a £500m scheme to jumpstart the film and television industries.
In July, it also pledged £1.5bn for the arts. The first tranche of the Culture Recovery Fund, totalling £257m across 1,385 approved applicants, was released in October. How have the sector’s finance professionals weathered the storm? And how are they bracing their businesses for a future which may involve only a partial return to normality? We hear from three industry CAs.
John Sharkey CA, Executive Vice President, Europe, ASM Global.
“High-risk areas have been identified as anywhere where people are congregated together for long periods of time in close proximity under a roof – so being in events has been an interesting challenge,” says John Sharkey CA, who spent periods with EY, Scottish Enterprise and transportation company FirstGroup before moving into the exhibitions and conference sector. “We’ve been right in the eye of the storm – but we’re in good company when you think of airlines, nightclubs, cinemas and the rest.”
Sharkey notes that an instant, multifaceted logistical strategy was required when the pandemic struck. “We suddenly went from being a business in full tilt to driving into a brick wall,” he says. “The first thing we needed to do was reschedule all the events that were in the diary; then we had to very quickly establish a digital infrastructure because, in common with everyone else, we immediately went from being in offices and buildings to being at home. Then we had to manage staff, furloughing and so on, and then get our buildings brought down to effectively a cryogenically frozen state. We couldn’t just walk out, lock the door and leave. Then it was a case of managing relationships with landlords, promoters and other commercial partners.
“So, there’s been a huge amount of frenetic activity. Now the storm has settled, we’ve got into stabilisation mode and started thinking about how we’re going to look after our staff, how our customer journey is going to be dealt with, how we’ll deal with food service, how we’ll handle communications and PR and what kind of environmental hygiene measures will need to be in place.”
It’s because of this last factor that ASM Global – which also has operations in the Americas, mainland Europe, the Middle East and Asia Pacific – has devised a new hygiene scheme, dubbed “VenueShield”, that will apply tailored protocols to some 325 of its international venues, considering all factors from protective equipment to food safety measures via surface cleaning, thermal cameras and reduced touch points.
From a financial perspective, Sharkey believes that some major shifts of emphasis are in the pipeline as the world gradually comes out of a crisis and bridges its way to greener pastures. “Amortisation of long-term deals and extensions of contracts are going to play quite a big role,” he says, “and I think it’ll be more about pro forma valuations going forward and less about what’s in the locker at the minute.”
While it would be a harsh assessment that suggested companies should have been braced specifically for a pandemic – “I’m not sure too many risk assessors would have checked the box that said within the space of a month the world would grind to a halt” – Sharkey says we can all learn a key lesson: adaptability: “Fundamentally, companies to me aren’t about bricks and mortar, they’re about people – a good team will adapt to the environment and ride the storm, be entrepreneurially reactive rather than trying to reach for an Encyclopaedia Britannica of what you do if such-and-such happens.”
The CA qualification, he says – as well as encouraging a healthily “outward-facing” attitude and a “perspective on how different industries knit together, vertically and horizontally” – has an admirable approach to ethics: “After all, it’s only when the tide moves out that we see the shipwrecks - and that’s when you really need strong, ethical personalities around the boardroom.”
Rob Collie CA, Director of Group Finance Delivery, Sky.
Rob Collie CA – whose path to Sky came via Arthur Andersen, PwC and Cadbury Schweppes – cites Nassim Nicholas Taleb’s book The Black Swan as a useful guide for how the world reacts to something as unpredictable as the Covid-19 saga. “The book is about our inability to understand risk in our complex and connected world,” he says. “We know things will likely go wrong at some point – and we enjoy Hollywood movies about doomsday scenarios – but would never believe there could be a ‘black swan’ unless we see one.”
So, what was his department’s response to handling the unthinkable? “One of the first things we had to do was decide what our truly critical activities were,” he says. “You’ll not be surprised to hear that keeping the TV broadcasting was one of them, but accountants will be pleased to hear that finance activities were also included: paying suppliers and colleagues, collecting cash, closing the books – not the sexiest of finance topics but stuff that should be recognised as absolutely vital.”
Despite having taken a knock (Sky reported a £575m fall in revenue at the end of July, as sport was hit by the lockdown), Collie says the company was a stable ship for this particular wave to hit. “People increasingly want a simple digital experience they can control and consume when they want, where they want – and Covid has accelerated those trends,” he says. “Thankfully we’ve been moving in this direction for some time at Sky, with the likes of Sky Q and Now TV.”
As for the future, Collie – who says his ICAS training helped him see accountancy as “a language to express business opportunities in a compelling way” – believes that such constructive positivity, alongside an emphasis on valuation, risk management, forecasting and scenario planning, will be key to forging a path for the rest of the pandemic saga and beyond. “Strong businesses have one eye on weathering the storm but the other eye on how this will create opportunities,” he says. “Any such opportunities need finance professionals to provide insight and advice.”
And what if another black swan should heave into view? “The risk is that everyone will now do a brilliant job on pandemic scenarios but dial down on innovation disruption, data security and even asteroids.”
Francesca Rogers CA, Head of Finance, Village Underground & EartH.
As a music aficionado who had just completed a graduate scheme at EY and qualified as a CA, Francesca Rogers set about surveying the employment landscape for opportunities in the field where her passion lay. Before long she was working her way up from Management Accountant at the superclub Ministry of Sound, to Finance Manager at management multinational IMG. In June this year she became Head of Finance at two Hackney-based venues – Village Underground, a night club housed in revamped tube carriages, shipping containers and a warehouse, and its newer multi-arts centre partner EartH.
“Grassroots music venues are one of the hardest-hit sectors in the pandemic,” she explains. “It’s almost impossible to open with social distancing and break even, particularly as a venue with no outdoor space, so we have been reliant on government schemes and other forms of support to cover our overheads until we can reopen.”
Village Underground received £398,000 from the government’s Culture Recovery Fund and a crowdfunding drive launched in June has raised a further £36,000 to date. “This will allow us to continue operating in the near future, and to plan for the longer term,” says Rogers. “We hope both independent music and the cultural sector as a whole will continue to receive the support it needs and deserves.”
The venue had its own flashes of innovation – but not without logistical problems. “We decided to open Village Underground as a bar with live DJs,” says Rogers, “but the decision had to be made incredibly quickly due to the constantly changing government rules, and without any historical data to enable accurate forecasting.”
Predicting cashflow has been a priority, says Rogers, as has “arranging payment plans with suppliers and modelling the future of the business”. She has been “scrutinising every single penny” but pandemic-proofing also involves unavoidable outlay. “The main area of greater investment has been in health and safety for the bar to comply with Covid regulations,” she says.
While Rogers foresees the crisis management continuing for a long time, with many smaller venues likely to close permanently, she’s also optimistic about the future. “The ICAS training gave me the confidence to tackle anything that’s thrown my way during this turbulent time,” she says. “The training in cashflow forecasting and analysing different scenarios has been really useful, while the pandemic has encouraged us to be more entrepreneurial, to constantly adapt to new rules and try out different ideas.
“It’s also been a useful exercise in scrutinising our costs and learning what we really need to spend money on. I’ve seen the importance of accurate reporting more than ever before, with tiny amounts having potentially huge knock-on effects for the future of the business.”