Review of the Registered Clubs Industry in NSW - Clubs NSW

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6 Strengthening the financial viability of the registered clubs industry 6.1.4 The level of financial viability among individual clubs varies widely Evidence presented to IPART in submissions and roundtables (and borne out by IPART’s investigations of case study clubs) indicates that the financial health of individual registered clubs varies significantly. Some are very profitable, others are marginally profitable, and some face serious viability issues in both the short and long term. In a submission, ClubsNSW provided data on the proportion of clubs by size (in terms of gaming revenue 98 ) considered to be profitable in 2007, and the proportions considered to be marginally profitable or non-profitable (Table 6.5). 99 These data indicate that the majority of clubs were profitable (around 68 per cent), while a further 14 per cent were marginally profitable and around 18 per cent were not profitable. Table 6.5 Proportion of profitable and non-profitable clubs by size ($ gaming machine revenue) 2007 Club size Non-profitable (%) Marginally profitable (%) Profitable (%) 0-200K 23.8 7.9 68.3 >200K – 1m 17.0 18.2 64.8 >1m – 5m 18.8 11.7 69.5 >5m – 10m 21.7 19.6 58.7 > 10m 8.3 14.6 77.1 Total clubs 18.2 13.9 67.8 Source: Allen Consulting Group, Socio-Economic Impact Study of Clubs in NSW (2007) 2008, p 22. 98 See section 2.2.2 for a description of classification by size based on gaming revenue. 99 ClubsNSW submission, 4 April 2008, p 19. 96 IPART Review of the Registered Clubs Industry in NSW
6 Strengthening the financial viability of the registered clubs industry ClubsNSW highlighted that many of the clubs with gaming machine revenue of less than $200,000 per annum considered to be marginally profitable or non-profitable in 2007 are bowls and golf clubs that provide a significant proportion of the recreational facilities in NSW. Clubs with gaming machine revenue of between $5 million and $10 million appear to be experiencing the most financial difficulty: 41.3 per cent of clubs in this size category were considered to be non-profitable or marginally profitable. However, IPART notes that ClubsNSW used only a club’s Earnings Before Interest and Tax (EBIT) to determine its profitability. All clubs with a ratio of EBIT to total revenue of less than 0.1 per cent were deemed not profitable, while those with a ratio of between 0.1 per cent and 5 per cent were considered marginally profitable, and those with a ratio of greater than 5 per cent were considered profitable. As noted above, IPART considers that any one measure taken in isolation is not necessarily a good indicator of financial viability. Nevertheless, ClubsNSW’s analysis provides a rough guide to the potential level of financial vulnerability in the industry. 6.1.5 Individual clubs are prospering or declining for a variety of reasons IPART examined the reasons why some clubs are prospering while others are declining. It found that a range of factors can affect an individual club’s financial viability, including: Its reliance on gaming machine revenue and vulnerability to regulatory change. Its level of volunteer support or ability to demand higher membership fees. The skills and effectiveness of its board and management. Its understanding of its own financial position. Its consideration of its long-term sustainability and/or retention of community assets. The level of competition it faces. Demographic and socio-economic changes in its local area. IPART also found that few new clubs have been established in recent years. Each of these findings is discussed below. Reliance on gaming and vulnerability to regulatory change As discussed in section 6.1.1, IPART found that most clubs rely heavily on gaming machine revenue. These clubs are particularly vulnerable to regulatory change that directly affects gaming machine operations, such as the recent increases in gaming machine tax rates and the introduction of non-smoking legislation. Review of the Registered Clubs Industry in NSW IPART 97
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Independent Pricing and Regulatory
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© Independent Pricing and Regulato
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Contents 6 Strengthening the financ
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Executive Summary Executive Summary
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Executive Summary estimated the val
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Executive Summary Therefore, IPART
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Executive Summary However, IPART al
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Executive Summary List of Recommend
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Executive Summary 15 Once the stand
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Executive Summary 29 That ClubsNSW
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Executive Summary 46 That ClubsNSW
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Executive Summary 60 That OLGR deve
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1 Introduction 1 Introduction Over
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1 Introduction 1.1.2 Review’s foc
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1 Introduction 1.2 Other reviews an
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1 Introduction 1.3 The structure of
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2 The registered clubs industry in
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3 Understanding the social contribu
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3 Understanding the social contribu
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9 Improving corporate governance Ne
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9 Improving corporate governance IP
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9 Improving corporate governance Ch
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9 Improving corporate governance es
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9 Improving corporate governance Re
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9 Improving corporate governance 9.
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10 Helping clubs better understand
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11 Making it easier for clubs to am
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12 Making it easier for new clubs t
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13 Removing unnecessary regulatory
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14 A framework for a management pla
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A Terms of reference A Terms of ref
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A Terms of reference The proc
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B Terms of reference checklist Term
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C List of submitters, roundtable pa
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D Gambling expenditure and problem
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E IPART’s methodology for recordi
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F ACG’s approach to measuring the
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G ClubsNSW - steps to establishing
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G ClubsNSW - steps to establishing
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Glossary and Abbreviations Glossary
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Review of the Registered Clubs Industry in NSW - Clubs NSW

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