## **Watershed Arts Trust Limited**
**(a company limited by guarantee)**
Report of the Board and consolidated financial statements Registered company number 01608779 Registered charity number 284188 Year ended 31 March 2022
Watershed Arts Trust Limited (a company limited by guarantee) Report of the Board and consolidated financial statements Year ended 31 March 2022
## **Contents**
|Strategic report|2 - 13|
|---|---|
|Trustees' report|14 - 16|
|Independent auditors' report to the members of Watershed Arts Trust Limited (a company limited by guarantee)|17 - 20|
|Consolidated statement of financial activities (including an income & expenditure account)|21|
|Consolidated cash flow statement|22|
|Consolidated and company balance sheets|23|
|Notes|24 - 44|
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Watershed Arts Trust Limited (a company limited by guarantee) Report of the Board and consolidated financial statements Year ended 31 March 2022
## **Strategic report**
The Board of Trustees presents its annual report and audited consolidated financial statements for the year ended 31 March 2022. This report consolidates the results of Watershed Arts Trust Limited and its subsidiaries, Watershed Trading Limited and Watershed Ventures CIC, collectively referred to here as Watershed. The financial statements comply with current statutory requirements, the memorandum and articles of association and Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2019) – Charities SORP (FRS 102), the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2006.
The Trustees confirm that they have given regard to the Charity Commission’s guidance on public benefit in directing the activities of the charity.
## **Introduction**
Watershed is a cultural organisation focussed on togetherness. We produce accessible and inclusive experiences that fire up the imagination in our venue, online and across the world.
We are recognised internationally as a leading centre for film culture, art and technology practice, and talent development programmes. Our values sit at the heart of everything we do, both creative and operational. With an ethos of responsibility and kindness, we produce and deliver support which is more than the sum of its parts.
Whilst thankfully in May 2021 we re-opened the building after covid, the challenge of the pandemic continued throughout the year with limited screen capacities, increased safety precautions and staff sickness putting a strain on both our people and our income. However, our commitment to audience care and continued inclusivity and access was highly valued:
_“This is a model of clear communication, showing care for both your staff and your customers. I do look forward to returning soon. You were always one of my favourite places to read, see movies and work in Bristol”_ @turingcop
Our response to covid included the creation of a new outside catering offer ‘Undershed’ which enabled us to establish a commercial presence on the ground floor of our building. It also gave us space to commission Bristolbased artist and activist Lucy J Turner, who created a series of stunning illustrations called ‘Heart of Lightness’ which celebrates people, togetherness and community – perfect themes for Bristol as we were coming out of lockdown.
Whilst the pandemic was tough, we embraced change and used the time to reflect on where we have been and dream beyond recovery. We developed a deeper understanding of the value we offer, the inclusion we believe in and the importance of bringing people together in an increasingly polarised society.
In the areas of inclusion and climate justice we have sought to prototype best practise and share our learning, creating toolkits and resources to support others to identify and make change. Balance and Belonging, our work around data-led inclusion, is providing sector-leading insight into our workforce and the success of our inclusive recruitment approaches.
2022 marks 40 years since Watershed opened its doors. In those intervening decades Watershed has surfed many waves – establishing ourselves as one of few truly cross-art form organisations in the UK but staying true to the founding vision of innovation and risk.
Throughout 2022, Watershed’s birthday celebrations are bringing audiences and artists together to ask open questions about our past, present and future.
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## **Achievements and performance**
Watershed is one of Europe’s leading independent cultural cinemas, the only multi-screen cultural cinema in the South West and one of very few places outside London where UK audiences can engage with a year-round programme of world cinema. We are a key stakeholder in Bristol UNESCO City of Film. We are the Film Hub Lead Organisation for Film Hub South West as part of the UK wide BFI Network and also home to two Talent Executives as part of BFI Network.
We established the Pervasive Media Studio in 2008 and its ethos of collaborative innovation has grown an international reputation and network. We gift space to over 122 residents and have a rich network of over 450 creatives.
Our Café and Bar provides a welcoming city centre hospitality offer with a thoughtfully sourced menu and an emphasis on vegetarian and vegan dishes. We play a trusted connector role in the Bristol creative ecology and we are home to a range of conferences and events. We leverage funding, commissions and opportunities for others and have long term strategic collaborations with universities and local authorities.
- 1.1 million people visited us on the web
- 143,300 people visited our building
- 63,744 people bought tickets for our venue screenings and events
- We screened 200 film titles, over 2021 screenings
- 77,928 people engaged with our online programme
- 16,265 young people engaged with our programme
- 39,000 people engaged with projects beyond the venue
- 122 artists and creatives are resident in the Pervasive Media Studio
- 104 full time equivalent jobs at Watershed
- Watershed Group turnover in 2021/22 was £4.6 million
- Pervasive Media Studio residents reported turnover in excess of £6.3 million
- Pervasive Media Studio residents reported secured research funding in excess of £12.5 million
## **Highlights**
Watershed’s programme centres around twin pillars of cultural cinema and creative technology – with an increasing focus on the emerging overlaps between the two forms.
## **Cultural Cinema**
The focus during the year was on rebuilding our in-venue cinema cultural film offer, audience engagement and development for diverse film culture.
Partnerships were key to maintaining audience and programme development with ongoing partners delighted and relieved to be back in venue at Watershed. These included Afrika Eye, Slapstick, Palestine Film Festival, Japan Foundation Touring Programme, Deaf Conversations About Cinema and UWE Philosophy & Politics Conversations About Cinema: Thought in Action. The latter were delivered online at the beginning of the year and are now in venue producing the highest admissions for the films they select as well as introducing new student audiences to Watershed.
_“Team UWE is everywhere doing cool stuff! This weekend a series of films on masculinities through the lens of the Western curated by @UWEBristol MA Student @lolabmck at @Wshed Bristol Fantastic”_ tweet from @finn_mackay
New partnerships have created rich programme and audience developmental opportunities. These included Cables and Cameras – a Bristol based creative organisation who provide a hub for Black and POC filmmakers and creatives in the city – to deliver Inspired, a takeover of Watershed from Sat 25 to Mon 27 Sept online and in-venue. This weekend provided fresh perspectives and films by Black and POC creatives that provoke and inspire.
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_“So Glad I caught @michaelDJenkins film Pickney. So Great to see authentic Black Bristolian and Caribbean representation. So important this kind of story telling continues. Congrats all! Excited to Check out the other events over the weekend”_ tweet from @corinneswalker
Where possible we have worked with our key partners to promote and cross-promote the cinema offer - e.g., working with Afrika Eye Festival on the release of the restoration of Ousmane Sembène's film Mandabi and Bristol Palestine Festival with Elia Suleiman's It Must Be Heaven.
In July we presented the 5th edition of Cinema Rediscovered Film Festival that took place in venue and online with a range of premieres of restorations, seasons and events.
In August we increased our cinema programme to 6 days a week (Tue to Sun) and increased our seating capacities from 25% to 50%. We also introduced 25% capacity social distance screenings as part of our weekly programme as well as continuing our weekly relaxed screenings to ensure our offer includes space for those of our audience members who are more vulnerable.
_“A shout out to Watershed for being so considerate towards those who value it so much. As they move to 75% capacity screenings, they also introduce 25% capacity screenings alternatives each week to enable inclusivity This on top of the Relaxed screenings catering to those who need it.”_ @H0rr0r0fDracula
A theme that has run through all our audience research and feedback during this period is the importance and value of having space and opportunity to come together:
_'communal experience of watching the material with an audience, absolute joy!'_ Audience member for Oxide Ghosts
## **Outside the shed**
Although there has been welcome growth of in-venue activity over the year, our support for cultural cinema is not confined to our building.
The potential of hybrid was still being used creating some extraordinary events linking internationally based talent with Watershed based audiences. This was most evident in Afrika Eye where a documentary on Mali, music and the threat of Muslim fundamentalism was followed by a Q&A with one of the musicians in the studio in Bamako. Audience members contributing to the transnational conversation in the cinema were from the Congo and Caribbean.
We also deliver impact across the region, through our work in Film Hub South West, which is part of BFI Film Audience Network, and is the driving force behind a growing network of over 200 cinemas, film festivals, cross-arts venues and other film exhibition organisations.
In this period 20 organisations were awarded a total of £101,270 through open call with an additional £45,498 of investment made in key South West film venues through the cinema incentive scheme.
We continued a focus on supporting people from backgrounds under-represented in the screen industries through initiatives like Beyond Boundaries 360, a series of workshops to develop their skills and confidence in putting on film events.
_“Everything felt so tangible and doable, ALL sessions felt so useful, and action orientated. For me really did feel like it was cracking open things I wouldn't have had any idea”_ – Beyond Boundaries 360 participant
Our flagship initiative New Release Scheme worked with film exhibitors across the UK, supporting marketing initiatives to increase audiences around five new releases (Sound of Metal, Another Round, Limbo, Balloon and Ali & Ava.)
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BFI NETWORK continued to support talent development in the region including supporting and commissioning new films and supporting those who may face barriers in accessing funding.
_“BFI NETWORK (South West) has made me feel welcomed and valued as someone with interesting and unusual stories to tell. They’ve gone above and beyond with their accessibility provision... making me feel that a century later, there just might be a new era of deaf and disabled films with talent thriving behind the camera as well as in front of it.”_ Script Development Lab participant William Mager.
## **Creative Technology**
_This place. A studio. A community. A place to tinker, test, play. Where strangers become friends. Where thought provocateurs open up unimaginable possibilities. Where generosity lies at the heart of every conversation and collaboration. Where being interruptible creates the stuff of dreams. A safe house. A home._ Harmeet ChaggerKhan.
Pervasive Media Studio offers practitioners space and access to resources, advice, and equipment at no financial cost to them. We have a dynamic international network who we work with to explore common challenges from divergent city perspectives. We believe that cooperation is a powerful force for good, testing out alternative ways to live, work and play by hosting challenging conversations and encouraging responsible experimentation. The Case Against Crypto, an article by our Creative Technologist reached over 40k readers and featured in the Financial Times. Growing ideas into practical action, we recently published a Climate Action Toolkit to support those in the creative industries to make change in their practice.
## **Supporting creative businesses to experiment**
The Studio community continues to feel the financial impacts of COVID, and Brexit and our support is more vital than ever. Despite these challenges our Residents are still generating exciting new ideas, employment and revenue. Resident Annual Survey headlines (126 Respondents):
- Total annual turnover £6,306,986, approximately £4m less than the previous year
- Average resident turnover is £50k, approximately £70k less than the previous year
- Total funding leveraged (including Research funding) £14,706,741
- Employees (includes freelancers) 373
- Audience reached 36,886,097
Watershed acts as a funder of creative technology research and development - enabling individuals and small companies to explore early-stage ideas. Last year we ran programmes that invested over £385k of funding with awards ranging from around £300 to £50k. Our Winter Residencies artists were Shrouk El-Attar an artist, engineer, and LGBT refugee from Egypt who prototyped a belly dancing robot, and Alistair Gentry whose playful project investigated British Rail’s patent filing for a flying saucer.
## **Producing an inclusive community**
_The Studio is a unique space for fostering the energies of its residents. As a Black creative it is also an escape from the performative and narrow expectations outside. I feel I meet Black creative in a space of openness and freedom which we struggle to find easily_ . Dr Edson Burton.
The last year taught that it is vital to weave inclusive practice through all that we do. We’ve taken major steps in our transparency, including overhauling our contracts and developing a set of inclusive commitments that all Residents sign up to. Other key activity:
- Ableism training
- Access Riders for Studio Residents as part of updated contract
- A gender-neutral toilet and Baby changing facilities in the Studio.
- A range of Quiet Spaces available for Residents
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## **Working with Young People as global citizens**
Through a recent consultation we identified that creative technology (alongside cultural cinema) is where we can bring the most value to young people by using our programme, networks and resources to offer clear pathways of support over time. For these reasons we decided to stop publishing on Rife.
As we reconfigure our offer to young people, we created new opportunities to get involved in the work of the Studio. We launched Make Shift, a space for 18–30-year-old creatives to come together around creative technology and the opinions and ideas of young people. We also ran a number of international Labs connecting young creatives locally to those in Durban, Lagos and Seoul to explore global issues from different perspectives.
## **Reaching public audiences**
Our Residents reached almost 37 million people with their work last year. Our own hybrid weekly Lunchtime attracted audiences in UK, India, United States, Japan, Georgia, Russia, Canada, Italy and South Africa.
- _Goliath_ by Anagram, narrated by Tilda Swinton won the Grand Jury Prize for Best VR Immersive Work at the 78th Venice International Film Festival.
- _Only Expansion_ by Duncan Speakman won the BFI London Film Festival's first ever award in the Immersive Art and XR category.
- The Gathering Moss Online Exhibition (an international collaboration between the Studio and South Korea) reached 20,000 people
- 17,000 viewers for our creative technology YouTube content
The final Lunchtime Talk of each month is now BSL interpreted which strengthens our accessible programme offer – and BSL marketing information and materials are produced to help promote this service and the programme across our Deaf and hard of hearing networks.
_"A unique insight into an area of study & art I had never discovered before. I found the presentation of this talk both unique and fascinating, educating me on subject I would never have considered as an interest area for me. I learnt a lot from this discussion and found myself ruminating following its ending."_ Audience member from Composing Experience Lunchtime Talk
## **Report on 2021/22 Priorities**
In order to better reflect our values and build an inclusive working culture, we began work on a new People Strategy to cover recruitment, training, inductions and performance management.
We progressed our work in inclusion, completing training with Watershed’s Inclusion associates and turning the learning and actionable plans in each department.
We launched Watershed Forty, a year long, cross-departmental exploration of our relevance, vision and values.
We researched the potential of a Membership scheme for Watershed and concluded our current systems and capacity would not allow us to create something with enough value.
We re-booted Watershed’s Environmental Sustainability Group around the Climate Justice action research we are undertaking through Bristol and Bath Creative R&D. We created a measurable and ambitious plan for Watershed’s response to climate change.
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## **Strategic report** _(continued)_
## **2022 - 2023 Organisational Priorities**
Over the last 10 years, Watershed has grown considerably in terms of size, turnover and scale. In November 2019 we had completed a thorough review of Watershed’s systems, processes and workflows and identified the need to make considerable investment – as much of our systems were over a decade old, barely now fit for purpose and with little integration between systems. Covid has made things worse – whereas previously we were covering and patching the holes in our workflow with manual processes, we now have less staff to paper over the cracks, finances are stretched, and we have a new hybrid operating environment.
Our priorities balance these needs with those of recovery, by using the foundations of our values to guide us to resilience, rather than foregrounding numerical targets.
## **Inclusive**
Complete capital upgrade of All Gender toilets to ensure they are welcoming, accessible and fit for purpose
## **Open and Honest**
People Strategy: delivered and intranet launched to build upon our inclusive recruitment framework to ensure consistency across the organisation
## **Make Things Happen**
Six new Board members will be inducted and announced, supporting board diversity and bringing in specialisms around cultural cinema, hospitality and environment.
## **Entrepreneurial**
Climate Justice – we will undertake carbon training for all staff, develop a plan for environmental improvements to our building and a sustainable procurement policy.
## **Celebratory**
For our 40th birthday, Watershed 40 will deliver a community engaged programme to explore what does Bristol wants from Watershed for the next 40 years?
## **Risk Management**
Effective risk management is crucial to Watershed thriving in the changeable environment in which it operates. Watershed’s risk management strategy ensures that the organisation can:
- Maintain a resilient, flexible and viable operation
- Make calculated investments in new and speculative areas without undermining the coherence and sustainability of the organisation.
Watershed’s risk register identifies the key areas of risk the business faces, assesses the indicators, likelihood and impact of those risks and identifies the actions required in order to mitigate them should they arise.
The risk register is created and regularly reviewed by the Board and the Executive team. Watershed’s risk management strategy involves maintaining:
- Procedures to ensure early detection of identified and emergent risks
- Regular monitoring of key performance indicators across the organisation
- Procedures to effectively mitigate identified risks
- Procedures to minimise the impact on the organisation should identified risks materialise
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## **Strategic report** _(continued)_
## **Principal risks and uncertainties**
Watershed’s assessment of risk has been reviewed in light of the Coronavirus pandemic and the key risks facing the company have been identified as:
## **People and Culture**
- Recruitment and retention of appropriate staff teams and talent
- The continued impact of Covid on staff absence, wellness and mental health
- Providing an inclusive workplace with diverse opinions and talent
## **Customers**
- Volatile income across the trading and core funding programmes
- Loss of income from tenancy sub-leases
- Changes in the HE sector results in less collaboration and Partnership opportunities
- Fundraising – failure to retain donors and secure new donors.
## **Finance and Systems**
- Inflation and the impact of rising costs
- Reduction in public funding
- Systems infrastructure with unreliable and unsupported legacy systems impacting operational efficiency.
- Financial reporting and planning failing to meet organisational need, due to poor financial systems and controls.
- Failure to meet Watershed’s commitment to carbon neutrality and net zero.
For each of these risks, Watershed has in place indicators and mitigating actions to monitor, avoid, mitigate or transfer the impact of its principal risks and uncertainties. The Trustees consider that adequate controls are in place to mitigate the key risks identified in its risk register.
## **Fundraising**
Watershed is committed to the highest fundraising standards and believe that it is important that all our fundraising activities are clear, open, honest, respectful, and compliant.
Watershed is registered with the Fundraising Regulator. We commit to its Fundraising Promise and follow its Code of Fundraising Practice. Watershed raise funds via multiple fundraising activities, including postal and digital appeals, events and fundraising that has been organised by others on our behalf. We ensure compliance with these standards by:
- Our Development Manager ensures that all those engaging in fundraising for Watershed are aware of the Code of Fundraising Practice and any updates.
- Fundraising is conducted in line with our Fundraising Policy and supporters can raise an issue or complain about our fundraising activities as outlined in our Fundraising Feedback, Compliments and Complaints Policy.
- Fundraising complaints are monitored, recorded, and reported annually to the Fundraising Regulator by the Development Manager. There were no complaints or concerns received during the year.
- We value all our donors, no matter what they donate, will treat them fairly and with respect as well as being accountable for the resources given to us.
- We will not fundraise in a way which is an unreasonable intrusion on a person’s privacy, is unreasonably persistent or places undue pressure on a person to donate.
- We will consider the needs of any possible donor who may be in vulnerable circumstances or need extra care and support to make an informed decision and will not take a donation if we believe this is appropriate.
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## **Strategic report** _(continued)_
## **Financial review**
## **Overview**
The consolidated results set out on page 21 show a deficit of £21,614 for the year (2021: surplus of £354,456). The surplus on unrestricted funds for the year totalled £12,634 (2021: surplus of £469,373).
The comparative results for the year ending 31 March 2021 is mostly attributable to the receipt of a grant totalling £731,993 from the Arts Council Recovery Fund in the year, of which £33,333 was deferred into 2021/22. The award was made to support the Watershed Group during the COVID pandemic.
Before transfers between funds, Watershed showed an unrestricted deficit of £96,614, reflecting the challenging operating and trading conditions over the year as the venue re-opened following the pandemic. Unrestricted income (excluding income from restricted programme funds) was £3.10 million during the year and unrestricted expenditure (excluding programme costs) was £3.20 million.
Overall, designated funds which support the creative programme have decreased by £35,392 in the year (2021: decrease of £25,447).
## **Subsidiary Company Results**
The charity’s wholly owned subsidiary, **Watershed Trading Limited** , continued to operate Watershed’s café/bar and conference facilities.
In a normal year, these activities provide a valuable income stream to support the charitable activities of the Arts Trust and form a key part of the Watershed offer as a whole, providing a welcoming, open and inclusive meeting place for all to enjoy.
Following the re-opening of our hospitality offer, Watershed Trading Limited generated a profit before tax of £15,865 (2021: loss of £202,726). No donations were made through gift aid to the Charity, based upon the previous year’s trading (2021: £nil).
The two main sources of income generation for the Trading Company are:
- Café/bar food and liquor sales generated £708,409 (2021: £88,245).
- Conference sales generated £160,409 (2021: £10,394).
The charity’s wholly owned subsidiary, **Watershed Ventures CIC** , supports the development of talent, providing support to explore the potential of new technologies, and undertakes projects to promote collaboration between artists and the creative industries. In the year, Watershed Ventures CIC made no donations (2021: £nil) through gift aid to the Charity and generated a loss before tax of £501 (2021: loss of £1,165) and total revenue of £nil (2021: £nil).
No activity was undertaken by Watershed Ventures CIC in 2021/22 and no activity is currently planned for the 2022/23 financial year.
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## **Strategic report (continued)**
## **Financial monitoring and control**
Watershed’s financial systems enable early detection of potential problems allowing actions to be taken to mitigate any likely impact in a timely manner, including:
- A careful and prudent budgeting process to ensure that financial targets (income and costs) are realistic and achievable.
- Production of monthly management accounts to assess overall Group performance against budget.
- Weekly and monthly sales reports ensure that progress against sales targets is kept in close check. Food and liquor sales margins are tracked weekly and are verified by a monthly stock take.
- Financial performance is reviewed regularly by Watershed’s Executive team and quarterly by Watershed’s Finance Sub-Group and Board.
- The application of restricted funds is carefully monitored through individual profit and loss accounts relating to each fund. This ensures the correct application of restricted programme funds and maintains activities within the budget parameters set.
- Cash flow is tracked through a rolling annual forecast which is reviewed and updated on a weekly basis
Watershed’s income portfolio includes:
## **Programme Funds**
Programme funds received through partnership agreements, restricted project grants and contracts for services account for the most significant percentage of Watershed’s income (31% in 2021/22 down from 37% in 2020/21). Building relationships with key funders and partners is vital to growth, allowing Watershed to increase activity and invest in developing new, exciting initiatives. In 2021/22 programme funds (excluding regular funding from ACE) totalled £1.419 million (20/21: £1.675 million). Principal funding partners in the year included the University of the West of England (UWE), University of Bristol (UoB), Arts Council England (ACE), British Film Institute (BFI) and West of England Combined Authority (WECA).
## **Unrestricted Grants**
Watershed receives regular funding from Arts Council England (as a National Portfolio Organisation) and Bristol City Council (as a Key Arts Provider). Although these funds account for a relatively small portion of Group turnover (18%) they form a vital part of Watershed’s income portfolio enabling the organisation to plan for the future and deliver an exceptional cultural offer. 2021/22 was the final year of renewed 4-year relationships with both funders, with both funders confirming a one-year extension for the 2022/23 financial year. Watershed constantly seeks to minimise its reliance on public subsidy by actively working to maximise existing income streams and develop new ones.
## **General Fundraising**
In the 2021/22 financial year Watershed secured £30,125 (2021: £35,628) from fundraising through individual giving and private sponsorship.
## **Commercial sales - Café/bar and Conference**
Sales generated by Watershed’s trading subsidiary through its café/bar and conference operations account for 19% of Group turnover in 2021/22, compared to 2% in 2020/21. This is a marked recovery on the previous year when the building was closed, but below the long-term trend. The café/bar provides a vital safe and inclusive meeting space for participants in Watershed’s creative programme and members of the general public. The ambience in the café is carefully maintained to reflect the cultural programme and Watershed’s core values. Watershed’s exceptional conference service provides clients with quality facilities supported by experts in hospitality and technical delivery to create bespoke events. Events hosted range from corporate conferences to weddings. Watershed intends to further develop their broadcasting package to provide clients with a professional, high spec on-line experience for conference delegates.
Watershed’s conference facilities and expertise also contribute significantly to its cultural offer through the hosting of festivals and events programmed by the Arts Trust and its partners forming an important part of the creative programme.
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## **Strategic report (continued)**
## **Cinema sales**
Cinema ticket sales accounted for 10% of Group turnover in 2021/22, compared to 1% of Group turnover in 2020/21. Again, sales in the year have recovered compared to the prior year but remain below the pre-COVID19 levels. Watershed considers and balances the need to generate sales revenue from its cinema programme and its aim to provide a quality offer of cultural cinema which is accessible to all and affordable to those who are economically disadvantaged.
## **Property Income**
Rental income received from Watershed’s head lease tenancies continue to be applied to the charitable objectives of the Arts Trust. The property income in the year was 6% of the group turnover for 2021/22. Watershed continues to provide additional working space to a variety of small companies and individuals, together with teams from Bristol+Bath Creative R&D, supported by UWE, providing the project teams with a home from which to operate.
## **Coronavirus (COVID-19) Pandemic**
## **COVID-19 impact**
The impact of the COVID-19 pandemic continued to cast a shadow over the activities and financial performance of Watershed during 2021/22. It had a direct impact on the income from the café/bar, conferencing facilities and cinema sales as these services initially re-opened in May 2021 but with careful social distancing and other restrictions in place, which were lifted later in July 2021. The income from these operations in the year was £1.33 million compared to the pre-pandemic income in 2019/20 of £2.7 million. Watershed is closely monitoring the recovery of its core trading and income generating activity.
Watershed’s core funding from Arts Council England and Bristol City Council continued as did the project funding for areas of our creative programme. Watershed’s technical resource and expertise enabled these activities to continue operating in a digital environment, which presents opportunities for the future as Watershed assesses new ways of delivering its programmes and impact in a changing operating environment.
The receipt of grants from the Arts Council’s Cultural Recovery Fund in 2021/22 of £364,993 (along with £33,333 which was deferred from the prior year) provided Watershed with sufficient security to ensure that it remains a going concern as it reviews its business model.
Budget and cashflow forecasts undertaken throughout the year indicate that the Watershed Group will maintain sufficient cashflow throughout 2022/23 and 2023/24 financial years to continue operating without impediment. Group consolidated reserves (which includes both unrestricted and designated reserves but excludes the headlease) at the end of 2021/22 were £1,468,719 (2020/21 £1,456,085).
The consolidated statements have therefore been prepared on a going concern basis as considered appropriate by Watershed’s Trustees.
## **Future Resilience**
Watershed has grown considerably in terms of size, turnover and scale over the last decade. Watershed has identified the need to make considerable investment in their systems, processes and workflows. Covid delayed the implementation of the necessary investment and over the next year we will urgently continue this work and be implementing improvements in the financial systems, processes and control to make them more efficient.
Watershed’s mixed business model has been the source of Watershed’s financial resilience, without being overly dependent on any one contract or client. However, Waterside recognises that many areas of the business contribute to the viability of the others and therefore implementing business development or change requires significant business planning and modelling, which will be part of the improvement in Watershed’s systems, processes and workflows.
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## **Strategic report** _(continued)_
## **Reserves policy**
Watershed’s reserves policy was last reviewed in light of the Coronavirus pandemic at a meeting of the Trustees in June 2021.
## **Overview**
Watershed’s reserves policy ensures that we remain sustainable, have the capacity to mitigate existing financial challenges and manage unforeseen financial challenges, with the ability to invest in its future.
In establishing the level of reserves appropriate to its business, Watershed has considered:
- income and expenditure levels in the current and future years
- the obligations and operational requirements of the Charity and Group
- the future development needs of the organisation
## **Reserves**
Watershed reserves are split into the following funds:
## **General Fund**
The General Fund is to ensure that Watershed has the funds to meet its obligations as they fall due in the event of a loss of income.
Given the level of risk and uncertainty caused by COVID-19 and its impact, especially on Watershed Trading Ltd, the Trustees took the decision to review the reserves policy to allow more time to respond to any changes in operational and financial circumstances. In 2020/21, Watershed Trustees increased the general reserves target to 3 months of Group operating costs. Reflecting the 2022-23 actual operating expenditure to September 22, this amounts to £1,330,000. On 31 March 2022, Watershed’s General Fund was £1,120,696, which equates to 2.5 months Group operating costs.
The experience of lockdown suggests the General Fund target could be higher to support a longer period of trading should the effects of COVID-19 or other risks continue to be felt. However, Watershed does not currently have the ability to generate a higher reserve than has currently been set, and the ownership of the building provides Watershed with added security against significant losses. The General Fund target will be regularly reviewed by Trustees.
## **Building Fund (Bristol +)**
The Building Fund (previously named the Bristol + fund) is to ensure that Watershed buildings are maintained in an excellent state of repair, to meet the cost of unplanned emergency repairs and to meet future capital development needs.
The level of reserves currently held in the Building Fund, at £244,717, is deemed appropriate. Pre-COVID-19, this fund was used to underwrite the costs of Watershed’s planned capital development whilst fundraising for the project was/is ongoing. This development is on pause whilst the business is stabilised due to COVID-19, but the goal is to create a model which is more resilient and sustainable, both financially and environmentally, once the capital development is completed.
## **Designated Funds**
Watershed also holds several designated funds which are established to ring-fence surpluses attributable to timing differences in areas of project activity supported by specific one-off programme funds. This policy was last reviewed by Trustees in May 2020 and will be looked at again in 2022-3.
As at 31 March 2022, Watershed’s reserves comprise*:
General fund £ 1,120,696 Building Fund (previously Bristol + fund) £ 244,717 Film Hub designated fund £ 67,767 Clusters designated fund £ 35,539 **Total £ 1,468,719**
_*note – net current assets available at 31 March 2022 stand at £1,242,924_
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## **Strategic report** _(continued)_
Following the revaluation of the head lease in July 2019, accumulated depreciation charges have been written back. A new capital designated fund was set up in 2019/20 to ring-fence this amount for the purposes of capital investment.
The new head lease valuation of £7,650,000 is represented as:
Head lease designated fund £5,504,856 Capital designated fund £ 709,544 Revaluation reserve £1,435,600 **Total £7,650,000**
These funds represent a tangible fixed asset from which Watershed operates, which are fundamental to the delivery of the business plan. They are therefore not included in Watershed’s unrestricted reserves.
Registered company number 01608779
13
## **Trustees’ report**
## **Structure, governance and management**
Watershed is structured as a group of three companies, the parent company Watershed Arts Trust Limited and two wholly owned subsidiaries, Watershed Trading Limited and Watershed Ventures CIC. The Arts Trust delivers the core programme, Watershed Trading Ltd manages hospitality and Watershed Ventures is a CIC which we are not currently delivering any activity through.
Watershed’s governance structure reflects and supports the Group structure and its organisational core values, culture and needs. It provides the management capacity and expertise to deliver Watershed’s overall aims and objectives.
The Board, which administers the Charity, meets five times a year. Potential members are invited to attend Board meetings as observers for a short period of time. In due course official appointment is made by serving members if deemed appropriate. Prior to appointment new members are familiarised with Watershed’s memorandum and articles of association, business plan and recent financial performance. Watershed’s Board of Trustees are volunteers and receive no remuneration.
Watershed’s Executive group, comprising four senior managers, report to the Chief Executive Officer. The Executive Team meet weekly, joined by the Senior Management Team every fortnight. The Executive Team take responsibility for strategy and overall performance whilst senior managers take responsibility for the day-to-day operations. The Board review and approve changes to key management's remuneration.
Registered company number 01608779
14
## **Trustees’ report** _(continued)_
## **Statement of responsibilities of the Trustees of Watershed Arts Trust Limited in respect of the Board of Trustees report and the financial statements**
The Trustees, who are also directors of the charitable company for the purposes of company law, are responsible for preparing the Report of the Board of Trustees and the financial statements in accordance with applicable law and regulations.
Company law requires the Trustees to prepare financial statements for each financial year in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law).
Under company law the Trustees must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the charitable company and the Group and of the incoming resources and application of resources, including the income and expenditure, of the charitable group for that period. In preparing the financial statements, the Trustees are required to:
- select suitable accounting policies and then apply them consistently.
- observe the methods and principles in the Charities SORP.
- make judgements and estimates that are reasonable and prudent.
- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the charitable company will continue its activities.
The Trustees are responsible for keeping adequate accounting records that are sufficient to show and explain the charitable company’s transactions and disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Trustees are responsible for the maintenance and integrity of the corporate and financial information included on the charitable company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
## **Reference and administrative details**
Watershed Arts Trust Limited was incorporated as a company limited by guarantee on 19 January 1982. The company was registered with the charity commission on 18 March 1982. The wholly owned subsidiary Watershed Trading Limited was incorporated on 12 March 1982. Watershed Ventures CIC (previously iShed CIC) was incorporated on 12 February 2007.
The members of the Board of Trustees who served during the year and post year end and who constitute directors for Companies Act purposes are listed below.
## **Trustees**
J. Touzel (Chair) J. Tuttle (appointed 9 February 2022) P. Appleby (resigned 23 March 2022) J. Roscoe
P. Appleby (resigned 23 March 2022)
K. Arthurs (appointed 9 February 2022) S. Wilson (resigned 26 June 2021)
D. Bunyan (resigned 8 December 2021)
S. Cooper
L. Decordova (appointed 9 February 2022)
J. Durrant (resigned 23 March 2022)
S. Eugene-Hart
P. Gardener
L. Gardner
- S. Gatfield
L. Goux (appointed 9 February 2022)
- C. Lester (appointed 9 February 2022)
S. Lovegrove (resigned 15 June 2021)
- S. Sharma (appointed 9 February 2022)
Registered company number 01608779
15
## **Trustees’ report** _(continued)_
**Secretary:** Lisa Gardner **Chief Executive Officer:** Clare Reddington **Charity number** : 284188 **Company number** : 01608779 **Registered Office** : 1 Canon’s Road, Harbourside, Bristol, BS1 5TX **Auditors:** Saffery Champness LLP, St. Catherine’s Court, Berkeley Place, Clifton, Bristol, BS8 1BQ **Bankers:** HSBC Bank, 62 George White Street, Cabot Circus, Bristol, BS1 3BA **Solicitors:** TLT LLP, 1 Redcliff Street, Bristol, BS1 6TP
## **Disclosure of information to auditors**
The Trustees who held office at the date of approval of this Board of Trustees’ report confirm that, so far as they are each aware, there is no relevant audit information of which the charitable Company’s auditors are unaware; and each Trustee has taken all the steps that they ought to have taken as a Trustee to make themselves aware of any relevant audit information and to establish that the charitable Company’s auditors are aware of that information.
## **Auditors**
Watershed’s Board of Trustees re-appointed auditors Saffery Champness LLP at its Board meeting held on 7[th] December 2022
By order of the Board
**J Touzel**
_Chair of the Board_
1 Canon’s Road Bristol BS1 5TX
Registered company number 01608779
16
## **Independent auditors’ report to the members and Trustees of Watershed Arts Trust Limited (a company limited by guarantee)**
## **Opinion**
We have audited the financial statements of Watershed Arts Trust Limited (the ‘parent charitable company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2022 which comprise the Group Statement of Financial Activities, the Group Summary Income and Expenditure Account, the Group and Parent Charitable Company Balance Sheets, the Group Cash Flow Statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
- give a true and fair view of the state of the affairs of the group and the parent charitable company as at 31 March 2022 and of the group’s incoming resources and application of resources, including its income and expenditure, for the year then ended.
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
- have been prepared in accordance with the Companies Act 2006.
## **Basis for opinion**
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent charitable company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
## **Conclusions relating to going concern**
In auditing the financial statements, we have concluded that the trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group or the parent charitable company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the trustees with respect to going concern are described in the relevant sections of this report .
## **Other information**
The trustees are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact.
We have nothing to report in this regard.
Registered company number 01608779
17
## **Independent auditors’ report to the members and Trustees of Watershed Arts Trust Limited (a company limited by guarantee)** _(continued)_
## **Opinions on other matters prescribed by the Companies Act 2006**
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Trustees’ Annual Report which includes the Trustees’ Report and the Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the Trustees’ Annual Report which includes the Trustees’ Report and the Strategic Report have been prepared in accordance with applicable legal requirements.
## **Matters on which we are required to report by exception**
In the light of the knowledge and understanding of the group and charitable company and their environment obtained in the course of the audit, we have not identified material misstatements in the Trustees’ Annual Report which includes the Strategic Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept by the parent charitable company, or returns adequate for our audit have not been received from branches not visited by us; or
- the parent charitable company financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of trustees’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
## **Responsibilities of trustees**
As explained more fully in the Trustees’ Responsibilities Statement set out on page 20, the trustees (who are also directors of the charitable company for the purposes of company law) are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the trustees are responsible for assessing the group and the parent charitable company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the group or charitable company or to cease operations, or have no realistic alternative to do so.
## **Auditor’s responsibilities for the audit of the financial statements**
We have been appointed as auditors under the Companies Act 2006 and report in accordance with that Act.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Registered company number 01608779
18
## **Independent auditors’ report to the members and Trustees of Watershed Arts Trust Limited (a company limited by guarantee)** _(continued)_
## Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent charitable company’s financial statements to material misstatement and how fraud might occur, including through discussions with the trustees, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent charitable company by discussions with trustees and updating our understanding of the sectors in which the group and parent charitable company operate.
Laws and regulations of direct significance in the context of the group and parent charitable company include The Companies Act 2006 and guidance issued by the Charity Commission for England and Wales.
## Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the parent charitable company’s records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent charitable company’s policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Registered company number 01608779
19
## **Independent auditors’ report to the members and Trustees of Watershed Arts Trust Limited (a company limited by guarantee)** _(continued)_
## **Use of our report**
This report is made solely to the parent charitable company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent charitable company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent charitable company and the parent charitable company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Strong (Senior Statutory Auditor) For and on behalf of Saffery Champness LLP
Chartered Accountants St Catherine’s Court Statutory Auditors Berkeley Place Clifton, Bristol Date: 12 December 2022 BS8 1BQ
Saffery Champness LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
Registered company number 01608779
20
## **Consolidated statement of financial activities (including an income & expenditure account)**
_for the year ended 31 March 2022_
|**_Note_**
**Income**
**_Voluntary income_**
_Donations and legacies_
Individual giving
Donated services
Regular grant funding
_4_
Arts Council England Cultural Recovery Grant
_4_
_Other trading activities_
Commercial trading operations
_6_
_Investment income_
Interest receivable
**_Income from charitable activities_**
Earned income from cinema activities
Rental income
Service charges
Other earned income
Programme funds
_4_
**_Other income_**
Government grants (COVID support)
_4_
Capital grants
**Total income**
**Expenditure**
**_Costs of raising funds_**
Fundraising costs
_8_
Commercial trading operations
_6_
**_Charitable activities_**
Operation of cinema, engagement and
creative media projects
_9_
Donated services
CIC operation
_7_
Property management costs
**Total expenditure**
Net income/(expenditure) before transfers and
Net income/(expenditure) for the year
Transfers between funds
_20_
Net movement in funds
**_Reconciliation of funds_**
Total funds brought forward
**Total funds carried forward**|**Unrestricted**
**Funds**
**£**
30,125
3,854
812,384
398,326
862,871
27
2,107,587
462,869
171,684
124,828
89,413
6,000
854,794
142,256
-
**3,104,637**
(52,540)
(902,998)
(955,538)
(2,164,586)
(3,854)
(504)
(76,769)
**(3,201,251)**
(96,614)
109,248
12,634
9,106,085
**9,118,719**|**Restricted**
**Funds**
**£**
-
-
-
-
-
-
-
-
-
1,413,621
1,413,621
-
75,000
**1,488,621**
-
-
-
(1,413,621)
-
-
-
**(1,413,621)**
75,000
(109,248)
(34,248)
1,293,421
**1,259,173**|
**Total Funds**
**2022**
**£**
30,125
3,854
812,384
398,326
862,871
27
2,107,587
462,869
171,684
124,828
89,413
1,419,621
2,268,415
142,256
75,000
**4,593,258**
(52,540)
(902,998)
(955,538)
(3,578,207)
(3,854)
(504)
(76,769)
**(4,614,872)**
(21,614)
-
(21,614)
10,399,506
**10,377,892**|**Total Funds**
**2021**
**£**
35,628
6,141
812,384
698,660
100,833
75|
|---|---|---|---|---|
|||||
1,653,721
56,588
139,467
80,210
95,628
1,675,908|
|||||
2,047,801
777,264
10,000|
|||||
**4,488,786**|
|||||(20,275)
(683,035)|
|||||(703,310)
(3,367,095)
(6,141)
(1,198)
(56,586)|
|||||**(4,134,330)**|
|||||354,456
-|
|||||354,456
10,045,050|
|||||**10,399,506**|
Incoming resources and resulting net movement in funds in each year arise from continuing operations. The group has no recognised gains or losses for the current or previous year other than those shown above.
Registered company number 01608779
21
## **Consolidated cash flow statement**
_for the year ended 31 March 2022_
|**Consolidated cash flow statement**
_or the year ended 31 March 2022_|||
|---|---|---|
||**2022**|2021|
||**£**|£|
|**Cash flows from operating activities**|||
|Net (outgoings)/income|**(21,614)**|354,456|
|Depreciation of tangible assets|**175,920**|208,887|
|Depreciation write-off (head lease)|**-**|-|
|Loss on disposal of fixed assets|**-**|-|
|Taxation|**-**|(2,079)|
|Change in trade and other debtors|**23,126**|(29,366)|
|Change in stocks|**(9,182)**|8,891|
|Change in trade and other creditors|**(48,251)**
|(312,084)|
|**Net cash flow generated from operating activities**|**119,999**|228,705|
|**Cash flows from investing activities**|||
|Purchases of tangible assets|**(64,387)**
|(27,123)|
|**Net cash from investing activities**|**(64,387)**|(27,123)|
|**Cash flows from financing activities**|||
|Decrease in loan/long term creditors|**-**
|-|
|**Net cash flows from financing activities**|**-**
|-|
|Cash at bank and in hand at beginning of year|**1,722,687**|1,521,105|
|Cash at bank and in hand at end of year|**1,778,299**
|1,722,687|
## **Analysis of changes in net debt**
||**At**|**1 April 2021**|**Cashflows**|**At 31 March 2022**|
|---|---|---|---|---|
|||£|£|£|
|Cash||1,722,687|55,612|1,778,299|
|**Total**||**1,722,687**|**55,612**|**1,778,299**|
Registered company number 01608779
22
## **Consolidated and company balance sheets**
_at 31 March 2022_
||_Note_||**Group**||**Charity**|
|---|---|---|---|---|---|
|||**2022**|2021|**2022**|2021|
|||**£**|£|**£**|£|
|**Fixed assets**||||||
|Tangible assets|_13_|**9,168,143**|9,279,676|**9,130,612**|9,253,623|
|Investments|_14_|**-**|-|**50,101**|50,101
|
|||**9,168,143**|9,279,676|**9,180,713**|9,303,724
|
|**Current assets**||||||
|Stocks|_15_|**15,233**|6,051|**-**|-|
|Debtors|_16_|**338,412**|361,538|**388,687**|376,711|
|Cash at bank and in hand||**1,778,299**
|1,722,687|**1,424,354**
|1,225,894
|
|||**2,131,944**
|2,090,276|**1,813,041**
|1,602,605
|
|**Creditors: due within one year**|_17_|**(889,020)**
|
(937,271)
|**(674,004)**
|
(549,601)
|
|**Net current assets**||**1,242,924**
|1,153,005|**1,139,037**
|1,053,004
|
|**Total assets less current liabilities**||**10,411,067**|10,432,681|**10,319,750**|10,356,728|
|**Creditors: due after more than one year**|_18_|**(29,690)**|
(29,690)|**(29,690)**|
(29,690)|
|**Provisions for liabilities and charges**|_19_|**(3,485)**
|
(3,485)|**-**
|-
|
|**Net assets**||**10,377,892**|10,399,506
|**10,290,060**|10,327,038
|
|**Unrestricted income funds - general**|_20_|**1,120,696**|1,058,008|**1,032,864**|985,540|
|**Clusters – unrestricted designated fund**|_20_|**35,539**|35,539|**35,539**|35,539|
|**Rife– unrestricted designated fund**|_20_|**-**|14,662|**-**|14,662|
|**Film Hub – unrestricted designated fund**|_20_|**67,767**|68,849|**67,767**|68,849|
|**ACE Cultural Recovery designated fund**|_20_|**-**|34,310|**-**|34,310|
|**Bristol + unrestricted designated fund**|_20_|**244,717**|244,717|**244,717**|244,717|
|**Head lease unrestricted designated fund**|_20_|**5,504,856**|5,504,856|**5,504,856**|5,504,856|
|**Capital unrestricted designated funds**|_20_|**709,544**|709,544|**709,544**|709,544|
|**Revaluation reserve (head lease)**|_20_|**1,435,600**|1,435,600|**1,435,600**|1,435,600|
|**Restricted capital funds**|_21_|**1,259,173**
|1,293,421|**1,259,173**
|1,293,421
|
|**Total funds**||**10,377,892**|10,399,506|**10,290,060**|10,327,038|
A separate Statement of Financial Activities and Income and Expenditure Account for the charity has not been presented because Watershed Arts Trust Limited has taken advantage of the exemption afforded by section 408 of the Companies Act 2006. For the parent charity net movement in funds is a deficit of £36,978 (2021: surplus of £556,269).
These financial statements were approved by the Board on 7[th] December 2022 and were signed on its behalf by:
**J Touzel**
_Chair of the Board_
Registered company number 01608779
23
## **Notes**
_(forming part of the financial statements)_
## **1 Accounting policies**
## _**Company information**_
Watershed Arts Trust Limited is a charitable company limited by guarantee incorporated in England and Wales. The registered office is 1 Canons Road, Harbourside, Bristol, BS1 5TX.
## _**Basis of preparation**_
The financial statements have been prepared in accordance with Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2019) – (Charities SORP (FRS 102)), the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2006, which have been applied consistently.
Watershed Arts Trust Limited meets the definition of a public benefit entity under FRS 102. Assets and liabilities are initially recognised at historical cost or transaction value unless otherwise stated in the relevant accounting policy note.
## _**Going Concern**_
The impact of the COVID-19 pandemic continued to cast a shadow over the activities and financial performance of Watershed during 2021/22. It had a direct impact on the income from the café/bar, conferencing facilities and cinema sales as these services initially re-opened in May 2021 but with careful social distancing and other restrictions in place, which were lifted later in July 2021. The income from these operations in the year was £1.33 million compared to the pre-pandemic income in 2019/20 of £2.7 million. Watershed is closely monitoring the recovery of its core trading and income generating activity.
Watershed’s core funding from Arts Council England and Bristol City Council continued as did the project funding for areas of our creative programme. Watershed’s technical resource and expertise enabled these activities to continue operating in a digital environment, which presents opportunities for the future as Watershed assesses new ways of delivering its programmes and impact in a changing operating environment.
The receipt of grants from the Arts Council’s Cultural Recovery Fund in 2021/22 of £364,993 (along with £33,333 which was deferred from the prior year) provided Watershed with sufficient security to ensure that it remains a going concern as it reviews its business model.
Budget and cashflow forecasts undertaken throughout the year indicate that the Watershed Group will maintain sufficient cashflow throughout 2022/23 and 2023/24 financial years to continue operating without impediment. Consolidated Reserves at the end of 2021/22 were £1,468,719 (2020/21 £1,456,085).
The consolidated statements have therefore been prepared on a going concern basis as considered appropriate by Watershed’s Trustees.
Registered company number 01608779
24
## **Notes** _(continued)_
## **1 Accounting policies** _(continued)_
## _**Basis of consolidation**_
These consolidated financial statements include the financial statements of The Watershed Arts Trust Limited ("the charitable company"), Watershed Trading Limited and Watershed Ventures CIC, its wholly owned trading subsidiaries made up to 31 March 2022.
These financial statements consolidate the results of the charity and its wholly owned subsidiaries on a line by line basis.
The trading results of the subsidiaries are disclosed in notes 6 and 7 to these financial statements.
## _**Income**_
## _**Voluntary income**_
Income from government and other grants is recognised when the charity has entitlement to the funds, any performance conditions are met, the amount can be measured reliably, and in line with the timing implied by any multiperiod grant agreements.
Grants received in respect of revenue expenditure are credited to income in the period to which they relate. One off non-specific revenue grants which support core activities are categorised as voluntary income. Revenue grants received for specific creative projects are also categorised as income from charitable activities.
Grants received to fund capital expenditure are recognised in the Statement of Financial Activities in the year of receipt and held as appropriate in restricted or unrestricted funds. Where restricted, the balance in restricted funds is transferred to unrestricted funds in future years at the same rate so as to match the depreciation of the related assets.
## _**Income from charitable activities**_
Earned income from cinema activities represents the amounts (excluding value added tax) derived from the provision of goods and services to customers during the year in respect of cinema ticket sales and is accounted for on a receivable basis. Deposits received in respect of cinema tickets for the next accounting period are included in deferred income in creditors on the balance sheet until the criteria for income recognition are met.
Rentals receivable under operating leases, including any lease incentives, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
Turnover in respect of the restaurant, shop and bar takings is in the form of cash and credit cards and is accounted for on a receipts basis. Turnover in respect of the conferencing activities is accounted for on a receivable basis with income recognised in the profit and loss account for conferences completed in the current accounting period. Non-refundable deposits received in respect of conferences in the next accounting period are held as deferred income in creditors on the balance sheet.
Earned income in respect of Watershed Ventures CIC represents the amounts (excluding value added tax) derived from the provision of goods and services to customers during the year in respect of events and consultancies and is accounted for on a receivable basis.
## _**Donated services and facilities**_
Where services are provided to the charity as a donation that would normally be purchased from our suppliers, this contribution is included in the financial statements as value to the charity, at an estimate provided by the donors.
Registered company number 01608779
25
## **Notes** _(continued)_
## **1 Accounting policies** _(continued)_
## _**Expenditure**_
All expenditure is accounted for on an accruals basis.
Costs directly attributable to a specific expense heading are allocated to that heading.
Expenditure is recognised when a liability is incurred:
- costs of generating funds are those costs incurred in attracting voluntary income, and those incurred in trading activities that raise funds;
- charitable activities include expenditure associated with the cinema exhibition programme and digital studio programmes and include both the direct costs and support costs relating to these activities;
- governance costs include those incurred in the governance of the charity and its assets and are primarily associated with constitutional and statutory requirements;
- support costs include central functions and have been allocated to activity cost categories on a basis consistent with the use of resources, e.g., allocating property costs by floor areas, staff costs by the time spent and other costs by their usage.
## _**Leases**_
Operating lease rentals are charged to the statement of financial activities on a straight line basis over the period of the lease.
## _**Stocks**_
Stocks are stated at the lower of cost and net realisable value where cost is determined with reference to current prices. Stocks are assumed to be used on a first in first out basis.
## _**Taxation**_
The Trust was registered as a charity in March 1982. Under s505 ICTA 1988 the Charity is not subject to taxation on its charitable activities. The majority of the profits of the non-charitable subsidiary are normally gift aided to the parent charity thus reducing the group’s exposure to corporation tax.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax is provided in full in respect of timing differences between the treatment of certain items for taxation and accounting purposes. The deferred tax balance has not been discounted.
## _**Fund accounting**_
The Charity has various types of funds for which it is responsible, and which require separate disclosure. These are as follows:
## _**Restricted funds**_
These funds are earmarked by the donor for specific purposes. Grant income received to fund capital expenditure is held in restricted funds. The balance is transferred to unrestricted funds in future years at the same rates as to match the depreciation charges of the related assets.
Revenue funds restricted by the donor are matched against expenditure as appropriate.
## _**Unrestricted funds**_
Funds that are expendable at the discretion of the Board in furtherance of the objects of the charity. In addition to expenditure on the principal activities of the Trust, such funds may be held in order to finance capital investment and working capital.
## _**Designated funds**_
The Building Fund (previously named the Bristol + fund) is to ensure that Watershed buildings are maintained in an excellent state of repair, to meet the cost of unplanned emergency repairs and to meet future capital development needs.
Registered company number 01608779
26
## **Notes** _(continued)_
## **1 Accounting policies** _(continued)_
Currently the Building Fund is underwriting the costs of furthering the development of Watershed’s major capital programme whilst funding is secured to support the venture. At the end of 2021/22, these costs total £211,707 and are being treated as an asset on Watershed’s balance sheet.
Other designated funds ringfence surpluses attributable to timing differences associated with specific project activity and are utilised over the life of the project.
In 2020/21 a new designated fund was established to ring fence surpluses associated with the Arts Council Cultural recovery fund (£34,310). This fund was fully utilised in the 2021/22 financial year.
## _**Subsidiaries**_
Details of subsidiary undertakings owned by the charity are disclosed in notes 6 and 7.
## _**Fixed assets and depreciation**_
Assets under £1,000 are not capitalised unless they form part of an asset with a combined value of over £1,000.
Fixed assets are subject to a policy of cost and depreciation, except for the head lease. Depreciation is provided by the company to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over their estimated useful economic lives as follows:
Furniture and fittings 10% - 20% per annum Plant and equipment 10% - 33% per annum
In December 2002 Watershed purchased a new lease on the existing premises for the sum of £650,000 on the same terms as the existing lease excepting the term is for 99 years from 25 March 1982 and the rental is peppercorn.
Depreciation is provided on a straight line basis over a 79 year period (the unexpired term of the lease).
Leasehold improvements The Board re-assessed the useful economic lives of leasehold improvements in 1992. All leasehold improvements are depreciated over 25 years on a straight line basis.
In December 2002 Watershed commenced a programme of capital development which created new administration and event spaces, a third cinema screen, refurbished the existing two screens, created an extension to the café/bar area and provided a fully accessible lift. The programme was completed in March 2006.
In March 2009 Watershed constructed a balcony extension to the café/bar area.
In August 2011 Watershed refurbished its events spaces. It is considered likely that further refurbishment work will be required in 10 years’ time and consequently the costs of this work are being depreciated over a 10 year period. In December 2015 Watershed undertook a programme of refurbishment to upgrade its computer facilities, kitchen equipment and lighting to more energy efficient and environmentally friendly equivalents. The costs of these upgrades are being depreciated over a 10 year period to reflect the useful life of these improvements.
In June 2017 Watershed undertook a programme of refurbishment to update its Front of House facilities, making them fit for purpose and accessible. The costs of these upgrades are being depreciated over a 10 year period to reflect the useful life of these improvements.
Acquisition of the head lease to E &W sheds
In March 2007 Watershed purchased the head lease to E & W sheds for its unexpired term of 111 ¾ years. The final price paid was £5.95 million. Previously depreciation was provided on a straight line basis over a 111 ¾ year period (the unexpired term of the lease).
Registered company number 01608779
27
## **Notes** _(continued)_
## **1 Accounting policies** _(continued)_
In 2019/20, the head lease was revalued at a market value of £7,650,000. Going forward the treatment of the lease will be on a re-valuation basis.
The valuation was carried out by chartered surveyors Carter Baynes following the granting of a deed of variation from Bristol City Council which reduced the ground rent payable on the head lease to peppercorn from 1 April 2019.
Opinions of value were provided for both the investment and market value subject to the existing tenancies.
As the useful economic life of some of the above assets exceeds 50 years, the Trustees review the assets for impairment on an annual basis.
## _**Financial instruments**_
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
## _Basic financial assets_
Basic financial assets, which include trade and other debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
## _Basic financial liabilities_
Basic financial liabilities, including trade creditors, other creditors and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as 'creditors: amounts falling due within one year' if payment is due within one year or less. If not, they are presented as 'creditors: amounts falling due after more than one year'. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
## _**Cash and cash equivalents**_
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, bank overdrafts or other short-term liquid investments with original maturities of three months or less.
## _**Foreign currency policy**_
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the income and expenditure account.
## **2 Critical accounting judgments and key sources of estimation uncertainty**
The head lease to E&W sheds is held by the Charity for the purposes of direct use of the Charity. It is Watershed’s intention to impact positively on the immediate public realm and create an external environment around Watershed that is both welcoming and inclusive. Rental income generated by the head lease tenancies is applied directly to the charitable objectives of the Arts Trust. It is therefore deemed appropriate to classify the valuation of the head lease on its value as Property, Plant and Equipment (PPE) rather than as mixed use investment assets.
Registered company number 01608779
28
## **Notes** _(continued)_
## **2 Critical accounting judgments and key sources of estimation uncertainty** _(continued)_
Trustees have given due consideration to the impact of the COVID pandemic on the value of the head lease and consider that there are no material changes to the value of the property (see note 13).
Voluntary income is recognised at the point at which the Charity deems it has entitlement to those funds. Decisions around the timing of entitlement are based on the terms and conditions of the particular grant or contract, past precedents around funder’s accountability requirements and the need to show a true and transparent picture of the Charity’s activities.
Grant income is often offered to Watershed in advance of the activity it supports. In these instances, no entitlement is assumed until the funded activity commences. Up to this point funds are held as deferred restricted income. Income is then credited to the profit and loss account to match the related expenditure as the funded activity progresses.
## **3 Legal status of the charity**
The Watershed Arts Trust Limited is a company limited by guarantee and, as such, has no share capital. In the event of winding up, each member is liable to contribute a maximum of £1. As at 31 March 2022 there were 13 members.
Registered company number 01608779
29
## **Notes** _(continued)_
## **4 Grant and project income receivable (Group)**
|**Income from donations and legacies**
**Unrestricted grants**
**_Regular Grant Funding_**
Arts Council England – National Portfolio funds
Bristol City Council – Key Arts Provider funds
**_Total Regular Grant Funding_**
**_Cultural Recovery Grants_**
Arts Council England
**Total unrestricted grant funding**
**Restricted grants**
**_Cultural Recovery Grants_**
Arts Council England – Cultural Recovery
**Total restricted grant funding**
**Income from charitable activities**
**Unrestricted grants**
Europa Cinemas
**Unrestricted other project funding**
Other
**Total other grants**
**Restricted**
**Programme funding - grants**
British Film Institute
HE Sector
Other grants
**Programme funding - other**
Other project funds
**Total programme funds**
**Other Grants**
**Unrestricted**
Government grants (COVID support)
**Total other grants**
**Total**|Deferred as
at 1 April
2021
£
-
-
**-**
33,333
**33,333**
-
**-**
-
-
**-**
-
143,459
-
-
**143,459**
-
**-**
**176,792**|Cash
received &
receivable
2021/22
£
757,984
54,400
**812,384**
364,993
**364,993**
-
**-**
-
6,000
**6,000**
783,500
376,860
124,883
132,500
**1,417,743**
142,256
**142,256**
**2,743,376**|Credited to
income &
expenditure
2021/22
£
(757,984)
(54,400)
**(812,384)**
(398,326)
**(398,326)**
-
**-**
-
(6,000)
**(6,000)**
(766,953)
(408,525)
(113,643)
(124,500)
**(1,413,621)**
(142,256)
**(142,256)**
**(2,772,587)**|Transferred
to capital
grants
2021/22
£
-
-
**-**
-
**-**
-
**-**
-
-
**-**
-
-
-
-
**-**
-
**-**
**-**|Deferred as
at 31 March
2022
£
-
-|
|---|---|---|---|---|---|
||||||**-**|
||||||-|
||||||**-**|
||||||-|
||||||**-**|
||||||-
-|
||||||**-**|
||||||16,547
111,794
11,240
8,000|
||||||**147,581**|
||||||-|
||||||**-**|
|||||||
||||||**147,581**|
Registered company number 01608779
30
## **Notes** _(continued)_
## **5 Financial activities of the charity**
The financial activities shown in the consolidated statement includes those of the charity’s wholly owned subsidiaries, Watershed Trading Limited and Watershed Ventures CIC.
The gross incoming resources for the year ended 31 March 2022 for the charity was £3,680,748 (2021: £4,006,366). The overall net incoming resources for the year was a deficit of £36,978 (2021: surplus of £556,269), with a deficit of £2,730 (2021: surplus of £671,186) on unrestricted reserves.
## **6 Trading subsidiary’s results (Watershed Trading Limited)**
|**6**
**Trading subsidiary’s results (Watershed Trading Limited)**|||
|---|---|---|
||**2022**|2021|
||**Total**|Total|
||**£**|£|
|**Turnover**|**976,163**|538,641|
|Cost of sales|**(776,335)**|(619,471)|
|**Gross profit/(loss)**|**199,828**|(80,830)|
|Administration and other costs|**(126,663)**|(63,563)|
|**Trading profit/(loss)**|**73,165**|(144,393)|
|Other income|**9**|-|
|**Net income/ (outgoing funds)**|**73,174**|(144,393)|
|Gift aid payment to Watershed Arts Trust Limited|**-**|-|
|Management charge from Watershed Arts Trust Limited|**(57,309)**|(58,333)|
|Tax on profit on ordinary activities|**-**|2,079|
|**Retained profit/(loss) for the year**|**15,865**|(200,647)|
|Retained profit brought forward|**64,182**
|264,829|
|**Retained profit carried forward**|**80,047**
|64,182|
|The assets and liabilities of the subsidiary were:|||
||**2022**|2021|
||**Total**|Total|
||**£**|£|
|Fixed assets|**37,531**|26,053|
|Current assets|**391,489**|476,061|
|Creditors: amounts falling due within one year|**(345,388)**|(434,347)|
|Provisions for liabilities and charges|**(3,485)**|(3,485)|
|**Net assets**|**80,147**|64,282|
|**Equity shareholders’ funds**|**80,147**|64,282|
Registered company number 01608779
31
|**Notes **_(continued)_
**Subsidiary Turnover**
Café/bar, conference, retail sales
Government JRS grants
Arts Council England Cultural Recovery Fund
**Turnover**|**2022**
**Total**
**£**
**869,227**
**73,603**
**33,333**
**976,163**|2021
Total
£
98,754
373,220
66,667
538,641|
|---|---|---|
## **7 Trading subsidiary’s results (Watershed Ventures CIC)**
|**Turnover**
Cost of sales
**Gross profit**
Administration and other costs
**Trading profit**
Other income
**Net income**
Gift aid payment to Watershed Arts Trust Limited
Management charge from Watershed Arts Trust Limited
Tax on profit on ordinary activities
**Retained profit for the year**
Retained profit brought forward
**Retained profit carried forward**
The assets and liabilities of the subsidiary were:
Current assets
Creditors: amounts falling due within one year
**Net assets**
**Equity shareholders’ funds**|**2022**
**Total**
**£**
**-**
**-**
**-**
**(504)**
**(504)**
**3**
**(501)**
**-**
**-**
**-**
**(501)**
**8,286**
**7,785**
**2022**
**Total**
**£**
**58,586**
**(800)**
**57,786**
**57,786**|2021
Total
£
-
-
-
(1,198)
(1,198)
33
(1,165)
-
-
-
(1,165)
9,451
8,286
2021
Total
£
60,359
(2,072)
58,287
58,287|
|---|---|---|
Watershed Ventures CIC is exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of s479a.
Registered company number 01608779
32
**Notes** _(continued)_
## **8 Allocation of support costs**
The Trust allocates its support costs as shown in the table below and then further apportions those costs between the two charitable activities undertaken (see note 9). Support costs are allocated on a basis consistent with the use of resources.
|Charitable
activities
Fundraising costs Governance
£
£
£
**Support cost**
General office
91,486
1,746
15,056
Finance office
207,583
2,504
50,931
External audit
-
-
22,821
Professional services
16,478
-
13,736
Fundraiser costs
-
48,290
-
315,547
52,540
102,544
|**2022**
**Total**
**£**
**108,288**
**261,018**
**22,821**
**30,214**
**48,290**
**470,631**|2021
Total
£
83,887
205,769
19,433
22,758
16,564|
|---|---|---|
|||348,411|
## **9 Analysis of charitable expenditure**
|||Creative|||
|---|---|---|---|---|
||Audience
Engagement
Programme|technology and
talent
development|**2022**
**Total**|2021
Total|
|||projects|||
||£|£|**£**|£|
|Cinema Screening – direct costs|609,232|-|**609,232**|445,132|
|Direct programme/project costs|600,533|738,795|**1,339,328**|1,488,808|
|Arts programme management and marketing|339,656|239,912|**579,568**|584,191|
|Premises costs|307,560|162,684|**470,244**|324,513|
|General support costs|252,438|63,109|**315,547**|254,881|
|Governance costs|82,035|20,509|**102,544**|73,255|
|Depreciation|129,395|32,349
|**161,744**|196,315|
|Total|2,320,849|1,257,358|**3,578,207**|3,367,095|
Registered company number 01608779
33
## **Notes** _(continued)_
## **10 Staff numbers and costs**
The average headcount in the year for the group was 101 (2021: 109).
The full time equivalent average number of persons employed by Watershed during the year, including directors, analysed by category, was as follows:
||**Number of employees**|**Number of employees**|
|---|---|---|
||**2022**|2021|
|Cultural engagement programme|**36**|35|
|Administration|**12**|12|
|Trading|**21**|19|
||**69**|66|
|he aggregate payroll costs of these persons were as follows:|||
||**2022**|2021|
|**Group**|**£**|£|
|Directors’ emoluments|**-**|-|
|Wages and salaries|**2,206,588**|2,165,007|
|Social security costs|**192,356**|177,145|
|Pension costs|**47,796**|49,229|
||**2,446,740**|2,391,381|
The aggregate payroll costs of these persons were as follows:
During the current and previous year, the Trustees were not paid any remuneration or reimbursed for expenses. No Trustees made a donation to the charity in the current or previous year.
Key management compensation in total for the year was £78,592 (2021: £70,353). The key management personnel of the charity comprises the Chief Executive Officer.
The emoluments of one member of staff, including benefits in kind, are within the range of £75,000 to £80,000 (2021 - the emoluments of one employee, including benefits in kind, was within the range of £60,000 to £69,999).
## **11 Net movement on funds is stated after charging**
||**2022**|2021|
|---|---|---|
||**£**|£|
|Auditors’ remuneration – audit services (Charity: £14,875)|25,325|13,650|
|Auditors’ remuneration – non audit services (Charity: £7,946)|11,199|9,350|
|Depreciation and other amounts written off tangible fixed assets|175,920|275,322|
|Inventories recognised as an expense|628,362|1,257,449|
|Operating lease payments recognised as an expense|10,306|10,306|
Registered company number 01608779
34
## **Notes** _(continued)_
## **12 Taxation**
The company, which is a registered charity, is not liable to taxation on the net income from its primary activity. Stated below are the tax details of the subsidiary Watershed Trading Limited. There was no corporation tax due for 2022 or 2021 by Watershed Ventures CIC.
|**Current tax**
UK corporation tax on results of the year
**Deferred tax**(see note 19)
Origination/reversal of timing differences
Tax on profit on ordinary activities|**2022**
**£**
**-**
**-**
**-**
|2021
£
-
(2,079)
(2,079)|
|---|---|---|
## _Factors affecting the tax charge for the current period_
The tax assessed for the period differs from the standard rate of corporation tax in the UK (19%), _(2020: 19%)._ The differences are explained below:
|_Current tax reconciliation_
Profit/(loss) on ordinary activities before tax
Current tax at 19%
_Effects of:_
Losses brought back
Other timing differences
Expenses not deductible for tax purposes
Deferred tax changes in tax rates
Group relief claimed
Total current tax charge (see above)|**2022**
2021
**£**
£
**15,865**
(202,726)
**3,014**
(38,518)
**-**
36,275
**(3,883)**
-
**17**
164
**1,725**
-
**(873)**
-
**-**
(2,079)|
|---|---|
Registered company number 01608779
35
## **Notes** _(continued)_
## **13 Tangible fixed assets**
|**13 Tangible fixed assets**|||||
|---|---|---|---|---|
||**Head lease**|**Leasehold**|**Furniture and**|**Total**|
|||**improvements**|**equipment**||
|**Group**|**£**|**£**|**£**|**£**|
|_Cost or valuation_|||||
|At beginning of year|7,650,000|3,110,594|1,775,373|12,535,967|
|Disposals in the year|-|-|-|-|
|Revaluation of head lease|-|-|-|-|
|Additions|-|18,804|45,583|64,387|
|At end of year|7,650,000|3,204,571|1,745,783|12,600,354|
|_Depreciation_|||||
|At beginning of year|-|1,978,065|1,278,226|3,256,291|
|Depreciation on disposals|-|-|-|-|
|Charge for year|-|103,267|72,653|175,920|
|At end of year|-|2,081,332|1,350,879|3,432,211|
|_Net book value_|||||
|**At 31 March 2022**|**7,650,000**|**1,123,239**|**394,904**|**9,168,143**|
|At 31 March 2021|7,650,000|1,132,529|497,147|9,279,676|
Critical judgements around the value of the head lease are described in note 2
Registered company number 01608779
36
## **Notes** _(continued)_
**13 Tangible fixed assets** _(continued)_
|**13 Tangible fixed assets**_(continued)_|||||
|---|---|---|---|---|
||**Head lease**|**Leasehold**|**Furniture**|**Total**|
|||**improvements**|**and**||
||||**equipment**||
|**Charity**|**£**|**£**|**£**|**£**|
|_Cost or valuation_|||||
|At beginning of year|7,650,000|3,110,594|,658,887|12,419,481|
|Disposals in the year|-|-|-|-|
|Additions|-|18,804|19,929|38,733|
|At end of year|7,650,000|3,204,571|1,603,643|12,458,214|
|_Depreciation_|||||
|At beginning of year|-|1,978,065|1,187,793|3,165,858|
|Depreciation on disposals|-|-|-|-|
|Charge for year|-|103,267|58,477|161,744|
|At end of year|-|2,081,332|1,246,270|3,327,602|
|_Net book value_|||||
|**At 31 March 2022**|**7,650,000**|**1,123,239**|**357,373**|**9,130,612**|
|At 31 March 2021|7,650,000|1,132,529|471,094|9,253,623|
The Trustee’s review of the fixed assets has concluded that their value is not impaired.
The head lease qualifies as a ‘long leasehold’ as it has over 50 years to run.
## **14 Fixed asset investments**
|**Shares**
At the beginning of the year
At the end of the year|**Charity**
**2022**
**£**
**50,101**
**50,101**|Charity
2021
£
50,101
50,101|
|---|---|---|
The above shares represent equity investments in group undertakings.
The company owns 100% of the issued share capital of Watershed Trading Limited (company registration number: 01621620), a company incorporated in England and Wales. The principal activities of this company are the operation of the café/bar, and conference facilities at Watershed.
The company owns 100% of the issued share capital of Watershed Ventures CIC (company registration number: 06097013), a company incorporated in England and Wales. The principal activities of this company are to promote participation by individuals, groups and organisations in the creative industries in the South West of England and elsewhere.
## **15 Stocks**
|Finished goods and goods for resale|**Group**
**2022**
**£**
**15,233**
|2021
£
6,051
|**Charity**
**2022**
**£**
**-**
|2021
£
-|
|---|---|---|---|---|
Registered company number 01608779
37
## **Notes** _(continued)_
## **16 Debtors**
|Trade debtors
Prepayments and accrued income
Other debtors including taxation and social
security
Amounts owed from Group undertakings|**Group**
**2022**
**£**
**99,000**
**175,090**
**64,322**
**-**
**338,412**
|2021
£
17,938
305,245
38,355
-
361,538
|**Charity**
**2022**
**£**
**22,923**
**170,572**
**64,232**
**130,960**
**388,687**
|2021
£
15,703
305,245
55,763
-
376,711|
|---|---|---|---|---|
All debtors are recoverable within one year.
Other debtors include an amount of £61,386 owed to Watershed for other taxes and social security.
## **17 Creditors: amounts falling due within one year**
|Trade creditors
Other creditors including taxation and
social security
Accruals and deferred income
Amounts owed to group undertakings
CBILS loan|**Group**
**2022**
**£**
**355,263**
**165,827**
**367,930**
**-**
**-**
**889,020**
|2021
£
207,384
133,538
396,349
-
200,000
937,271
|**Charity**
**2022**
**£**
**340,005**
**64,047**
**269,740**
**212**
**-**
**674,004**
|2021
£
194,450
51,143
302,676
1,332
-
549,601|
|---|---|---|---|---|
Other creditors include £136,106 (2021: £114,294) an amount owed for other taxes and social security.
Accruals and deferred income includes accruals of £144,378, deferred income comprising £60,349 of conference deposits, £9,375 of rental income received in advance, £6,247 of advance cinema sales and £147,581 of grant and project income (note 4).
In March 2021, a loan from HSBC Bank was taken out by Watershed Trading Limited for £200,000 as part of the Coronavirus Business Interruption Loan Scheme. The funds were held in a separate reserve account and remained unused. The loan was repaid in full in February 2022.
Deferred rent income, advanced cinema sales, and conference deposits were fully released in the year. The Balances at the year end were:
|Balance as at 1 April 2021
Amount deferred in the year
Balance as at 31 March 2022|**Group**
**£**
**78,675**
**(2,704)**
**75,971**|**Charity**
**£**
**41,370**
**(25,748)**
**15,622**|
|---|---|---|
Registered company number 01608779
38
## **Notes** _(continued)_
## **18 Creditors: amounts falling due after more than one year**
|Other loans
Analysis of loans
Wholly repayable within 5 years|**Group**
**2022**
**£**
**(29,690)**
**(29,690)**
|2021
£
(29,690)
(29,690)
|**Charity**
**2022**
**£**
**(29,690)**
**(29,690)**
|2021
£
(29,690)
(29,690)|
|---|---|---|---|---|
The balance of £29,690 relates to rental deposits being held in respect of tenancies to E & W sheds.
## **19 Provisions and liabilities**
|**Group**
At beginning of year
Movement in the year (note 12)
Add back deferred tax asset (held in debtors)
**Deferred tax liability at end of year**
he elements of deferred taxation are as follows:
Difference between accumulated depreciation and capital allowances
Other short term timing differences
|**Deferred**
**tax**
£
3,485
-
-
3,485
**2022**
2021
**£**
£
**3,485**
3,485
**-**
-
**3,485**
3,485
|**Deferred**
**tax**
£
3,485
-
-
3,485
**2022**
2021
**£**
£
**3,485**
3,485
**-**
-
**3,485**
3,485
|**Deferred**
**tax**
£
3,485
-
-
3,485
**2022**
2021
**£**
£
**3,485**
3,485
**-**
-
**3,485**
3,485
|
|---|---|---|---|
|||||
|||||
|||||
||||3,485|
The elements of deferred taxation are as follows:
The charity has no deferred taxation liabilities.
Registered company number 01608779
39
## **Notes** _(continued)_
## **20 Unrestricted income funds**
|||||**Group**|**Charity**||
|---|---|---|---|---|---|---|
|||||**£**|**£**||
|At beginning of year||||9,106,085|9,033,617||
|Movement in year before transfers||||(96,614)|(111,978)||
|Transfer from restricted funds (note 21)||||109,248
|109,248
||
|**At end of year**||||**9,118,719**|**9,030,887**||
||**At beginning**|**Incoming**|**Expenditure**|**Transfers**|**Other**|**At end of**|
||**of year: 1**|**resources**|||**recognised**|**Year: 31**|
||**April 2021**||||**gains and**|**March 2022**|
||||||**losses**||
||£|**£**|**£**|**£**|**£**|**£**|
|**Unrestricted income funds**|||||||
|General fund|1,058,008|3,100,783|(3,197,397)|159,302|**-**|**1,120,696**|
|_Designated Funds_|||||||
|Building fund|244,717|-|-|-|**-**|**244,717**|
|Head lease fund|5,504,856|-|-|-|**-**|**5,504,856**|
|Capital fund|709,544|-||-|**-**|**709,544**|
|Revaluation reserve (head lease)|1,435,600|-|-|-|-|**1,435,600**|
|Clusters Fund|35,539|-|-|-|**-**|**35,539**|
|Rife Fund|14,662|-|-|(14,662)|**-**|**-**|
|Film Hub Fund|68,849|-|-|(1,082)|**-**|**67,767**|
|ACE Cultural Recovery funds|34,310|-|-|(34,310)|**-**|**-**|
||9,106,085|3,100,783|(3,197,397)|109,248|-|**9,118,719**|
The head lease fund (£5,504,856) represents the head lease purchased via a capital grant of £6,400,000 provided to Watershed by South West Regional Development Agency (SWRDA) in March 2007. At the time, a legal charge was placed on the property as a condition of acceptance of the grant funding. In the year 2011/12 SWRDA closed due to government cuts and the Trust and SWRDA mutually agreed to terminate the agreement entered into relating to the legal charge on the property. As a result, the head lease is now deemed to be unrestricted and a designated fund has been established to ring fence the balance of the grant as the intention is to hold the asset for the long-term benefit of the Trust.
Following the revaluation of the head lease in July 2019 and a change in accounting treatment, accumulated depreciation charges of £709,544 have been written back. A new capital designated fund was set up in 2019/20 to ring-fence this amount for the purposes of capital investment. The uplift in the value of the head lease (£1,435,600) is held in the Revaluation reserve. These amounts represent the head lease valuation of £7,650,000 and therefore do not form part of the freely available reserves of the Trust.
Registered company number 01608779
40
## **Notes** _(continued)_
## **21 Restricted funds: Group and Charity**
||**At**|**Incoming**|**Transfer to**|**Re-**|**Outgoing**|**At end of**|
|---|---|---|---|---|---|---|
||**beginning**|**resources**|**unrestricted**|**classification**|**resources**|**Year: 31**|
||**of year: 1**||**income**|**to**||**March**|
||**April 2021**||**funds**|**unrestricted**||**2022**|
|||||**funds**|||
||£|**£**|**£**|**£**|**£**|**£**|
|**Capital funds**|||||||
|Deferred capital grant|7,996|-|(1,600)|-|-|**6,396**|
|Deferred capital refurbishment grants|504,577|-|(67,426)|-|-|**437,151**|
|Lottery lease purchase grant|522,719|-|(8,712)|-|-|**514,007**|
|ACE GforA capital grant|33,289|-|(2,800)|-|-|**30,489**|
|ACE small capital grant|114,840|-|(28,710)|-|-|**86,130**|
|Garfield Weston capital grant|100,000|-|-|-|-|**100,000**|
|Other capital funds|10,000|75,000
|-|-|-
|**85,000**|
||1,293,421|75,000|(109,248)|-|-|**1,259,173**|
Transfer to unrestricted income funds is in respect of the annual release to the SOFA in respect of capital grants. Sufficient resources are held to enable each fund to be applied in accordance with any restrictions.
## **Deferred capital grant**
Grant support to fund refurbishments undertaken in 2001/02 has been transferred to deferred capital grants and is being taken to income over the same period of time as the depreciation of the assets funded by the grants (25 years).
## **Deferred capital refurbishment grants**
Grant support to enable refurbishment of the existing cinemas and the construction of new administration spaces, a third cinema screen, an extended café/bar facility and a new lift has been transferred to deferred capital grants and is being taken to income over a period of 25 years. The work commenced in December 2002.
## **Lottery lease purchase grant**
Lottery Grant support from Arts Council England Stabilisation scheme to enable the Watershed’s lease purchase has been transferred to deferred capital grants and is being taken to income funds over a period of 79 years to match the unexpired period of the lease.
## **Garfield Weston capital grant**
Grant support received from the Garfield Weston Foundation towards the costs of phase 1 of Watershed’s proposed capital development project has been transferred to deferred capital grants. Since this project has been delayed, the funds have now been approved for use in supporting the refurbishment of Watershed’s first floor toilets into a fully inclusive facility and will be taken to income over the same period of time as the depreciation of the assets it will fund once the refurbishment has been undertaken in 2022/23.
## **Other capital funds**
Donation from an individual specifically to support Watershed’s capital development project has been transferred to deferred capital grants and will be taken to income over the same period of time as the depreciation of the assets it will fund once the capital project has been undertaken.
Grant support from Bristol City Council towards the costs of refurbishing Watershed’s first floor toilets into a fully inclusive facility. The funds will be taken to income over the same period of time as the depreciation of the assets it will fund once the refurbishment is completed in 2022/23.
## **Voluntary income and project funding from charitable activities**
Donated services and one-off grants received which are restricted by the donors are spent in accordance with the donors’ restrictions.
Revenue grants received for specific creative projects are categorised as income from charitable activities and the grants are spent in accordance with the donors’ restrictions.
Registered company number 01608779
41
## **Notes** _(continued)_
## **22 Analysis of fund balances - group**
|**22 Analysis of fund balances - group**|||||
|---|---|---|---|---|
||**Unrestricted**|**Restricted**|**2022**|2021|
||**funds**|**funds**|**Total**|Total|
||**£**|**£**|**£**|£|
|Fixed assets|7,908,970|1,259,173|**9,168,143**|9,279,676|
|Net current assets|1,242,924|**-**|**1,242,924**|1,153,005|
|Long term liabilities|(29,690)|**-**|**(29,690)**|(29,690)|
|Provisions for liabilities and charges|(3,485)|**-**|**(3,485)**|(3,485)|
||9,118,719|1,259,173|**10,377,892**|10,399,506|
## **23 Operating leases as a lessee**
The future minimum lease payments under non-cancellable operating leases expected to be paid by the Charity and Group will fall due as follows:
||**2022**|2021|
|---|---|---|
||**Group and**|Group and|
||**Charity plant**|Charity plant|
||**and equipment**|and equipment|
||**£**|£|
|Within one year|**10,306**|10,306|
|Between one and five years|**27,586**|37,892|
|After five years|**-**|-|
||**37,892**|48,198|
## **24 Operating leases as a lessor**
The future minimum lease payments under non-cancellable operating leases expected to be received by the Charity and Group are due to be received as follows:
||**2022**|2021|
|---|---|---|
||**Group and**|Group and|
||**Charity leasehold**|Charity leasehold|
||**property**|property|
||**£**|£|
|Within one year|**211,219**|236,385|
|Between one and five years|**794,340**|806,974|
|After five years|**183,594**|382,179|
||**1,189,153**|1,425,538|
Registered company number 01608779
42
## **Notes** _(continued)_
## **25 Related party transactions**
During the year legal fees of £1,424 (2021: £6,972) were paid to TLT LLP in respect of legal services provided to the Watershed Group. In addition, pro bono services to the value of £3,854 (2021: £6,141) were provided to the Watershed Group. James Touzel is a trustee of Watershed Arts Trust Limited and a partner of TLT LLP.
Watershed has a non-exclusive arrangement with TLT LLP for the provision of legal services. This arrangement has previously been approved by the Board and was reconfirmed in June 2016.
The Board has delegated authority to the Chief Executive Officer to instruct TLT LLP, or any other law firm, on matters where the total fee charged on that transaction does not exceed £10,000. Transactions above this limit are approved by the Board. James Touzel absents himself from any discussion of any proposal to instruct TLT LLP or to approve fee proposals submitted by TLT LLP.
During the year consultancy fees of £nil (2021: £6,000) were paid to Susan Cooper in respect of work undertaken on the SWCTN programme. Susan Cooper is a trustee of Watershed Arts Trust Limited.
During the year consultancy fees of £nil (2021: £1,025) were paid to Parys Gardener in respect of work undertaken on programme design and facilitation. Parys Gardener is a trustee of Watershed Arts Trust Limited.
Registered company number 01608779
43
## **26 Comparative statement of financial activities**
|**_Note_**
**Income**
**_Voluntary income_**
_Donations and legacies_
Individual giving
Donated services
Regular grant funding
_4_
Arts Council England Cultural Recovery Grant
_4_
_Other trading activities_
Commercial trading operations
_6/7_
_Investment income_
Interest receivable
**_Income from charitable activities_**
Earned income from cinema activities
Rental income
Service charges
Other earned income
Programme funds
_4_
**_Other income_**
Government grants (COVID support)
Capital grants
**Total income**
**Expenditure**
**_Costs of raising funds_**
Fundraising costs
_8_
Commercial trading operations
_6_
**_Charitable activities_**
Operation of cinema, engagement and
creative media projects
_9_
Donated services
CIC operation
_7_
Property management costs
Reversal of depreciation (Head lease revaluation)
_13_
**Total expenditure**
Net income/(expenditure) before transfers and
Net income/(expenditure) for the year
Transfers between funds
_20_
_Other recognised gains and losses_
Gains on revaluation of head lease
Net movement in funds
**_Reconciliation of funds_**
Total funds brought forward
**Total funds carried forward**|**Unrestricted**
**Funds**
**£**
35,628
6,141
812,384
587,977
100,833
75
1,543,038
56,588
139,467
80,210
95,628
3,557|**Restricted**
**Funds**
**£**
-
-
110,683
-
-
110,683
-
-
-
-
1,672,351|
**Total Funds**
**2021**
**£**
35,628
6,141
812,384
698,660
100,833
75
1,653,721
56,588
139,467
80,210
95,628
1,675,908
2,047,801
777,264
10,000
**4,488,786**
(20,275)
(683,035)
(703,310)
3,367,095
(6,141)
(1,198)
(56,586)
-
**(4,134,330)**
354,456
-
-
354,456
10,045,050
**10,399,506**|
|---|---|---|---|
||375,450
777,264
-
**2,695,752**
(20,275)
(683,035)
(703,310)
(1,584,061)
(6,141)
(1,198)
(56,586)
-
**(2,351,296)**
344,456
124,917
-
469,373
8,636,712
**9,106,085**|1,672,351
10,000
**1,793,034**
-
-
-
(1,783,034)
-
-
-
-
**(1,783,034)**
10,000
(124,917)
-
(114,917)
1,408,338
**1,293,421**||
Registered company number 01608779
44