Review of the Registered Clubs Industry in NSW - Clubs 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