Review of the Registered Clubs Industry in NSW - Clubs NSW

7 Improving clubs’ financial reporting and performance
benchmarking
Table 7.5 Percentage of clubs within certain EBITDARD% ranges
EBITDARD% range 3 months Sept-Dec 07
25% + 6%
15%-25% 33%
10-15% 26%
5%-10% 14%
0%-5% 21%
Average 14%
Note: ClubData Online provides benchmarking services to approximately 400 registered clubs.
Source: ClubsNSW submission, 4 April 2008, p 52.
As noted above, Panthers Entertainment Group supported the use of a different
measure – EBITDA%. In its submission, it presented several EBITDA% ranges and
described what a club’s financial condition is likely to be in each range (Table 7.5). It
indicated that clubs with EBITDA% of less than 10 per cent were likely to be
experiencing financial distress. IPART reviewed these EBITDA% ranges and
corresponding descriptions of financial condition, and found that they are consistent
with its analysis of its case study clubs.
Table 7.6 EBITDA% as an indicator of financial distress
EBITDA% range
Financial condition
> 25% Business flourishing – ability to reinvest and reinvent as
required.
15%–25% Solid financial position – needs to critically evaluate capital
purchases.
10%–15% Stable financial position – sufficient cash flow to maintain
current business operations. May find it difficult to reinvest
and reinvent as required.
5%–10% Financial distress – changes required to ensure viability.
0%–5% Serious financial distress – serious questions as to whether the
club can operate as a going concern.
Source: Adapted from PEG submission, p 27.
ClubsNSW noted that there is potentially up to a 2.5 per cent positive differential
between EDBITA% and EBITDARD%, which suggests that an EBITDA% of 12.5 per
cent would be an equivalent of an EBITDARD% of 15 per cent.
IPART considers that, initially, using an EBITDARD% threshold of 15 per cent is
appropriate based on the following considerations:
A 15 per cent threshold is likely to capture clubs that are not necessarily in
financial distress but may be underperforming. If a lower threshold were used
(for example, 10 per cent), there would be less scope for the Club Viability Panel
and industry specialists to suggest a range of initiatives to ‘turn around’ the
trading performance of the club.
124 IPART Review of the Registered Clubs Industry in NSW